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VILLAGE OF MALTA INCOME TAX RULES AND REGULATIONS (Page 2) |
.1 In the case of resident unincorporated businesses, professions, enterprises, undertakings or other entities conducted, operated, engaged in, prosecuted or carried on, irrespective of whether such taxpayer has an office or place of business in this municipality, there is imposed an annual tax of 1% on the net profits earned, accrued or received during the effective period of the ordinance attributable to this municipality, under the formula or separate accounting method provided for in Section 3 of the ordinance, derived from sales made, work done or services performed or rendered and business or other activities conducted in this municipality.
.2 The tax imposed on resident associations or other unincorporated entities owned by two or more persons is upon the entities rather than the individual members or owners thereof but the tax imposed on an unincorporated resident entity owned by one person is upon the individual owner. (For tax on that part of a resident owner's distributive share of net profits not taxed against the entity, see Article III-A.3b).
.3 The tax imposed by-Section 3, paragraph A-3a of the ordinance is imposed on all resident unincorporated entities having net profits attributable to this municipality under the method of allocation provided for in the ordinance, regardless of where the owner or owners, of such resident unincorporated business entity reside.
.4 Resident unincorporated entities owned by two or more persons all of whom are residents of this municipality shall disregard the method of allocation provided for in the ordinance and pay the tax on their entire net profits thereof. In such case, the tax paid by the entity shall constitute all tax due from the owners or members of the entity for their distributive share of such net profits; however, an additional return shall be required from any such owner or member having taxable income other than the distributive share of the net profits from the entity.
b. Imposition of Tax on Resident's Distributive Share of Profits of a Resident Unincorporated Business Entity, Not Attributable to this municipality.
.1 A resident individual who is sole owner of a resident unincorporated entity shall disregard the business allocation formula and pay the tax on the entire net profits of this resident unincorporated business entity by this municipality.
.2 In the case of a resident individual partner or part owner of a resident unincorporated entity, there is imposed an annual tax of 1% on such individual's distributive share of net profits earned, accrued or received during the effective period of the ordinance not attributable to this municipality, under the method of allocation provided for in Section 3 of the ordinance, and not taxed against the entity by this municipality.
4. a. Imposition of Tax on Net Profits of Non-Resident Unincorporated Businesses:
.1 In the case of non-resident unincorporated businesses, professions, enterprises, undertakings, or other activities conducted, operated, engaged in, prosecuted or carried on, there is imposed an annual tax of 1% on the net profits earned, accrued or received during the effective period of the ordinance attributable to this municipality, under the formula or separate accounting method provided for in the ordinance.
.2 The tax imposed on non-resident unincorporated entities owned by two or more persons is upon the entities rather than the individual members or owners thereof. (For tax on that part of a resident owners distributive share of net profits not taxed against the entity by this municipality. See Article III-A.4b.
.3 Non-resident unincorporated entities owned by two or more persons all of whom are residents of this municipality may elect to disregard the method of allocation provided for in the ordinance and pay the tax on the entire net profits. In such case, the tax paid by the entity shall constitute all tax due from the owners or members of the entity for their distributive share of the net profits; however, a return shall be required from such owner or member having taxable income other than the distributive share of the net profit from the entity by this municipality. See Article XV for Credits.
b. Imposition of Tax-on Resident's Share of Profits of a Non-Resident unincorporated Business Entity Not Attributable to this municipality. See Article XV for Credits.
1. A resident individual who is sole owner of a non-resident unincorporated business entity shall disregard the business allocation formula and pay the tax on the entire net profits of this unincorporated entity by this municipality.
.2 In the case of a resident individual partner or part owner of a nonresident unincorporated entity, there is imposed an annual tax of 1% on such individual's distributive share of net profits earned, accrued or received during the effective period of the ordinance not attributable to the city under the method of allocation provided for in Section .3 of the ordinance and not taxed against the entity by this municipality.
5. Imposition of Tax on Net Profits of Corporations.
a. In the case of corporations, whether domestic or foreign and whether or not such corporations have an office or place of business in this municipality, there is imposed an annual tax of 1% on the net profits earned, received or accrued during the effective period of the ordinance attributable to this municipality under the formula or separate accounting method provided for in the ordinance.
b. In determining whether a corporation is conducting a business or other activity in this municipality, the provisions of Article III-B of these regulations shall be applicable.
c. Corporations which are required by the provisions of Section 5727.38 to 5727.41, inclusive, of the Revised Code of Ohio, to pay an excise tax in any taxable year as defined by the ordinance, may exclude that part of their gross receipts upon which the excise tax is paid. In such case, expenses incurred in the production of such gross receipts shall not be deducted in computing net profits subject to the tax imposed by the ordinance.
6. Amplification:
In amplification of the definition contained in-Article 11-A of these regulations but not in limitation thereof, the following additional information respecting net business profits is furnished.
a. NET PROFITS.
.1 Net Profits as used in the ordinance and these regulations means net profits derived from any business, profession or other activity or undertaking carried on for profit or normally carried on for profit.
