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Court ruling allows Ohio small businesses to file single local tax return

By The Center Square

COLUMBUS – An Ohio Supreme Court ruling should help small businesses owners cut through government bureaucracy and save time and money, according to a Central Ohio think tank.

The ruling, which could allow small businesses to file a single local income tax return, is a step in the right direction for small businesses throughout the state, according Greg R. Lawson, a research fellow at The Buckeye Institute.

“While more reform is needed to fix Ohio’s byzantine local tax system, this ruling is good news for Ohio and its economy and will allow small business owners to focus on keeping their doors open and creating jobs,” Lawson said.

At issue was what municipalities’ small businesses were required to file income tax returns. Ohio laws requires returns to be filed where a worker works and where they live. That can be challenging and substantially time-consuming for contractors, who might work in many different cities and towns over the course of a year.

Nearly 200 Ohio cities and villages sued the state, claiming when the legislature created a state-administered, centralized system – paid for by a fee on local governments – for reporting and collecting municipal taxes in 2014 and 2017, it violated the Home Rule Amendment of the Ohio Constitution.

Before the change, local municipalities administered, collected and audited their own taxes, forcing small businesses to file separate returns for each. The law consolidated the process, allowing those businesses to work through a centralized state system.

The court upheld the state’s system.

“It is common for contractors who work in numerous different cities to have to file 20, 30 or even 40 different tax returns,” Lawson said. “Today’s ruling by the Ohio Supreme Court will allow plumbers, electricians and other Ohioans who work for themselves or own small businesses to file their local income taxes in one place – saving them time and money and cutting unnecessary government bureaucracy.”