Court rules in favor of state regarding collection of business income taxes


By Rick Palsgrove
Southeast Editor

Ohio municipalities aren’t giving up the fight to control their business income tax revenues.

The municipalities lost a recent court battle seeking to stop the state’s efforts to place business income tax collection under the state’s centralized control instead of keeping it under local municipal control. The ruling means businesses may opt-in to file their net profit filings through the state’s Ohio Business Gateway.

In February, the Franklin County Common Pleas Court did not allow a permanent injunction requested by the municipalities to halt the state’s plan.

According to Groveport City Administrator Marsha Hall, the municipalities involved in the lawsuit (which does not include Groveport) filed an appeal of the ruling in the 10th District Court of Appeals the week of Feb. 25.

“It is expected that the appeal will be a lengthy process,” said Hall. “The state collection of business income tax is effective now until such time that an appeal would be granted. Legislation introduced at Groveport City Council will ensure that we are compliant with the changes made in HB49 during the ongoing legal proceedings.”

Municipal officials from around the state believe that control of business income tax collections are an important function of local governments.

A Feb. 26 resolution passed by Groveport City Council cited these reasons for the its opposition to the state’s plan: it is “a clear attack” on the home rule powers granted to municipalities by the Ohio Constitution; it would adversely affect municipalities with tax revenue from warehouses, distribution centers, and businesses providing online sales; municipalities can better ensure prompt and proper auditing of local tax returns; and that the municipal income tax is the largest revenue source for the city and helps provide for essential city services.

“Our biggest issues are whether the state will be able to track our businesses like we can, and if the state will be able to correctly divide payments between municipalities for those businesses who currently file in multiple locations, but under the new system would just file with one form to the state,” Hall said in an interview last year.

Under the state’s control, a centralized system will collect business income taxes and then distribute tax receipts to the intended municipalities.

According to a information from the governor’s office, the business benefits of such a system are: uniformity and simplicity with one return, one place to file, one set of rules, and one audit rather than various sets of rules and filing requirements from various municipalities; and reduced cost of compliance, bookkeeping, paperwork and red tape.

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