R31. Collection at Source; Withholding  


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  • A. DUTY OF WITHHOLDING

    1) It is the duty of each employer who employs one or more persons, whether as an employee, officer, director or otherwise, on a salary, wage, or other personal service compensation basis, to deduct each time any such compensation is paid, allocated or set aside to an employee the tax of 2.1% on such qualifying wages subject to the Municipal income tax paid by said employer to said employee. However, the tax commissioner shall have the authority to grant employers with only one resident employee permission for said employee to file individually. The tax shall be deducted by the employer from:

    A) The gross amount of all salaries, wages, bonuses, incentive payments, fees, commissions and other forms of qualifying wages allocated, set aside, or paid to residents of the Municipality; and

    B) All compensation allocated, set aside, or paid to nonresidents for services rendered, work performed or other activities engaged in within the Municipality.

    C) An employer is liable for the payment of the tax required to be deducted and withheld, whether or not such tax in fact has been withheld.

    2) All employers within or doing business within the Municipality are required to make the collections and deductions specified for residents of the Municipality whose services were performed outside the Municipality.

    3) Employers who do not maintain a permanent office or place of business in the Municipality, but who are subject to tax on net profits attributable to the Municipality under the business apportionment percentage formula, are considered to be employers within the Municipality and subject to the requirements of withholding in respect of services performed by an employee(s) within the Municipality.

    4) The mere fact that the tax is not withheld will not relieve the employee of the responsibility of filing a return and paying the tax on the compensation paid. If the employer has withheld the tax and failed to pay the tax withheld to the tax commissioner, the employee is not liable for the tax so withheld, unless the employee colluded with the employer not to remit the withheld tax.

    5) Commissions and fees paid to professionals, brokers and others who are independent contractors, and not employees of the payor, are not subject to withholding or collection of the tax at the source. Such taxpayers must in all instances file a declaration and return and pay the tax.

    6) Where a nonresident receives compensation for personal services rendered or performed partly within and partly without the Municipality, the withholding employer shall deduct, withhold and remit the tax on that portion of the compensation which is earned within the Municipality in accordance with the following rules of apportionment:

    A) If an employer is located within the Municipality, all nonresident employees who report to the Municipal location are taxable to the Municipality unless the employer is withholding tax for other municipalities where the employee's work is performed.

    B) If the nonresident is a salesperson, agent or other employee whose compensation depends directly on the volume of business transacted or chiefly effected by the salesperson, the deducting and withholding shall attach to the portion of the entire compensation which the volume of business transacted or chiefly effected by the employee within the Municipality bears to the total volume of business transacted by him within and outside the Municipality.

    C) The deducting and withholding of personal service compensation of other nonresident employees, including officers of corporations, shall attach to the proportion of the personal service compensation of such employee which the total number of his working hours within the Municipality bears to the total number of all the employee's working hours.

    D) The fact that nonresident employees are subject to call at any time does not permit the apportionment of pay for time worked within the Municipality on a seven-day per week basis. The percentage of time worked within the Municipality will be computed on the basis of a 40-hour week unless the employer notifies the tax commissioner that a greater or lesser number of hours per week is worked.

    E) The determination of tax liability of nonresidents working in and out of the corporate limits of the Municipality is to be computed based on the formula of the total number of days worked in the Municipality divided by the total number of days worked during the year and the resulting percentage applied to the total annual income from wages, including sick leave and vacation pay. Where no record can be substantiated of the number of days worked, the figure 240 is to be used as the total number of days worked.

    F) The occasional entry into the Municipality of a nonresident employee who performs personal services on twelve or fewer days in a calendar year in the Municipality and performs the duties for which he is employed primarily outside the city, shall not be deemed to take such employee out of the class of those rendering their services entirely outside the Municipality unless one of the following applies:

    i) The individual is an employee of another person; the principal place of business of the individual's employer is located in another municipal corporation in the state of Ohio that imposes a tax applying to compensation paid to the individual for services performed on those days in the Municipality; and the individual is not liable to that other municipal corporation for tax on the compensation paid for such services.

    ii) The individual is a professional entertainer or professional athlete, the promoter of a professional entertainment or sports event, or an employee or such a promoter, all as may be reasonably defined by the Municipality.

    (1) In the case of employees of a professional athletic team who are nonresident members of the professional athletic team, the deduction and withholding of personal service compensation shall attach to the entire amount of wages, salaries and other compensation received for duty days that occur in the Municipality. To determine the Municipality-source income of a nonresident member of a professional athletic team not paid specifically for duty days, the following allocation formula must be used: The qualifying wages, earned and subject to tax is the total income earned during the taxable year, including incentive payments, signing bonuses, reporting bonuses, incentive bonuses, roster bonuses and other extras, multiplied by a fraction, the numerator of which is the number of duty days in the Municipality during the taxable year, and the denominator of which is the total number of duty days spent both within and without the Municipality during the taxable year.

    (2) Travel days that include a game, practice, meeting, promotional activity or other similar team event are considered duty days spent in the Municipality. Travel days involving no game, practice or required service will not be apportioned to the Municipality, but will be included in the total number of duty days.

