All for-profit businesses are responsible for remaining compliant with relevant federal, state, and local taxes. We strongly recommend that you consult with a professional accountant and/or attorney to determine your applicable federal, state, and local tax requirements. Please refer to the Professional Services page for legal assistance resources.
Most businesses will need a federal Employer Identification Number (EIN) from the Internal Revenue Service (IRS). The IRS - Do You Need an EIN? page will help you determine whether your business needs an EIN. The EIN application is free and must be completed during one session. After all the validations are finished you should receive an EIN for your business. If you have any questions the IRS maintains a Frequently Asked Questions page for the online EIN application.
There are a number of federal employment taxes. All employers must deposit and report applicable employment taxes to the IRS, including Federal Income Tax, Social Security and Medicare Taxes, Additional Medicare Tax, and Federal Unemployment Tax. Self-employed individuals are liable for the Self Employment Tax. The IRS maintains guides to the following:
State and Local Taxes
All Ohio for-profit businesses must register with the Ohio Department of Taxation. The Ohio Department of Taxation offers a free online Small Business Tax Workshop which provides greater detail on the types of taxes for which small businesses are liable and how to ensure full compliance. The Ohio Department of Taxation also maintains a Business Registration Guide, a Small Business Tax Training Manual, and a list of taxes administered by the State of Ohio.
The best way to get started is by creating an account with the Ohio Business Gateway. The Gateway will allow you to register, submit forms, and make payments for state and local taxes, including Sales & Use Tax, Employer & School District Withholding Tax, and Commercial Activity Tax. The Get Started Using The Gateway resource provides tips and tutorials on getting started with the Ohio Business Gateway. If you don’t feel comfortable using an online service there are also limited business registration services available via phone.
Here’s a brief overview of the most common types of State and Local taxes for businesses:
- Sales & Use Tax - Applies to the retail sale, lease, and rental of “tangible personal property” as well as the sale of selected services in Ohio
- Employer & School District Withholding Tax - Ohio businesses are responsible for withholding Ohio income tax and school district income tax from their employees’ pay. Ohio income tax withholding is required for all employees but school district income tax withholding is only applicable for employees who reside in a school district that has enacted such a tax.
- Commercial Activity Tax (CAT) - The CAT is an annual tax that must be paid by businesses whose gross receipts from business activities in Ohio amount to $150,000 or more in the calendar year. There are additional requirements for businesses with over $1 million dollars in gross receipts in the calendar year.
- Ohio Unemployment Tax - Most Ohio employers are liable to pay unemployment taxes and report wages paid to their employees on a quarterly basis.
- Local Income Tax - Most municipalities and even some townships will administer a local tax on businesses with employees working in that municipality. Businesses operating in a given municipality must withhold local income taxes from their employees’ pay and ensure payment to the proper municipality. Please check with the municipality or municipalities where your business will operate to ensure that your business is in full compliance with local income tax.
The Ohio Department of Taxation maintains an online tool for employers called The Finder, which provides information on local tax jurisdictions and tax rates for all addresses in Ohio, including for municipal tax income, school district income tax, and the sales & use tax.