Several important tax-related bills supported by the Ohio Chamber are moving through the legislature this year. These include legislation repealing the employment services tax, reducing the withholding tax rate on pass-through business income, exempting digital advertising services from sales tax, and creating another one-time sales tax holiday for clothing, school supplies and instructional materials. Normally, tax policy is addressed in the biannual state budget, which is why the expedited process on the legislation is somewhat surprising.
House Bill 343, strongly supported by the Ohio Chamber, would repeal the sales tax applied to companies who contract for personnel or temporary labor through an employment services provider. The six to eight percent tax is levied not only on the service provider’s fee but also on the wages earned by the employee(s). That amounts to charging a sales tax on creating jobs and is the core reason the Ohio Chamber advocates its repeal. The bill is in the House Economic & Workforce Development Committee, has been thoroughly vetted in five hearings, and should soon be recommended by the committee for passage.
Senate Bill 288 would accomplish a long-standing objective of the Ohio Chamber: lowering the withholding tax rate on pass-through entity (PTE) business income from five to three percent, allowing small business owners to keep more capital in their company. Moreover, with the first $250,000 of PTE income now being exempt from personal income tax and the rate on PTE income above that being capped at three percent, the Ohio Chamber will be advocating for additional withholding rate reductions. SB 288 is in the Senate Ways & Means Committee and appears on track for a Senate vote before June.
House Bill 466 would specifically exempt from sales tax digital advertising services, whereby auto dealers, for example, advertise their products online. The Ohio Chamber supports the bill, but a broader, more problematic issue must be addressed. Specifically, an expanded interpretation of what constitutes a taxable “electronic information service” is resulting in more businesses being assessed sales tax for conveying information electronically. HB 466 is currently in the House Ways & Means Committee and may be acted upon soon.
Finally, on the heels of a successful 2015 sales tax holiday, Senate Bill 264 would establish August 5-7, 2016, as another one-time tax holiday. The Ohio Chamber supports this legislation and it appears to be on track for passage. It has passed the Senate and is in the House Finance & Appropriations Committee. Together, these four bills will further improve Ohio’s business tax climate.