Exemption on First Million Helps Entrepreneurs Succeed
One aspect of Ohio's new business tax code that makes the state particularly attractive to entrepreneurs launching small businesses is that there is no tax on the first $1 million of gross receipts. Instead, businesses with less than $1 million in gross receipts pay just a minimum tax of $150, points out William P. Driscoll, a partner in Columbus-based financial analysis firm Driscoll & Fleeter. 'That is a big plus for smaller enterprises, especially those that transact most or all of their business within the state of Ohio,' he says. 'It helps new companies get through the start-up phase—the most challenging time for most small businesses—and begin turning a profit sooner.'
Businesses of all types are increasingly focused on boosting efficiency and productivity, and success in those endeavors has a direct impact on the bottom line. However, companies in states that continue to tax corporate profits get hit with what amounts to a 'success penalty' (i.e., efficiency and productivity gains trigger higher tax levies). Ohio businesses no longer pay a tax on capital, freeing up money to invest in things like productivity improvements, and since the CAT applies to gross receipts rather than profits, 'A more profitable business does not incur higher taxes,' Fleeter notes.
