Ohio budget proposal includes sweeping tax changes

by Chuck February 27, 2013

Several changes proposed in the latest Ohio state budget could have significant implications for businesses with nexus in the state.

Ohio Gov. John Kasich’s proposed budget, released Feb. 5, includes a reduction in income tax, income tax breaks for pass-through entities, and new extraction taxes. It also proposes to extend sales taxes to most services and payments for intangible property not specifically exempted.
If this budget proposal passes, the Ohio state sales tax rate would go down by 0.5% while bringing in an extra $5.2 billion over three years. It is expected that local sales tax rates would be similarly adjusted.

While many questions regarding the taxability of services remain unanswered, the following services, would remain exempt from sales tax:

  • Construction and mining services (including services used in producing oil and natural gas)
  • Education and personal instruction
  • Electricity, natural gas (sold by a utility) and water
  • Food storage
  • Health care services (hospital, physician, dentist and nursing charges, medical lab fees, etc.)
  • Intracity bus fare
  • Interstate air fare
  • Labor on real estate repair or remodeling
  • Livestock veterinary services
  • Rental of a primary residence
  • Residential waste collection
  • Social assistance services

The Ohio General Assembly is working their way through the implications of the governor’s proposed budget and decisions are expected before the end June.

Charles F. Spielmann

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