Tangible personal property tax nearing end: Final returns due April 30

Ohio’s local property taxes on business machinery, equipment and inventory have long been a source of irritation for Ohio business owners. But, after more than a century and a half, these taxes are about to fade into the history books. The state’s final tangible personal property tax returns are due from businesses on Wednesday, April 30. The returns will cover the 2008 tax year, the last for the tangible personal property tax in Ohio. The gradual elimination of the personal property tax was a key element of reforms enacted in 2005 by the Ohio General Assembly and embraced by Gov. Ted Strickland in his 2008-09 state budget plan. The reforms will mean $3.9 billion in overall annual tax savings by the time they are fully implemented in the 2010 fiscal year, including $1.6 billion annual savings in tangible personal property taxes.Ohio Tax Commissioner Richard A. Levin said the tax has long been seen as a disincentive to investment. "Every major study of Ohio’s tax system has criticized this tax for hurting the state’s ability to compete, particularly when it comes to manufacturing," he said. "But this year is the last year for that tax. Next year, it’s history." The tangible personal property tax, Ohio’s largest local business tax, can be traced back to 1846, when the Ohio General Assembly enacted a law requiring that all property in Ohio be taxed by uniform rule. Since 1931, state law has limited taxes on tangible personal property to machinery, inventory, furniture, fixtures and other equipment used in the course of conducting business. The state’s assessment rate on tangible personal property is 6.25 percent for the 2008 tax year. Next year, the rate drops to zero – and Ohio will join a select group of nine other states without a general business tax on tangible personal property. Among Ohio’s neighbors, all have such a tax except Pennsylvania. Where business owners file their final personal property tax returns depends on whether the business is located in one county or more than one county. Single-county taxpayers must file with their county auditor; inter-county taxpayers must file with the Department of Taxation. Taxpayers may seek to have the deadline extended to June 15 as long as they make the request by Wednesday. When taxes are paid also depends upon the location of the business. For a business with property in only one county, the taxpayer can elect to pay half of their tax liability with their April 30 return and the balance by Sept. 20. If a business has property in more than one county, the total tax liability is due by Sept. 20.The phase out of the tangible personal property tax is part of a larger series of reforms that also include the gradual elimination of the corporation franchise tax and a 21 percent, across-the-board cut in income tax rates. Revenue from a new commercial activity tax (CAT) is being used to compensate schools and local governments for lost personal property tax revenue.