Ohio LLC Taxes

How is an LLC Taxed in Ohio?

Taxation in Ohio isn’t applied in the same way to all LLCs – instead, it varies depending on a number of factors, such as an LLC’s nature, locality, and tax election.

While LLCs typically benefit from pass-through taxation by default, they can elect to be taxed as one of the following:

• C Corporations: The LLC is treated as a separate entity to its owners, subject to the commercial activity tax (CAT), which is based on the gross receipts of the business, while the owners also pay personal income taxes on any distributions they take.
• S Corporations: In return for paying owners a “reasonable salary,” the LLC’s remaining profits are distributed among members without a need to pay FICA or self-employment taxes on them.

The following sections go into the various tax responsibilities of your LLC at local, state, and federal levels in Ohio to help you ensure your LLC navigates them effectively.

Ohio Local Taxes

Tax regulations and local laws vary considerably across Ohio and its various municipalities, with each city or county imposing its own set of distinctive taxes at the local level.

Below are the main local taxes and permits to be aware of:

Sales and Use Taxes

If you are an LLC that sells goods or services that are subject to sales and use tax, you are required to collect and remit the tax to the state. The Ohio sales tax rate is 5.75% for the state. 

However, this rate may vary depending on the county and regional transit authority where the sale takes place. A regional transit authority in Ohio is a type of local government entity that provides public transportation services to a specific region within the state. Some counties and regional transit authorities may levy additional sales and use taxes, ranging from 0.25% to 2.25%. 

In Ohio, there are four types of local entities that can impose sales and use taxes: 

• Cities
• Counties 
• School districts
• Regional transit authorities

In some parts of Ohio, different local entities that can charge sales and use taxes may share the same territory. These entities are counties and regional transit authorities. However, the total amount of local sales tax cannot go beyond 2.25% in these areas. If your business operates in one of these areas, you have to use the combined area code to collect the correct local tax.

Note: To find the sales and use tax rate that’s in effect in your locality, use the Ohio Department of Taxation’s The Finder tool. This tool can provide the sales tax rate for any location in Ohio by address, zip code, or GPS coordinates. You can also download tax rates and boundary data from this tool.

Special Situations

To determine which local area’s sales/use tax your Ohio LLC needs to pay, the following rules are observed:

• Local sales tax: Determined by the location of the seller. This means that the sales tax rate is based on where the seller has a physical presence, such as a store, office, or warehouse.
• Local use tax: Determined by the location of the consumer. This means that the use tax rate is based on where the buyer receives or uses the taxable goods or services.

However, there are a number of specific cases where these general rules in Ohio may be applied differently, such as for:

• Vendors: If a vendor makes sales from a temporary location, such as a trade show, fair, or festival, the vendor must collect the sales tax rate of the county where the sale takes place. If a vendor makes sales through the internet, mail order, or telephone, the vendor must collect the use tax rate of the county where the buyer is located, unless the vendor has no nexus in Ohio.
• Waste collection: If a waste collection service provider collects waste from multiple locations in different counties, the provider must collect the sales tax rate of the county where the provider’s place of business is located. If the provider collects waste from a single location in a different county, the provider must collect the sales tax rate of the county where the waste is collected.

For a more in-depth look into the various special situations, as well as the requirements of each, see the Ohio Department of Taxation website.

Property Tax

In Ohio, there is no statewide property tax, as it is instead set and managed by each county’s auditor’s office and treasurer’s office. Your business’s property value is assessed by these local government agencies, who apply the local property tax rate to calculate how much tax you owe. 

For more information on how property tax works in your local area, this means you’ll need to get in contact with either your county’s:

• Auditor’s office: For questions about appraisal methodology, exemptions, property values, and special inventory appraisal; or the
• Treasurer’s office: For questions about tax rates, tax bills, payment options, and any other information related to paying property taxes.

Note: To help you find the relevant contact information, you can use the county tax office directory provided by the Ohio Department of Taxation.

Ohio State Taxes

Every state has its own regulations and rules that dictate how it taxes individuals and businesses. Below is a list of the most relevant state-level taxes for LLCs in Texas. 

Commercial Activity and Financial Institutions Taxes

Ohio’s two unique state-specific taxes include the Commercial Activity Tax (CAT) and the Financial Institutions Tax (FIT). 

The CAT is an annual tax imposed on the privilege of doing business in Ohio. It applies to businesses with annual gross receipts of more than $150,000 in the state. There is a minimum tax applied to four tiers, which is based on annual gross receipts:

• Less than $1 million: $150 minimum tax
• $1 million–$2 million: $800 plus 0.26% x (taxable gross receipts – $1 Million)
• $2 million–$4 million: $2,100 plus 0.26% x (taxable gross receipts – $1 Million)
• Over $4 million: $2,600 plus 0.26% x (taxable gross receipts – $1 Million)

The FIT is a business privilege tax that applies to financial institutions with at least $50 million in total assets. The FIT rate varies from 0.8% to 14%, depending on the ratio of equity capital to total assets. 

