Ohio Tax Law Changes
The following is an update on Ohio and Florida state and local tax changes, along with current state amnesty programs.
There are some key Ohio city law changes enacted as part of H.B 5, more commonly referred to as municipal reform. We will focus on the changes enacted that will impact employer withholding. The changes outlined below are effective Jan. 1, 2016.
If an employer has a brick and mortar location in Ohio imposing a city income, withholding is required for all employees working at or out of that city. There is no change in this requirement under municipal reform.
- The current 12-day rule has been replaced with a 20-day rule. What does this mean for employers? If an employer has an employee that works in a city for more than 20 days, the employer is required withhold for that city beginning with the 21st There is no longer a requirement for retroactive withholding back to the first day of activity in the city. The 20-day rule is imposed on an employee basis, not an employer basis. If one employee meets the 20-day rule there is no requirement to withhold for the city for all employees working in that city.
- An employee can no longer be determined to have worked in more than one city in one day. Under the current 12-day rule, an employee can be viewed as working in multiple cities on one day. Under current law, if an employee spends a minute in a city performing work, the employee is considered to have worked a day in the city.
Under municipal reform, an employee can only work in one city each day. An analysis must be done to determine where an employee has spent the preponderance of his or her time during any particular day. The city where the employee has spent a preponderance of time will be considered the city for withholding for that day. Any travel time from employer’s location to a customer’s location or travel between two customers’ locations will be considered time spent in the city where the employer is located.
- Temporary worksite locations – If an employer will be providing services in a certain city and the employer knows the project will last more than 20 days, city withholding will be required from day one.
- Small business exclusion – H.B. 5 provides a small business exclusion from the 20-day rule. If you are an employer in Ohio, with an Ohio location, you are not required to comply with the 20-day rule if you have receipts under $500,000 in a calendar year.
- The key to city withholding is what city is withholding required if the employer does not have a brick and mortar location in Ohio. According to statute and various conversations with city taxing agencies, the city location for withholding could possibly change on a daily, weekly or monthly basis. This is an area that Skoda Minotti continues to monitor.
- As a result of municipal reform, all cities imposing an income tax are required to enact new statute/regulations by Jan. 1, 2016. We know both Regional Income Tax Agency and the Central Collection Agency are both working on new sample statute/regulations for cities to adopt. The issue is what happens if the city has not adopted new statute/regulations before Jan. 1, 2016. If not, can the city impose a city income tax, is withholding required… stay tuned also on this issue.
Florida Tax Law Changes
Florida enacted legislation exempting the purchase of college textbooks from sales tax. This exemption is in effect for the period July 1, 2015 through June 30, 2016. To qualify for the exemption the following three conditions must be met:
- Must be a required book for a course
- Purchasers must provide documentation that they are currently enrolled in a Florida college/university.
- The vendor must maintain documentation supporting the exemption.
The exemption is available whether the textbook is purchased electronically or in person.
Current State Tax Amnesty programs
Individuals who have struggled to pay taxes in the past may be in luck. Tax amnesty has begun in several states for a limited period of time. Tax amnesties provide the chance for a stated group of tax payers to avoid facing criminal prosecution for delayed tax payments by paying a defined amount. Paying this amount will result in tax forgiveness of a tax liability. Here is a list of the states that will be receiving a tax amnesty:
- Indiana 09/15/2015 – 11/16/2015
- Kansas 09/01/2015 – 10/15/2015
- Maryland 09/01/2015 – 10/30/2015
- Missouri 09/01/2015 – 11/30/2015
- Oklahoma 09/14/2015 – 11/13/2015
Any questions concerning these items or any other state and local tax issues, please contact Mary Jo Dolson, CPA, at 813-386-3881.