U.S. States with No Business Income Tax - Ohio
Ohio located in the East North Central region of the United State. Ohio is the seventh most populous, and the tenth most densely populated in the country. The manufacturing sector is the largest industry in the state. The state’s factories lead the nation in the production of plastics and rubber, fabricated metals, and electrical equipment and appliances. Ohio also is a leading producer of steel, autos, and trucks.
The business climate in the state is incredibly business-friendly. Ohio does not charge corporate income taxes on business entities and the tax structure is very simple. The affordable business operating cost, the well-developed employment market, and the central location attract foreign investors to do business in Ohio.
Although Ohio business entities do not need to pay state income tax, they are required to pay following taxes:
- Federal Income Tax Return
According to Internal Revenue Service (IRS), all business entities must file an income tax return on or before the following April 15th (Corporation) or March 15th (LLC) of the tax year, or Oct 15th (Corporation) or Sep 15th (LLC) with extension, if calendar year is applied on tax purpose. However, the business entity must pay the tax due in full no later than the original due date for filing its tax return (not including extensions). Interest and penalty will be charged on taxes paid late even if an extension of time to file is granted.
- Ohio Commercial Activity Tax Filing
Ohio has a Commercial Activity Tax (CAT) that applies to entities doing businesses at Ohio State. The CAT tax will be applied only if gross receipt is over USD 150,000, and the due date is May 10 at each year for annually filers. The company must register with the Ohio Department of Taxation (DOT) if required to pay CAT. Once registered, the company will receive the tax number and filing frequency (quarterly or annually).
The CAT rate is 0.26%, but the first $1 million in taxable gross receipts are excluded from the calculation of a taxpayer’s CAT liability with respect to the 0.26% rate component. The first $1 million in taxable gross receipts are taxed at $150 which is annual minimum tax (AMT). The AMT is charged at a tiered structure, and taxpayers will pay an amount that corresponds with their overall commercial activity. Please refer to the chart below.
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Taxable Gross Receipts
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Annual Minimum Tax
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CAT
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$1 Million or less
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$150
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No Additional Tax
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More than $1 Million but less than or equal to $2 Million
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$800
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0.26% x (Taxable Gross Receipts - $1 Million)
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More than $2 Million but less than or equal to $4 Million
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$2,100
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0.26% x (Taxable Gross Receipts - $1 Million)
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More than $4 Million
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$2,600
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0.26% x (Taxable Gross Receipts - $1 Million)
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- Sales or Use Tax
If the entity located in Ohio and engage in sale of tangible personal property or other taxable services, you must register with the Ohio Department of Taxation and pay the state’s sales tax. The use tax generally applies to the storage, use, or other consumption in Ohio of goods purchased from retailers in transactions not subject to the sales tax. Use tax may also apply to purchases shipped to Ohio consumer from another state, including purchases made by mail order, telephone, or Internet.
The state general sales tax rate of Ohio is 5.75%. The sales and use tax rate in Ohio consist of the state tax rate, the local tax rate, and any district tax rate that may be in effect.
- Payroll Tax
If the business entities have employees and pay wages in U.S., they must report income and payroll taxes withheld from their employees to Internal Revenue Service (IRS) periodically. The business entities are also responsible for filing and paying Social and Medicare Taxes (employer share amount) and Federal Unemployment Taxes.
Meanwhile, they must register as employer with Ohio Department of Taxation. Employers in Ohio are required to withhold the payroll tax from the employees?wages or from other payments and remit the tax electronically to the State periodically. And employers must contribute to Unemployment Insurance Tax (UI).
- Annual Renewal
All active business entities registered at Ohio are required to operate in compliance with the General Corporation Law/Limited Liability Company Act of the State of Ohio. They must have and maintain a Registered Agent, which has a physical street address in Ohio; must renew state/local business license/permit periodically (if applicable).
If you are interested in Ohio business registration or annual renewal services, please contact Kaizen professional consultants. Kaizen U.S. office is a professional CPA firm, offers complete compliance services and business support. Please consult with Kaizen consultants for more details.
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