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Ohio Senate Passes Improved Tax Reform Package

On June 2, 2005 the Ohio Senate passed Substitute House Bill 66 - the state budget/tax reform package - on a mostly party line vote of 19-13.  Republican Senators Lynn Wachtmann and Jim Jordan joined all 11 Senate Democrats in voting against the bill. Republican Senator Steve Stivers, who is serving in Iraq , did not vote.  All remaining Republican senators voted for the measure.  

While the proposed gross receipts or commercial activities tax (CAT) remains a component of the bill, the Senate did accelerate the phase-out of the inventory portion of the tangible personal property (TPP) tax.  Under the Senate passed measure, all three portions of the TPP tax (machinery & equipment, furniture & fixtures, and inventory) will be phased out uniformly over a four-year period, so that the entire TPP tax would be eliminated by 2009.  The acceleration of the inventory tax phase-out will have a significant positive impact on dealers as it relates to this tax package.    

While we remain concerned with the impact of the CAT on our industry, we are pleased the Senate made the necessary changes to the inventory tax phase-out.  In addition, the Senate stripped the authority of the Tax Commissioner to adjust the CAT rate, which will now require legislative action.  Also under the Senate version of the bill the vendor discount will remain at the current 0.9% instead of the .75% that was scheduled to go into effect on July 1, 2005.  It is important to note that the sales tax on the money difference will remain intact, as will the scheduled reductions in the personal income tax rates included in the tax reform package.  Please note the plan also adjusts the state sales tax rate from 6.0% to 5.5% on July 1, 2005.

Make no mistake.  Dealer interaction with members of the Senate was instrumental in making what originally was a terrible plan for our industry much better. OADA appreciates the efforts of dealers and metro association executives who contacted their senators.

The bill is now subject to debate in a House/Senate conference committee and is then expected to be forwarded to the Governor for his signature before the end of June. At this time no significant changes to the tax portions of the bill are anticipated in conference committee, but we will keep you apprised.  A summary of dealer-related portions of the bill will be forwarded to dealers upon final action by the legislature and the Governor in the near future.  In the meantime, dealers may contact OADA at (800) 686-9100 with any questions or click here for plan highlights and click here to calculate the impact of the Senate version on your dealership.