.2 Net Profits as disclosed on any return filed pursuant to the provisions of the ordinance shall be computed by the same accounting method used in reporting net income to the Federal Internal Revenue Service (providing such method does not conflict with any provisions of the ordinance). Net profits, shown on returns filed pursuant to the ordinance must be reconciled with the income reported to the Federal Internal Revenue Service.
b. GROSS RECEIPTS.
.1 Gross Receipts shall include but not be limited to income in the form of commissions, fees, rentals from real and tangible personal property, and other compensation for work or services performed or rendered as well as income from sales of stock in trade.
.2 From gross receipts there shall be deducted allowable expenses to arrive at the net profit subject to tax.
c. EXPENSES.
1. All ordinary, reasonable and necessary expenses of doing business including reasonable compensation paid employees, shall be allowed but no deduction may be claimed for salary or withdrawal of a proprietor or of the partners, members, or other owners of an unincorporated business or enterprise.
.01 If not claimed as part of the cost of goods sold or elsewhere in the return filed, there may be claimed and allowed a reasonable deduction for depreciation, depletion, obsolescence, losses resulting from theft or casualty, not compensated for by insurance or otherwise of property used in the trade or business, but the amount may not exceed that recognized for the purpose of the federal income tax. Provided, however, that loss on the sale, exchange or other disposition of depreciable property or real estate, used in the taxpayer's business shall not be allowed as a deductible expense.
.02 Current amortization of emergency facilities under the provisions of the Internal Revenue Code, if recognized as such for federal income tax purposes, may be included as an expense deduction hereunder.
.03 Where depreciable property is voluntarily destroyed only the cost of such demolition and the undepreciated balance thereof will be allowed as an expense in the year of such demolition, to the extent allowable for federal income purposes.
.04 Bad debts in a reasonable amount may be allowed in the year ascertained worthless and charged off, or at the discretion of the Commissioner (if the reserve method is used), a reasonable addition to the reserve may be claimed, but in no event shall the amount exceed the amount allowable for federal income tax purposes.
.05 Only taxes directly connected with the business may be claimed as a deduction. If for any reason the income from property is not subject to the tax, then taxes on and other expenses of said property are not deductible. In any event, the following taxes are not deductible from income: (1) the tax under the ordinance; (2) federal or other taxes based upon income exclusive of the amount of Ohio franchise tax computed on the net worth basis; (3) gift, estate or inheritance taxes; and (4) taxes for local benefits or improvements to property which-tend to appreciate the value thereof.
.06 In general, non-taxable income and expenses incurred in connection therewith are not to be considered in determining net profits. Income from intangibles, by way of dividends, interest and the like, shall not be included if such income is subject to taxation under the in-tangible personal property laws of the State of Ohio or is specifically exempt from taxation under said law.
.07 If the taxpayer reports income that is nontaxable under the ordinance and such amounts are deducted in order to reconcile the return with the taxpayer's federal income tax return, expenses attributable to this nontaxable income shall not be allowed. In the absence of records showing the actual expenses attributable to such nontaxable income, and upon approval of the commissioner, such amount shall be deemed to equal five percent of such nontaxable income.
.08 Capital gains and losses from sale, exchange or other disposition of property shall not be taken into consideration in arriving at net profits earned. Any amount received on a sale or other disposition of tangible personal property used in business, in excess of book value, shall be treated as taxable income under the ordinance to the extent of depreciation allowable (under the ordinance). The balance shall be treated as capital gain.
7. Rentals from Real Property
a. Rentals received by the taxpayer are to be included in net income for the village income tax to the extent that they are considered income for Federal Tax purposes.
b. In determining the amount of gross monthly rental of any real property, periods during which (by reason of vacancy or any other cause) rentals are not received shall not be taken into consideration by the taxpayer.
c. Rentals received by a taxpayer engaged in the business of buying and selling real estate shall be considered as part of business income.
d. Real property, as the term is used in this regulation, shall include commercial property, residential property, farm property, and any and all other types of real estate.
e. In determining the taxable income from rentals, the deductible expenses shall be of the same nature, extent and amount as are allowed by the Internal Revenue Service for federal income tax purposes.
f. Residents of this municipality are subject to taxation upon the net income from rentals (to the extent above specified), regardless of the location of the real property owned.
g. Non-residents of this municipality are subject to such taxation only if the real property is situated within this municipality.
h. Corporations owning or managing real estate are taxable only on that portion of income derived from property located in this municipality.
8. Patents and Copyrights:
a. Income from patents or copyrights is not to be included in net profits.
B. Allocation of Business Profits.
A request to change the method of allocation must be made in writing before the end of the taxable year.
1.. Separate Accounting Method.
a. The net profits allocable to this municipality from business, professional or other activities conducted in this municipality by corporations or unincorporated entities (whether resident or nonresident) may be determined from the records of the taxpayer if taxpayer has bona fide records which disclose with reasonable accuracy what portion of his net profits is attributable to that part of his activities conducted within this municipality.