Ohio Municipal Net Profit Tax: City Income Tax on Your Business, Rates and Who Administers It
Ohio Municipal Net Profit Tax: City Income Tax on Your Business, Rates and Who Administers It
If your business is located in an Ohio city or village, or earns profit there, you may owe a municipal net profit tax in addition to the state taxes you already know about. Ohio does not levy a corporate income tax, but cities do tax business net profit, and many new owners do not expect it. This guide covers what the tax is, what current rates look like, who collects it, and the decisions you need to make before your first filing.
This article is informational content, not legal or tax advice. Municipal rates and procedures change, and your obligations depend on your entity type, your location and where your profit is earned. Confirm details with the city's finance office, and talk with a qualified CPA or attorney before you file or make an election.
What the Municipal Net Profit Tax Is
Ohio cities and villages tax business net profit under Ohio Revised Code chapter 718. Each municipality sets its own rate, and Ohio has no single statewide rate for this tax. Net profit is what the business has left after allowable deductions, not its gross receipts.
Do not confuse this with the Commercial Activity Tax. The CAT is a state gross receipts tax of 0.26% (.0026) on Ohio taxable gross receipts. Only businesses with more than $6 million of Ohio taxable gross receipts owe the CAT or must register for tax year 2025 and later, and CAT filing frequency depends on receipts. The CAT is not a substitute for the city net profit tax. Each one is a separate obligation.
Whether a city can tax your profit depends on where your business is located and where it conducts business. If you operate in more than one place, work out that question before you file, and take it to a CPA.
Current City Net Profit Rates
The rates below come from the 2026 city pages for four Ohio municipalities. They show how much rates can vary, but they are not a complete list, and cities change their rates. Check your own city before you estimate tax.
| City | Net profit rate (2026 city page) |
|---|---|
| Akron | 2.5% |
| Canton | 2.5% |
| Columbus | 2.5% |
| Youngstown | 2.75% (collected through RITA) |
Youngstown's 2.75% is the highest of the four. Look up your city's current rate on its official website or call its finance office. A rate found in a secondhand table may be out of date.
Who Collects the Tax
Collection is not handled by one system. The administrator you file with depends on the municipality where the tax is owed.
- The city or village itself. Some municipalities run their own finance or tax office and collect directly.
- RITA (Regional Income Tax Agency). Many cities use RITA to collect the tax. Youngstown is one of them.
- Cleveland's Central Collection Agency. Cleveland collects through its Central Collection Agency.
- Other regional agencies. Many other cities use regional collection agencies. Your city's finance office will tell you which one applies.
If your business works in more than one city, you may deal with several administrators. Keep a list of each municipality's administrator, rate and filing requirements, because they will not match.
The State Administrator Election Under ORC 718.80
ORC 718.80 allows a taxpayer to elect the Ohio Tax Commissioner as sole administrator of the municipal net profit tax. You make the election through Ohio Business Gateway. Once elected, the Commissioner administers the net profit tax for your municipal obligations in place of each city or its agency.
Three rules matter:
- The deadline. The election is due by the 15th day of the 4th month of the taxable year. For a business on a calendar year, that is April 15.
- All or nothing. The election applies across all municipalities. You cannot elect state administration for one city and local administration for another.
- What it covers. The election covers net profit only. Withholding and individual city income tax stay local.
Whether the election simplifies your filings depends on how many cities you touch and how well your records are kept. A business with profit in one city may gain little. A business spread across several cities may gain more. Compare the workload against what each city requires, and have a CPA confirm the election fits before the deadline. Confirm the mechanics through Ohio Business Gateway and the Ohio Department of Taxation.
What Stays Local
Even if you make the state election, two obligations stay with the municipality:
- Employee withholding. If you pay wages to employees who work in a city with an income tax, the city's withholding rules apply. Set up withholding with that city's administrator.
- Individual city income tax. Owners who live in or earn income in a taxing city may owe that city's individual income tax on their own income. This is separate from the business net profit tax.
Track each obligation separately in your bookkeeping so that every payment goes to the right administrator.
School District Income Tax
Some Ohio school districts levy their own income tax under Ohio Revised Code chapter 5748. It is separate from the city net profit tax and is not part of the city rate. Whether it reaches your business profit depends on your residence and how your business is organized. Ask your school district and the Ohio Department of Taxation whether your district levies the tax and how it applies to you.
Keep the Municipal Tax Separate From Other Ohio Requirements
Ohio owners often mix several different obligations together. Keep these apart:
- No state general business license. Ohio issues no single general state business license. Required licenses depend on your business type and can come from a state agency, a county or a city.
- No statewide general contractor license. Ohio has no statewide general contractor license.
- Counties issue no business license. The county auditor issues the sales tax vendor's license under a state statute. The application fee was $50 as of April 9, 2025, and you can apply through Ohio Business Gateway or the county auditor.
- No annual report for LLCs. Ohio LLCs file no annual or biennial report. Articles of organization cost $99.
- Trade names go to the state. Trade name registration costs $39 and is filed with the Secretary of State, not the county.
- Workers' compensation. Ohio workers' compensation coverage is bought from the state BWC fund.
Steps to Take Before Your First Filing
- List your business address and every city where you conduct business or earn profit.
- Look up each city's current net profit rate and find out which agency administers it.
- Decide whether to make the ORC 718.80 election. For a calendar-year business, the deadline is April 15.
- Register with each administrator and ask about filing requirements, due dates and any estimated payments.
- Set up wage withholding for employees with the correct city.
- Ask whether your school district levies an income tax that reaches your business income.
- Keep records by municipality so profit and expenses are allocated correctly.
Official Resources
- Ohio Department of Taxation: tax.ohio.gov
- Ohio Secretary of State: ohiosos.gov
- Ohio Business Central, the Secretary of State's online filing portal: ohiobusinesscentral.gov
- Ohio Small Business Development Centers: Ohio SBDC Network
- Your city or village finance office, reached through the municipality's official website
When to Get Professional Help
A single-city business with straightforward profit can often handle the basics on its own. Bring in a CPA or attorney if you operate in several municipalities, have employees in more than one city, use a partnership or corporate structure, or are weighing the state election. A short consultation before your first filing is worth more than a correction after it.
This article is informational only and is not legal or tax advice.