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Tax Articles

TAX ARTICLES 

New Federal Tax Updates

Internal Revenue Service


http://www.irs.gov/

For tax years beginning in 2009, many small businesses can potentially deduct up to $250,000 of purchased (no leased) equipment and software as soon as these items are put to work.  Both new and used assets are eligible.  This valuable break is called the Section 179 depreciation deduction.  The allowance will fall back to only about $135,000 for tax years beginning in 2010 (January 1, 2010). 

Another big tax break that is available for most new (not used) business equipment and software and some leasdhold improvements are that are purchased (not leased) and put into use by December 31, 2009.  For these assets, your business can generally claim first-year bonus depreciation deductions equal to 50% of the cost that's left over after subtracting allowable Sec. 179 deductions (if any).


New State and Local Tax Updates 

Ohio Department of Taxation Web site - Business Gateway.

http://tax.ohio.gov/online_services/ohio_business_gateway_2_0.stm


Ohio Commercial Activities Tax

http://tax.ohio.gov/divisions/communications/information_releases/CAT/index_CAT.stm

1. What is the Commercial Activity Tax ("CAT")?

The CAT is an annual tax measured by taxable gross receipts from most business activities. Most receipts generated in the ordinary course of business are subject to the CAT. The CAT only applies to those gross receipts that are sitused (sourced) to Ohio (i.e., taxable gross receipts – see FAQs #29 through #31).

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2. When did the CAT start?

The start date for the CAT was July 1, 2005.

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3. When was the first tax return due?

The first return was for a semi-annual period (July 1, 2005 to Dec. 31, 2005) for both annual and quarterly taxpayers and was due Feb. 10, 2006. A fee (or minimum tax) for taxpayers with at least $150,000 in taxable gross receipts at any time during calender year 2005 of $75 was due with that return (less any registration fees paid). In addition, a tax rate of .06% (0.0006) was applied to taxable gross receipts over $500,000 (the first $500,000 in taxable gross receipts is excluded). The method you use for federal tax purposes controls what receipts you have to report for each tax period (accrual or cash - 5751.01 (F)(4) accounting method).

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4. How can I contact the Department of Taxation with questions about the CAT?

By Internet: tax.ohio.gov, click on "Contact Us" to e-mail your question

By telephone: 1-888-722-8829

By fax: 1-614-644-9641

By mail: P.O. Box 16158 Columbus, Ohio 43216-6158

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5. Who is subject to the CAT?

The CAT applies to most businesses including but not limited to retail, wholesale, service, manufacturing and other general businesses regardless of the type of business organization such business operates. For example, sole proprietorships, partnerships, LLCs, S corporations, corporations, disregarded entities (SMLLC, QSSS, etc.), trusts, and all other type of associations with taxable gross receipts of more than $150,000 in the calendar year are subject to the CAT.

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6. Who is not subject to the CAT?

Excluded from the CAT are:

  • Non-profit organizations,
  • Most governmental entities,
  • Some public utilities (telegraph company, natural gas company, pipe-line company, water-works company, heating company, combined company [excludes electric]),
  • Dealers in intangibles,
  • Financial institutions,
  • Insurance companies,
  • Certain affiliates of financial institutions and insurance companies, and
  • Businesses with less than $150,000 of taxable gross receipts (unless they are part of a “consolidated elected taxpayer” or “combined taxpayer”).

Sales/Use Taxes

1. What is sales tax?

Sales tax is a "trust" tax that is to be collected by all retailers and certain service providers when they make taxable retail sales. It is called a "trust" tax because the consumer has entrusted this tax to retailers and certain service providers with the understanding that it will be reported and paid to the State of Ohio in a timely manner.

2. What must I do to make taxable retail sales in Ohio?

Every Ohio retailer (vendor) and certain service providers making taxable retail sales must obtain a vendor's license, collect the proper amount of sales tax, file tax returns with payment of tax collected, and maintain complete records of transactions.

3. Are there different vendor's licenses for different types of businesses?

Yes, all vendors must obtain one or more of the following licenses depending on the nature of their business.

  • Regular Vendor's License (ST-1) -- Issued by the County Auditor to vendors with a fixed place of business in Ohio. Vendors of tangible personal property and certain services must have one regular vendor's license for each fixed sales location.
    Application Fee $25

     

  • Delivery Vendor's License (ST-1D) -- Issued by the Department of Taxation to vendors who make sales based on delivery of tangible personal property and certain services at the consumer's location.
    Application Fee $25
  • Transient Vendor's License (ST-1T) -- Issued by the Department of Taxation to vendors who transport stocks of goods to temporary places of business or exhibits in a county where they have no fixed place of business in order to make sales or lease motor vehicles.
    Application Fee $25
  • Service Vendor's License (ST-1S) -- Issued by the Department of Taxation to vendors providing automatic data processing, computer services or electronic information services; taxable telecommunications service; landscaping and lawn care service; private investigation and security service; information service (1-900 telephone calls); exterminating service; building maintenance and janitorial service; employment service; employment placement service; satellite broadcasting service; and snow removal service (Mechanical).
    Application Fee $25

 

 

 

4. What is a taxable sale?

A taxable sale includes any transaction in which title or possession of tangible personal property or the benefit of certain services is, or will be, transferred or provided for a price. All retail sales are subject to the tax unless they are specifically excepted or exempted in Ohio's sales tax law.

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5. Is sales or use tax due on purchases over the Internet?

If the seller is located in Ohio or the out-of-state seller has substantial nexus with Ohio, sales or use tax is due on all sales of tangible personal property and selected services to purchasers in Ohio, unless the purchaser has a statutory basis for claiming exception or exemption.  NOTE: Many out-of-state sellers are registered with Ohio to collect and remit Ohio use tax on taxable sales made to Ohio consumers.

If the seller is not located in Ohio and does not have substantial nexus with Ohio, the seller cannot be required to collect and remit Ohio use tax.  However, the  purchaser will still owe Ohio use tax on the purchase of goods or services, unless the purchaser has a statutory basis for claiming exception or exemption.

6. What services are not taxable?

Professional, personal, and insurance transactions are not taxable when any transfer of tangible personal property is a small item for which no separate charge is made.

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7. Are warranties, maintenance agreements, or service contracts subject to the sales tax?

Basically, yes. However, warranties, extended warranties, maintenance agreements or service contracts covering exempt equipment would also be exempt.  

 

 

8. Are delivery costs taxable?

Yes. Effective Aug. 1, 2003 delivery charges by a vendor for preparation and delivery to a location designated by the consumer of tangible personal property or a service, including transportation, shipping, postage, handling, crating, and packing are taxable.

 


Integra Financial Services, LLC
103 E. Market St.
Germantown, OH  45327
(937) 895-4254
FAX (513) 672-2196
brian@1integra.com

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