If your LLC is subject to the CAT, you must file an annual CAT return by May 10 each year. If your LLC is subject to the FIT, you must file a FIT annual report by October 15 of each year. 

Note: If your LLC is not subject to either tax, you still need to file a No Tax Due Report through the Ohio Business Gateway by May 10 each year. This report is mandatory for all businesses that are registered with the Ohio Secretary of State but have no taxable activity in the state.

Ohio Income Tax

Ohio is one of the 41 states in the US that impose state-level business and individual income tax on residents and non-residents. 

Business income in Ohio is subject to different tax rules than individual income. The income tax rates and brackets depend on your taxable income and residency status. There are five income tax rates: 0%, 2.76%, 3.22%, 3.68% and 3.99%. 

You can register, file, and pay your state income taxes through the Ohio Business Gateway. To save money on Ohio state income tax, your business can take advantage of various tax credits, exemptions, and incentives that are available for certain activities, such as research and development, job creation, energy efficiency, and more. 

You can find more information on business credits that could be considered tax incentives on the Ohio Department of Taxation website. 

Sales-Related Taxes

In Ohio, a sales tax rate of 5.75% is applied to the price of most tangible personal property and some services that are sold to consumers. However, this rate can vary from 6.5% to 8%, depending on the local sales tax rates in the county or city where the sale takes place. 

Some of the products that have unique state sales tax requirements include:

• Alcoholic beverages: A gallon of beer is taxed at $0.18, a gallon of wine is taxed at $1.48, and a gallon of mixed beverages is taxed at $2.18.
• Cigarettes and tobacco products: A pack of 20 cigarettes is taxed at $1.60, and other tobacco products are taxed at 17% of the wholesale price.
• Motor fuel: A gallon of gasoline is taxed at $0.385, and a gallon of diesel is taxed at $0.47.
• Motor vehicles: A motor vehicle is subject to a sales and use tax of 5.75%, plus any local sales and use taxes, when it is purchased or leased.
• Telecommunications services: A telecommunications service is subject to a sales and use tax of 5.75%, plus any local sales and use taxes, when it is sold to an end user in Ohio.

This is not a complete list of the different products with separate sales-related taxes in Ohio. To ensure your LLC’s compliance regardless of what it sells, you should consult a tax professional who can walk you through the requirements.

Note: If your business plans to sell taxable goods or services, you must obtain a vendor’s license from the Ohio Department of Taxation, which allows you to collect, report, and remit sales taxes to the state. You can apply for a vendor’s license online via the Ohio Business Gateway website or in person at your local county auditor’s office. 

Transportation Taxes

Transportation taxes in Ohio are a collection of charges imposed specifically on transportation-related items and activities. For businesses that operate vehicles for commercial purposes, there are several key taxes to be familiar with, including: 

• Motor Fuel Tax 
• Motor Vehicle Sales and Use Tax
• Heavy Vehicle Use Tax

To see a complete list of all the state taxes, as well as more details on how they apply in different situations, you can visit the Ohio Department of Taxation website. 

Federal Taxes

Regardless of where your business is located, if you run an LLC in the US, there are a number of federal taxes you’ll need to pay. Below, we’ve explored some of the main types your LLC may be required to pay for federal tax purposes:

Income Tax

By default, the IRS will not treat single and multi-member LLCs as a separate entity from you for tax purposes. What this means is that you’ll need to report your share of your LLC’s profits on your individual tax returns and pay federal income tax on them at the personal rate of your tax bracket.

Having said that, keep in mind that LLCs can also elect to be taxed as C corps or S corps, which changes how these taxes are levied in different ways.

Self-Employment Tax

In addition to income tax, members of single- and multi-member LLCs will need to pay self-employment tax on the share of the business’s profits that they report on their personal tax return at the end of the year.

This tax is levied at a flat rate of 15.3% against businesses with net earnings that exceed $400, though it is applied slightly differently to LLCs that have elected to be taxed as S corps or C corps.

Employment Tax

If your LLC hires any employees, it will need to withhold a portion of their salaries to cover various types of taxes on your employees’ behalf – including Social Security, Medicare (FICA), and payroll taxes.

Furthermore, the members of any LLCs that have elected to be taxed as an S corp will be required to pay employment taxes on their salaries. However, in return for this, the remainder of the business’s profit after these salaries have been distributed will be safe from both self-employment and FICA taxes.

Excise Tax

If your LLC engages in certain types of business (such as the sale of alcohol and tobacco or operating a heavy highway vehicle, among others), it may need to pay federal excise taxes in order to do so legally. Each excise tax comes with its own set of rules, rates, and filing obligations you’ll need to be aware of.

Understanding and fulfilling these federal tax obligations is crucial for keeping your LLC compliant and avoiding unnecessary financial penalties and/or fines.

How to File LLC Taxes in Ohio

Below, we’ve outlined the general process an LLC in Ohio will need to follow in order to file their tax return correctly. Note that the specificities of each step will vary slightly depending on how your LLC is organized and the specific locality it’s based in. 

