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SMART TAX USA - Ohio State Tax Exemptions for Manufacturing Facilities

In Ohio, the Office of Tax Incentives is part of the Department of Development and it is responsible for administering Ohio’s business tax incentive programs. The Office of Tax Incentives also works directly with the Ohio Tax Credit Authority, an independent 5-member board of economic development professionals that reviews and approves applications for tax credits and determines tax benefit levels. Tax policies generally favor manufacturing facilities because Ohio has traditionally been a state with a large manufacturing sector.

The Ohio State sales and use tax rate is 5.5% and individual counties are allowed to levy additional sales and use taxes. The state sales and use tax is applicable to retail sales of products and many different kinds of services in Ohio. The use tax is also applicable to storage, use and consumption of tangible personal property or the receipt of services if sales tax was not paid to the vendor or seller.

Sales Tax Exemption for Manufacturing Machinery and Equipment

Ohio’s Manufacturing Machinery & Equipment Sales Tax Exemption is intended to assist companies that purchase machinery and equipment for use in manufacturing operations. Sales tax exemptions may apply to machinery, equipment, supplies and fuel used in manufacturing facilities to produce tangible personal property for sales. This regulation exempts businesses whose applications are approved by the Ohio Tax Credit Authority from both state and county sales taxes.

Sales Tax Exemption for Warehouse Machinery and Equipment

The Warehouse Machinery & Equipment Sales Tax Exemption is applicable to companies that purchase certain kinds of equipment for warehouses in Ohio. Eligible machinery and equipment must be used at least 51% of the time for storage, transportation, mailing or handling of warehouse inventory if the inventory is primarily distributed outside Ohio to retail stores owned by the business or if the inventory is distributed via direct marketing. This regulation exempts businesses whose applications are approved by the Ohio Tax Credit Authority from both state and county sales taxes.

Sales Tax Exemption for Research and Development

The Research and Development Sales Tax Exemption provides relief from sales taxes on purchases of machinery and equipment that are used primarily for research and development. This regulation is applicable to direct research related to designing, creating or formulating new products, equipment or processes, and it is also applicable to pure scientific research without regard for production of products or services. The regulation exempts businesses whose applications are approved by the Ohio Tax Credit Authority from both state and county sales taxes.

Sales Tax Exemption for Warehouse Inventory

The Warehouse Inventory Tax Exemption provides relief from the personal property tax on certain kinds of inventory such as goods brought into Ohio for storage without additional processing and then distributed outside of the state. This tax exemption should be claimed on the Ohio Personal Property Tax Return.

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