November 21, 2019 Tax Advisor

Ohio Senate Bill 26

Ohio Governor Mike DeWine signed Ohio Senate Bill 26 into law, which reflects several noteworthy tax changes.

  1. Repeals the lawyer and lobbyist exemption from claiming the business income deduction and preferential 3% tax rate. As before, if your income is from a pass-through entity (LLCs, LLPs, etc.) there is no tax on the first $250,000 of income with a flat 3% tax rate on any income above that threshold.
  2. Known as the “Pink Tax,” repeals the sales tax on feminine hygiene products, as well as prescription diapers and incontinence pads covered by Medicaid. Most states still tax tampons and other menstrual products and are often classified as “luxury items” rather than necessities. Consumer groups estimate Ohio women pay $4 million in taxes for these products.
  3. Allows teachers to deduct up to $250 for out-of-pocket expenses for classroom supplies and professional development.

The law also will require taxpayers claiming the business income deduction to list their North American Industry Classification System (NAICS) code for each source of business income claimed on their Ohio return.

Wayfair Update

It has been a little over a year since the U.S. Supreme Court ruled in favor of South Dakota, effectively reversing the long-held physical presence standard for sales tax collection that was in place since the Quill decision back in 1992. The court’s decision makes physical presence not necessary for a company to have substantial nexus with a state. Over the past year, almost all states that impose a sales tax, with the exceptions of Florida and Missouri have issued guidance on this matter.

We’ve included a summary of the state-by-state threshold amounts and implementation dates.

The Wayfair decision impacts numerous remote sellers (those without brick and mortar storefronts) in various states. Companies should analyze their facts and circumstances and evaluate whether it would be beneficial to either take advantage of state voluntary disclosure programs or potentially join the Streamlined Sales Tax organization (representing 23 states) to take advantage of their Certified Service Provider program – a third party software and return filing service.

To learn more about Ohio Senate Bill 26 or how the Wayfair decision could impact your business, contact your BMF Advisor or click here >>>.

About the Authors

Mark A. Rossetti

CMI
Senior Manager, State and Local Tax Services

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