Step 1: Gather Your Documentation

To ensure accurate tax filing, thorough record-keeping is essential. Begin by collecting your personal information, including:

• You and your partner’s Social Security number, date of birth, and residential address
• The previous year’s tax returns
• Your LLC’s Employer Identification Number (EIN)

Then, you’ll need to gather all documentation related to your business’s income, such as:

• Invoices you’ve issued
• Sales transaction logs
• Electronic payment reports from services like PayPal or Stripe

Lastly, assemble all records pertaining to your business expenses, which should cover:

• Lease receipts for your business premises
• Bills for utilities
• Records of office supplies purchases
• Documentation of business-related travel
• Payroll records for employees

Note: Depending on how your LLC is organized and its tax election, you may need different information for your tax return. 

Step 2: Find The Right Tax Forms

Once you’ve gathered all necessary documents, the next step is to select the correct tax forms for your LLC based on its organization:

• Single-Member LLCs: The business’s total income and expenses are reported on a Schedule C form, which is attached to the owner’s personal tax return and due by April 15 or the following business day if it lands on a weekend or holiday.
• Multi-Member LLCs: File an information return using Form 1065. Members must fill out a Schedule K-1 showing their individual earnings or losses by March 15 or the next business day.
• C Corporations: File a corporate tax return using Form 1120 by the April 15 deadline or on the next business day if it’s a weekend or holiday.
• S Corporations: Use Form 1120-S for the corporate tax return and distribute Schedule K-1 forms to shareholders for reporting their shares of profits or losses. The deadline for filing taxes using 1120-S is March 15 or the following business day.

Since state and local taxes will have their own individual forms and requirements, we recommend contacting your municipality or hiring an accountant for guidance.

With the appropriate documentation gathered and the correct tax forms for your business entity on hand, you’ll be ready to fill them out and submit them.

Step 3: File Your Taxes

The majority of businesses choose electronic filing for its speed, enhanced security, and reliability compared to paper filing, which can be slower and more prone to errors. Here’s how it works:

• Federal Tax Returns: The IRS provides two electronic services for tax submission: Free File for businesses with an AGI below $72,000 and Free Fillable Forms for those above the threshold.
• State and Local Tax Returns: The filing requirements may differ depending on the type of tax. The Ohio Department of Taxation provides information on how to report various taxes, such as income tax, sales tax, commercial activity tax, and more. You can also find tax forms, online services, taxpayer assistance, and other resources on their website. 

Note: These electronic filing tools are best suited for those who are already confident in handling their LLC taxes as if filling out a paper form. 

For new business owners, we recommend opting for the expertise of a tax professional in order to ensure both accuracy and compliance in your tax filings. 

Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes.

Keep Your Ohio LLC Compliant

While LLCs are generally easier to maintain than corporations, there are certain state and local formalities your LLC must satisfy in order to remain compliant. 

Ohio LLC Annual Report

Ohio is one of the few states that does not require LLCs to file any annual report or pay any annual fee to the Secretary of State. This means you don’t have to worry about updating your LLC information or paying any extra costs every year. However, you still have to pay taxes and comply with other state and federal regulations for your LLC.

A tax report that an LLC may need to file is the Commercial Activity tax (CAT). This is an annual privilege tax on businesses with more than $150,000 in taxable gross receipts. 

The tax rate is $150 for the first $1 million of gross receipts, plus 0.26% of the excess amount. The CAT is due on May 10th of each year for annual filers, or on the 10th day of the second month following the end of each quarter for quarterly filers. You can register and file the CAT online through the Ohio Business Gateway.

Licensure and Tax Requirements

In Ohio, almost all businesses are required to obtain various licenses and permits at the local, state, and federal levels. Below, we’ve broken down three of the most common types your LLC may need:

• Sales Tax Licenses: If your LLC sells taxable goods or services in Ohio, you need to register for a vendor’s license and collect and remit sales tax to the state. You can apply for a license either online through the Ohio Business Gateway or with your county auditor. Then, on a periodic basis—either monthly, quarterly, or semiannually—you must file a sales tax return through the Business Gateway. Use Form UST-1 for sales tax and Form UUT-1 for use tax.
• Professional Licenses: If your LLC engages in a profession or occupation that requires a state license, certification, permit, or registration, you need to obtain the proper credentials from the relevant agency, board, or commission. For example, if your LLC provides accounting, real estate, or medical services, you need to have the appropriate licenses from the respective boards. You can find out what professional licenses and business permits you need to run your business in Ohio by visiting the Licenses and Permits page on the Ohio Business Gateway. 
• Environmental Permits: If your LLC’s project or activity will discharge any pollutants to the air, land, water, or sewers, you probably need a permit from the Ohio Environmental Protection Agency (EPA). This may depend on the type and quantity of the substance. You can find information on the types of permits, the application process, and the fees on the Ohio EPA website.

Note: To find out all the licenses and permits that your LLC may require, you can visit the Licenses and Permits section of the State of Ohio official website.