Monday, March 4, 2013

What does HB59 Mean To You and Your Business?

I just participated in a conference call with the Ohio Chamber of Commerce regarding Governor Kasich's proposed Tax Reform in HB59.

There were several items that they covered, but I wanted to share two areas in this proposal that will have a major impact for individuals and businesses in Ohio.

The first one is in the area of Personal Income Tax.  Starting in 2013, the proposed bill will implement a 20% income tax reduction over a three-year period. This applies to all 9 of the different income tax brackets.  Here is the breakdown for the reduction:

2013 - 7.5% reduction
2014 - 7.5% reduction
2015 - 5% reduction

In addition to the above 20%, there will be an additional 4% reduction in 2013 which will be funded through the Income Tax Reduction Fund.  This is a one-time reduction.  So in essence, you will receive a 11.5% reduction to your personal income tax in 2013 only.

Now let's move on the the changes in the Sales Tax Expansion.  In the proposed bill, ALL services are automatically subject to the Ohio Sales & Use Tax unless an exemption is agreed upon.  So what is a service?  It is an act performed for another person/business for a fee.  Under the current draft of the bill, there are 11 exceptions to these services:

  1. Medical/Health care services
  2. Education & tutoring services
  3. Real property construction services
  4. Residential leases
  5. Insurance transaction
  6. Adult & child day care
  7. Social services
  8. Mining
  9. Residential trash pick-up
  10. Employee services (except 1099 is subject to the tax)
  11. Funeral services
All other services will be subject to this tax like advertising, getting your hair cut, attending sporting events, etc.

This expansion also includes expanding sales tax to intangible services like trademarks, patents, licences, selling of mortgages, etc.  And it will also include a sales tax on all digital products like downloads (think of all apps purchased on Apple products).  In this bill, there is a proposed decrease in the current state rate of 5.5% to 5%.    These changes would take place September 1, 2013.

HB59 has many more items included that I didn't mention here including the Oil & Gas Severance Tax, the addition of a Small Claims Division under the Board of Tax Appeals and the reduction of income tax to be paid by businesses that are set up as pass-thru organizations (sole proprietorship, partners, LLC, Etc.)

The budget bill must be in place by July 1, 2013.  So between now and mid-April, this bill will be flushed out in the General Assembly. It is scheduled to be on the House floor on April 18. I urge you to contact your legislators if you have an opinion on this proposal and other issues.  For a map of House Districts in Ohio, go here.

If you have any questions about the above information, please feel free to contact me anytime - Cheri Hottinger 740.345.9757 x5 or

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