What taxes apply to a new small business?

Taxes for New Small Businesses in Ohio

When starting a small business in Ohio, understanding the tax obligations is critical for smooth operations and compliance. Below are the key taxes that typically apply to new small businesses in the state.

State-Level Taxes

• Commercial Activity Tax (CAT): Ohio imposes a Commercial Activity Tax on businesses with taxable gross receipts exceeding $150,000 annually. This tax is a gross receipts tax, not a net income tax, and rates vary depending on revenue brackets.
• State Income Tax Withholding: If your business has employees, you must withhold Ohio state income tax from their wages and remit it to the Ohio Department of Taxation.
• Sales and Use Tax: Businesses selling tangible personal property or certain services must collect and remit Ohio sales tax. Additionally, use tax applies to purchases made without sales tax paid.
• Employer Payroll Taxes: Employers are responsible for withholding and paying state unemployment insurance taxes and contributing to workers’ compensation insurance.

Local Taxes

• Municipal Income Taxes: Many Ohio cities and municipalities levy local income taxes on businesses and employees. Rates and rules vary by location, so check with the local tax authority where your business operates.
• Commercial Activity Tax Local Variations: Some local jurisdictions may have additional business-related taxes or fees.

Operational Tips for Tax Compliance

• Register with Tax Authorities: Register your business with the Ohio Department of Taxation and local tax agencies to obtain necessary tax accounts.
• Maintain Accurate Records: Keep detailed records of sales, payroll, and expenses to simplify tax reporting and bookkeeping.
• Automate Tax Filings: Use accounting software or payroll services to automate withholding, tax calculations, and filing deadlines.
• Stay Updated: As of 2026, tax rates and thresholds may change; regularly review Ohio Department of Taxation resources for updates.