2006 Ohio Revised Code - 718.02. Determination of income subject to tax.
This section does not apply to taxpayers that are subject to and required to file reports under Chapter 5745. of the Revised Code.
(A) Except as otherwise provided in division (D) of this section, net profit from a business or profession conducted both within and without the boundaries of a municipal corporation shall be considered as having a taxable situs in such municipal corporation for purposes of municipal income taxation in the same proportion as the average ratio of the following :
(1) The average original cost of the real and tangible personal property owned or used by the taxpayer in the business or profession in such municipal corporation during the taxable period to the average original cost of all of the real and tangible personal property owned or used by the taxpayer in the business or profession during the same period, wherever situated.
As used in the preceding paragraph, real property shall include property rented or leased by the taxpayer and the value of such property shall be determined by multiplying the annual rental thereon by eight;
(2) Wages, salaries, and other compensation paid during the taxable period to persons employed in the business or profession for services performed in such municipal corporation to wages, salaries, and other compensation paid during the same period to persons employed in the business or profession, wherever their services are performed, excluding compensation that is not taxable by the municipal corporation under section 718.011 of the Revised Code;
(3) Gross receipts of the business or profession from sales made and services performed during the taxable period in such municipal corporation to gross receipts of the business or profession during the same period from sales and services, wherever made or performed.
If the foregoing apportionment formula does not produce an equitable result, another basis may be substituted, under uniform regulations, so as to produce an equitable result.
(B) As used in division (A) of this section, "sales made in a municipal corporation" mean:
(1) All sales of tangible personal property delivered within such municipal corporation regardless of where title passes if shipped or delivered from a stock of goods within such municipal corporation;
(2) All sales of tangible personal property delivered within such municipal corporation regardless of where title passes even though transported from a point outside such municipal corporation if the taxpayer is regularly engaged through its own employees in the solicitation or promotion of sales within such municipal corporation and the sales result from such solicitation or promotion;
(3) All sales of tangible personal property shipped from a place within such municipal corporation to purchasers outside such municipal corporation regardless of where title passes if the taxpayer is not, through its own employees, regularly engaged in the solicitation or promotion of sales at the place where delivery is made.
(C) Except as otherwise provided in division (D) of this section, net profit from rental activity not constituting a business or profession shall be subject to tax only by the municipal corporation in which the property generating the net profit is located.
(D) This section does not apply to individuals who are residents of the municipal corporation and, except as otherwise provided in section 718.01 of the Revised Code, a municipal corporation may impose a tax on all income earned by residents of the municipal corporation to the extent allowed by the United States Constitution.
(E) If, in computing the taxpayer's adjusted federal taxable income, the taxpayer deducted any amount with respect to a stock option granted to an employee, and if the employee is not required to include in income any amount or any portion thereof because it is exempted from taxation under division (F)(10) of section 718.01 of the Revised Code and division (A)(2)(d) of section 718.03 of the Revised Code by a municipal corporation to which the taxpayer has apportioned a portion of its net profit, the taxpayer shall add the amount that is exempt from taxation to the taxpayer's net profit that was apportioned to that municipal corporation. In no case shall a taxpayer be required to add to its net profit that was apportioned to that municipal corporation any amount other than the amount upon which the employee would be required to pay tax were the amount related to the stock option not exempted from taxation.
This division applies solely for the purpose of making an adjustment to the amount of a taxpayer's net profit that was apportioned to a municipal corporation under divisions (A) and (B) of this section.
HISTORY: 127 v 91 (Eff 9-17-57); 148 v H 477 (Eff 7-26-2000); 148 v H 483 (Eff 1-1-2002); 148 v S 287, § 9. Eff 12-21-2000; 150 v H 95, § 1, eff. 6-26-03; 150 v H 362, § 1, eff. 12-30-04.
The effective date is set by section 6 of H.B. 362 (150 v - ).
The provisions of § 156, H.B. 95 (150 v - ), read as follows:
SECTION 156. (A) The amendment, repeal and reenactment, or enactment by this act of sections 718.01, 718.02, 718.03, 718.05, 718.051, and 718.121 of the Revised Code apply to taxable years beginning on or after January 1, 2004.
The provisions of § 9 of SB 287 (148 v - ) read as follows:
SECTION 9. That sections 718.01, 718.011, 718.02, and 718.08 of the Revised Code as amended or enacted by Sub. H.B. 483 of the 123rd General Assembly shall take effect on the effective date of this section.
This section is intended to accelerate the effective date of
718.08 of the Revised Code from January 1, 2002, to the earliest time permitted by law upon the enactment of this act. The effective date of those sections was delayed unintentionally to correspond with delayed effective dates contained in Sub. S.B. 3 of the 123rd General Assembly (January 1, 2002), but the delay inadvertently postpones the effect of other amendments and enactments made by Sub. H.B. 477 of the 123rd General Assembly.
Effect of Amendments
150 v H 362, effective December 30, 2004, added (E).
H.B. 95, Acts 2003, effective June 26, 2003, in the introductory paragraph, substituted "taxpayers that are subject to and required to file reports under Chapter 5745." for "electric companies or combined companies, or to electric light companies for which an election made under
section 5745.031," and deleted "is in effect" following "Revised Code"; in the introductory paragraph of (A), deleted the first sentence which read: "In the taxation of income that is subject to municipal income taxes, if the books and records of a taxpayer conducting a business or profession both within and without the boundaries of a municipal corporation disclose with reasonable accuracy what portion of its net profit is attributable to that part of the business or profession conducted within the boundaries of the municipal corporation, then only such portion shall be considered as having a taxable situs in such municipal corporation for purposes of municipal income taxation," substituted "Except as otherwise provided in division (D) of this section" for "In the absence of such records," and inserted "the following" at the end of the paragraph; substituted "original cost" for "net book value" twice in the introductory paragraph of (A)(1); substituted "apportionment" for "allocation" in the final paragraph of (A)(3); and added (C) and (D).
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