Question
Well, just because I'm taking an extended break from selling does not mean I'm taking a break from staying informed. Although I must confess, I was again slow on the uptake with this one!
johnny first mentioned this:
Until Ohio implements their new commerce tax effectively charging income tax even when you sell at a loss. Yay.
in this thread:
Ohio sellers getting nailed by state ?
When I first read that, I thought - what is this? I've been reading about Taft's Ohio tax reform in the local newspapers for many weeks now, and never saw anything related to a commerce tax.
Until today's local newspaper article.
So, I did my homework on this. Again.
Here is the text from the website:
What is the Commercial Activities Tax (CAT)?
The CAT is a low-rate, broad-based tax levied on the gross revenues of all businesses (except financial institutions), including service providers, no matter what their form of organization (C-corporation, S-corporation, LLC, partnership or sole proprietorship). To aid small businesses, the first $1 million of receipts is exempt from the low rate (0.26%). For businesses reporting less than $1 million a year in sales, a flat $100 is charged.
Exports, meaning goods or services sold outside of Ohio, will not be subject to the CAT.
The CAT tax approach, which will be phased in over five years, is much fairer to all businesses than the system it replaces, which taxes goods but not services. The commercial activities tax is preferable because it's broad-based, set at a low rate, hard to avoid and easy to comply.
Here is the site:
Jobs for Ohio
In short, I will now have to pay a $100 Commercial Activity Tax to the state of Ohio on all my shipments to Ohio.
Let's put this in perspective:
1. In 2004, my total Ohio gross sales were $544.63. I just estimated my profit on those Ohio sales in an Excel spreadsheet, taking into account listing fees, FVF fees, PayPal fees, packaging costs, to be about $185.00 total.
2. My YTD 2005 Ohio gross sales are $393.48. My estimated profit before taxes is around $140.00.
So, if Taft has his way - and he probably will, as most businesses with significant sales $ in Ohio stand to benefit from his tax reform plan - I will conceivably have to pay 50 to 75% of my profits on my shipments to Ohio residents in this CAT!
There is no exemption for mail order retailers like myself who sell very little within the state of Ohio.
In short, I have 2 choices:
#1 - Refuse to ship to Ohio addresses anymore with a huge red disclaimer in my TOS and take every neg that comes my way from people who won't read or abide by my TOS.
#2 - Refuse to conduct any more commercial activity on eBay and only sell off unwanted personal property.
I just can't say any more right now. This is just freakin' unbelievable!
Answer
Going on welfare is so much cheaper! Or just get a job where you can come up with tax ideas for the State, like he does. B*astards!
Answer
Where does it indicate tax applies to out of state sellers?
Answer
I just got off the phone with Taft's office and explained my problem with the tax. I told his office that I'd be better off with the flat .26% than having to pay the $100.
They are logging my opposition to the CAT. That is all. Most likely not even logging my explanation.
Answer
Go here:
CAT
Go down to CAT and download the PDF.
In the PDF file on page 8 of 12 (labelled as 30 on the page itself), it says that out-of-state businesses have to also register with Ohio and pay the tax, then it lists the exemptions.
How do you suppose they plan to enforce this?
Sheesh!
Debating whether I should make a big fuss about this and try to get the proposal changed to exempt sales of under (pick a number) altogether, refuse to ship to Ohioans anymore (which would also eliminate that pesky sales tax), or declare all my sales as personal property sales.
I plan to sell only on a much more limited basis going forward, maybe only a few months out of the year, so that last option might be feasible.
Answer
Do I understand this correctly?
If I'm based in Ohio and engage in covered commercial activities, then starting with the first dollar of transactions with Ohio residents I am subject to the minimum tax of $100.
So every online sellers covered under this law who sells to even one Ohio resident will have to pay $100. each year regardless of the gross value or profit of the transaction(s).
And since eBay will provide, in response to authorized requests, all records of the resident addresses of sellers and buyers, the checking for compliance will not be a significant problem.
Ohio residents, who for example sell on eBay, will either have to pay the tax, exclude Ohio buyers or risk the penalties of ignoring the tax.
Answer
Originally Posted by BJGrolle
is much fairer to all businesses than the system it replaces, which taxes goods but not services.
I'd like to know what system it replaces. It's a brand new extra tax, unless it's replacing the Franchise Tax, which I highly doubt and even then it's a mega increase.
I'm pissed.
Answer
reston_ray, you do understand it correctly. There is no exemption.
They are not figuring sellers like us into their equation - Ohio sellers who sell online and who have a very small portion of our sales in-state.
In summary, the latest proposal would:
Eliminate ALL Tangible Personal Property Taxes on equipment, machinery, inventory, furntiure and fixtures;
Eliminate Corporate Franchise Taxes;
Reduce Personal Income Tax (21% reduction across the baord);
As a replacement, the state would implement a new Gross Receipts Tax on all sales in Ohio. This tax would be calculated at a rate of .26%.
Additionally, there would be increases in KwH, “sin”, and real estate transfer taxes; and elimination of Ohio estate tax.
The online calculator that is designed to show how much money we will save in taxes is provided by the Ohio Manufacturer's Association. Naturally, a manufacturer is subject to more of the taxes in the above list than someone like an eBay seller who is selling used goods.
When I go through the calculator, the 21% reduction in personal income tax more than offsets the $100 CAT. So I should be happy, right? Because I'm saving money?
Nope!
I'd get the 21% savings whether or not I kept selling on eBay. So, IMO, johnny is right. This is an additional tax.
They can try to convince me of how much I'm saving. But what I see is that they are making it unprofitable for me to continue to ship to Ohio. When the tax I must pay is such a large percentage of my Ohio profits, I have essentially shipped to Ohio for nothing.
Ohio residents, who for example sell on eBay, will either have to pay the tax, exclude Ohio buyers or risk the penalties of ignoring the tax.
Those are the choices.
I don't like the options, but I'd much rather take the negs from Ohio numptys who ignore the
NO SHIPMENTS TO OHIO RESIDENTS BECAUSE OF THE NEW COMMERCIAL ACTIVITY TAX!
than continue shipping to Ohio residents for free.
Answer
NO SALES OR SHIPMENTS TO OHIO RESIDENTS BECAUSE OF THE NEW COMMERCIAL ACTIVITY TAX!
Add sales, because sure as heck, someone will think they can do a pickup, since you don't ship.....
====
Anyone turning over less than $40,000 within the state is being penalised by this arrangement. There should be an annual option to either pay the 0.26% or the $100 flat fee. If you (the generic you) unexpectedly go over the $40,000 mark intrastate, you just pay a little more tax on your increased turnover.
Point out to your local/regional newspapers that the State is trying to discourage legitimate small/home businesses from contributing not only to the household budget, but also to the local economy. Give themn your own figures as a small business that sells nationwide, and what the fee is compared to the amount of intrastate business that you do, and how it intereferes with your ability to trade viably within the state.
Good Luck (again) , Kevin
Answer
Thanks Kevin, you are so right.