Tax and Finance Management

Sponsors of CAT Repeal Make Their Case

The Ohio House Ways and Means Committee heard sponsor testimony this week on House Bill 234, which proposes a five-year phase-out of the state’s Commerical Activity Tax (CAT).

Ohio’s CAT was enacted in 2005, when the OMA helped lead the repeal of Ohio’s antiquated corporate tax and tangible personal property tax. Those taxes were replaced with the manufacturing-friendly CAT — a gross receipts tax that features a single low rate of 0.26% on in-state sales, while out-of-state sales are exempt.

The sponsors of HB 234 contend the CAT is a failed tax that distorts economic decision-making, but they overlook the fact that the CAT’s broad base and low rate minimize its impact on economic decisions. Moreover, CAT repeal under HB 234 would create a $2 billion annual budget gap — and with recent state spending increases for education, as well as cuts to personal income tax rates, repealing the CAT could mean it would be replaced with a new, much more burdensome tax on manufacturers.

OMA staff will continue to monitor HB 234 to ensure that repeal doesn’t mean repeal and replace. 10/14/2021

OMA Members Briefed on State Revenues, Federal Tax Plan

The OMA Tax and Finance Committee — chaired by Meredith Mullett, manager of tax compliance for The J.M. Smucker Company — met virtually this week. Guest speaker Kimberly Murnieks, director of the Ohio Office of Budget and Management (OBM), told members that Ohio has experienced the third-best economic recovery among large-population states, according to the “Back-to-Normal Index.” Fiscal year-to-date, Ohio’s General Revenue Fund tax revenues are $134 million (2.1%) above estimate, as noted in OBM’s latest monthly financial report.

Members also heard from A.J. Lewis, CPA and senior manager at OMA Connections Partner Clark Schaefer Hackett, who provided this overview of the U.S. House’s tax plan. David Eiselsberg, senior director, tax policy for the National Association of Manufacturers (NAM), encouraged members to engage their federal representatives via NAM’s Tax Action Center, adding that the proposed tax increases — including a 25% corporate rate — are estimated to cost the U.S. 1 million jobs in just the first two years. 10/13/2021

Which Industries Would Be Targeted by Federal Tax Plans?

The Tax Foundation has conducted an analysis of the tax plans offered by the Biden administration and Congress to determine how those plans would impact the effective tax rates on foreign profits of U.S. multi-nationals by industry.

According to the Foundation, non-metallic mineral product manufacturing — producers of glass, stone, clay, and concrete products — would be the most significantly affected industry. Primary metal manufacturing, paper manufacturing, and petroleum and coal products manufacturing would also be very heavily impacted. 10/11/2021

OMA Tax Committee Meets Oct. 13

The OMA’s Tax and Finance Committee will hold its third and final regularly scheduled meeting of the year on Wednesday, Oct. 13 at 10 a.m.

Guest speakers will include Kim Murnieks, director of Ohio’s Office of Budget and Management, with an update on the state’s finances, and A.J. Lewis from OMA Connections Partner Clark Schaefer Hackett with an overview of federal tax changes being considered by Congress. OMA members can register now for this online event. 10/7/2021

U.S. Tariffs to Remain on $350 Billion of Chinese Goods

This week, U.S. Trade Representative Katherine Tai announced the Biden administration plans to keep existing tariffs on more than $350 billion worth of Chinese goods due to China’s failure to meet the terms of former President Donald Trump’s “Phase 1” trade deal.

According to Reuters, Tai said the U.S. would keep all options open as it continues to push China to stop pouring billions of dollars of state subsidies into its semiconductor, steel, and other industries.

National Association of Manufacturers President and CEO Jay Timmons said China “remains a hub of bad behaviors — from intellectual property theft to market-distorting industrial subsidies” — and the U.S. needs “a new, holistic, and pragmatic approach to our relationship with China.” 10/5/2021

Reminder: Ohio Eliminates Sales/Use Tax on Employment Services

Earlier this year, as part of the FY 2022-23 state operating budget (House Bill 110), Ohio policymakers approved the repeal of the state’s sales tax on employment services used by businesses to hire employees. Repeal of this tax had been a longtime priority for Ohio manufacturers — and its elimination will save employers an estimated $303 million over the biennium.

OMA Connections Partner Plante Moran notes the repeal went into effect Oct. 1. “Companies that have historically paid sales tax to their vendors on these transactions should review their purchases after Oct. 1 to ensure sales tax is no longer being charged,” the firm says. Read more of the firm’s guidance. 10/5/2021

Federal Tax Plan Would Raise Cost of Plastics by $120 Billion

One of the federal proposals to pay for the $3.5 trillion Build Back Better Act is a new excise tax on plastics that are not reprocessed or recovered. The tax would be $0.20 per pound of virgin plastics used to make single-use plastics products, according to the non-partisan Tax Foundation.

The American Chemistry Council says the “plastic tax” is actually a $120 billion tax over ten years on “most everything Americans buy” and “a gift to China” since it would increase the cost of consumer goods by up to 26%. 10/5/2021

Four Tips to Improve Sales Forecasting

Is your business struggling to determine which platforms and technologies to use for your sales forecasting process? The answer is often more than one solution, according to OMA Connections Partner Plante Moran. To help mid-market manufacturers improve the quality of their sales forecasts, the firm has published these four tips. 10/4/2021

RSM’s Virtual Tax Summit, Nov. 1-5

OMA Connections Partner RSM will host its annual tax summit Nov. 1-5. The summit will be virtual, featuring an interactive platform, addressing concerns such as available tax incentives; industry-specific tax policy changes; and preserving cash for business operations. Members can register now for this complimentary event. 9/27/2021

Sales Tax Refund Review for Manufacturers

States provide several sales and use tax exemptions to manufacturers. But many manufacturers miss these exemptions due to tax law complexities. See this “Sales Tax Rapid Refund Review” for manufacturers, published by OMA Connections Partner Clark Schaefer Hackett, to identify refund or tax savings opportunities. 9/30/2021