Ohio Business Taxes at a Glance
Ohio taxes income at three levels: the state, many school districts, and hundreds of cities and villages. Businesses pay a gross receipts tax instead of a corporate income tax, and workers' compensation comes from a state agency. BOMCAS helps Ohio individuals and businesses manage each level.
State Income Tax: Flat From 2026
Starting with the 2026 tax year, Ohio has a single flat rate on taxable income above the zero-bracket amount. Ohio also allows a business income deduction: a portion of business income from pass-through entities and sole proprietorships is deducted, and the rest is taxed at a flat rate. Owners of S corporations, partnerships, and LLCs often benefit from it, but the definition of business income needs careful handling.
Recent legislation also tightened eligibility for some credits and exemptions. We prepare Ohio returns, apply the business income deduction correctly, and reconcile them to the federal return.
Pass-Through Entities and Nonresident Owners
Ohio pass-through entities with nonresident owners generally must withhold or pay Ohio tax on those owners' share of Ohio income, using the Ohio pass-through entity returns. Ohio also lets qualifying partnerships and S corporations elect to pay an entity-level tax, with a corresponding credit for owners. Whether the election helps depends on the owners' residency and their federal position. We prepare the entity filings, model the election each year, and track the credits that flow to each owner.
Municipal Income Taxes
Most Ohio cities and villages tax wages and net profits earned within their borders, and many tax their residents' income earned elsewhere, with a credit for tax paid to the work city that varies by municipality. Municipalities administer these taxes themselves or through regional agencies such as the Regional Income Tax Agency (RITA) or the Central Collection Agency (CCA). Businesses can choose to file municipal net profit returns centrally through the state.
Common issues include:
- Employees who live in one city and work in another
- Remote and hybrid employees, where withholding depends on where work is performed and how many days are spent in a city
- Contractors working on job sites in several cities
- Net profit returns for businesses operating in several municipalities
We prepare individual municipal returns, set up employer withholding by city, and handle net profit filings.
School District Income Tax
Some Ohio school districts levy their own income tax on residents. It is based on where you live, not where you work, and is filed with the Ohio Department of Taxation on a separate return. Employers must withhold it when they know an employee lives in a taxing district. We confirm district codes from employees' addresses and prepare the school district returns.
The Commercial Activity Tax Instead of a Corporate Income Tax
Ohio does not have a general corporate income tax. Instead, the Commercial Activity Tax (CAT) applies to taxable gross receipts sourced to Ohio. Since 2025, receipts up to $6 million per year are excluded, and businesses at or below that amount generally do not file. The annual minimum tax was eliminated in 2024, and the remaining taxpayers file quarterly.
Since the CAT is based on gross receipts, it applies regardless of profit. Related companies may be required or allowed to file as a group. Financial institutions pay a separate financial institutions tax. We determine whether a business crosses the exclusion, register and file when needed, and source receipts to Ohio.
Sales and Use Tax
Ohio has a state sales and use tax, with additional county and transit authority taxes. Vendors need a vendor's license, and taxable items include goods and some services, such as certain personal care, landscaping, building maintenance, and employment services. Ohio repealed several sales tax exemptions effective 2026. We register businesses, prepare returns, and check use tax on purchases.
Proving You Are Not an Ohio Resident
Ohio lets people who have moved away, such as retirees spending winters elsewhere, file an affidavit of non-Ohio domicile if they meet conditions that include limits on the time spent in Ohio. A valid affidavit creates an irrebuttable presumption that they are not Ohio residents. We help former residents decide whether it fits and file it on time.
Payroll and Workers' Compensation
Ohio payroll involves state income tax withholding, municipal income tax withholding, and school district tax withholding where applicable. Employers register with the Department of Job and Family Services for unemployment insurance.
Ohio is one of the few states where most employers obtain workers' compensation coverage from the state, through the Bureau of Workers' Compensation, rather than private insurers. Premiums are based on payroll and job classifications, and BWC requires payroll reports. We run payroll, handle the state and local filings, and prepare BWC payroll reporting.
Manufacturers, Hospitals, Builders, and Farms
- Manufacturing and automotive suppliers: inventory, fixed assets, and CAT sourcing
- Health care: physician practices and employees spread across cities
- Construction: municipal taxes on job sites in several cities
- Agriculture: farm reporting and sales tax exemptions for agricultural use
- Logistics: CAT on multistate receipts and high payroll volume
Bookkeeping for Ohio Businesses
Ohio bookkeeping needs to track wages by work location, net profits by municipality, and gross receipts for the CAT. We set up the chart of accounts and payroll records to provide these figures and reconcile them each month.
Getting Started With BOMCAS in Ohio
Employers withholding for several municipalities, businesses near the CAT exclusion, and pass-through owners weighing the entity-level election can contact BOMCAS for a remote review. Local pages for Ohio cities and services are planned under this section. Visit the BOMCAS home page or our services across the United States. This page gives general information and is not advice for a specific situation.
Talk to BOMCAS About Your Ohio Taxes
Have a question about your Ohio filings, payroll or bookkeeping? Contact BOMCAS or use the contact form below, and we will get back to you as soon as possible. You can also browse all United States services.