    (3) For purposes of this section:

    (i) The term "professional athletic team" includes, but is not limited to, any professional baseball, basketball, football, soccer or hockey team.

    (ii) The term "member of a professional athletic team" shall include those employees who are active team members, team members on the disabled list and any other persons required to travel and who do travel with and perform services on behalf of a professional athletic team on a regular basis. This includes but is not limited to coaches, managers and trainers.

    (iii) The term "duty days" shall mean all days during the taxable year from the beginning of the professional athletic team's official pre-season training period through the last game in which the team competes or is scheduled to compete.

    (iv) Duty days shall also include days on which a member of a professional athletic team renders a service for a team on a date that does not fall within the aforementioned period (e.g., participation in instructional leagues, all-star exhibition games or promotional activities). In addition, duty days includes days during the off-season when a team member undertakes training activities as part of a team-imposed program, but only if conducted at the facilities of the team.

    (v) Included within duty days shall be game days, practice days, days spent at team meetings, promotional activities and pre-season training camps, and days served with the team through all post-season games in which the team competes or is scheduled to compete.

    (vi) Duty days for any person who joins a team during the season shall begin on the day such person joins the team, and for any person who leaves the team shall end on the day such person leaves the team. Where a person switches teams during a taxable year, a separate duty day calculation shall be made for the period such person was with each team.

    (vii) Days for which a member of a professional athletic team is not compensated and is not rendering services for the team in any manner, including days when such member of a professional athletic team has been suspended without pay and prohibited from performing any services for the team, shall not be treated as duty days.

    (viii) Days for which a member of a professional athletic team is on the disabled list and performing no services for the team shall be presumed not to be duty days spent in the Municipality. However, such days are considered to be included in total duty days spent both within and without the Municipality.

    (4) The term "total compensation for services rendered as a member of a professional athletic team" means the total compensation received during the taxable year for services rendered:

    (i) From the beginning of the official pre-season training period though the last game in which the team competes or is scheduled to compete during that taxable year; and

    (ii) During the taxable year on a date which does not fall within the aforementioned period (e.g., participation in instructional leagues, all-star exhibition games or promotional activities). Such compensation shall include, but is not limited to, salaries, wages, bonuses as described in R31 A 5) F) ii) (1) and any other type of qualifying wages paid during the taxable year to a member of a professional athletic team for services performed in that year.

    (5) This section is designed to apportion to the Municipality, in a fair and equitable manner, the total compensation of a nonresident member of a professional athletic team for services rendered as a member of a professional athletic team. It is presumed that application of the foregoing provisions of this section will result in a fair and equitable apportionment of such compensation. Where it is demonstrated that the method provided under this section does not fairly and equitably apportion such compensation, the tax commissioner may require such member of a professional athletic team to apportion such compensation under such method as the tax commissioner prescribes, as long as the prescribed method results in a fair and equitable apportionment. A nonresident member of a professional athletic team may submit a proposal for an alternative method to apportion such compensation, when it is demonstrated that the method provided under this section does not fairly and equitably apportion such compensation. If approved, the proposed method must be fully explained in the Municipal income tax return for the nonresident member of a professional athletic team.

    iii) The income of nonresident entertainers is the entire amount received for performances, engagements or events that occur in the Municipality. In the case of a nonresident entertainer who is not paid specifically for a performance, the following allocation formula must be used: The income earned and subject to the tax is the total annual compensation multiplied by a fraction, the numerator of which is the number of performances the entertainer performed (or was available to perform, as, for example with understudies) in the Municipality, and the denominator of which is the total number of performances that the entertainer was obligated to perform under contract or otherwise during the taxable year.

    (1) Any person who, acting as a promoter, booking agent or employer, engages the services of, or arranges the appearance of any entertainer, entertainment act, sports event, band, orchestra, rock group, or theatrical performance, in the Municipality, and who makes any payment arising from said appearance shall be deemed to be an employer and shall, for purposes of the collection of the income tax, be required to withhold, report and pay over to the tax commissioner the tax at the applicable rate, on the gross amount so paid on the completion of the engagement, said reports to be on forms provided by the tax commissioner;

    (2) Any person who rents facilities to or for any entertainer, entertainment act, sports event, band, orchestra, rock group, or theatrical performance for use in performing services in the Municipality, and who makes any payment to those performers arising from said use of facilities, shall be deemed to be an employer and shall, for purposes of the collection of the income tax, be required to withhold, report and pay over to the tax commissioner the applicable tax at the rate hereof based on the gross amount so paid on completion of the engagement, said reports to be on forms provided by the tax commissioner.

    (3) An entertainer, performer or performing entity may request that the base amount for withholding the Municipal income tax be reduced by the amount of ordinary and necessary business expenses directly associated with the event. The tax commissioner must receive the request for a reduction of withholding tax at least 30 days prior to the performance date. Prior to the performance date, the tax commissioner will notify the performer and the withholding agent of the amount of allowable expenses to be deducted to arrive at the net income subject to withholding.

    (4) For the purposes of this regulation, an employer or agent of a nonresident entertainer will not be liable for payment of the tax unless the amount required to be deducted and withheld by the employer or agent for the Municipality on account of the employee exceeds $50 for a calendar year.

    G) Wage continuation plans paid by the employer or third party agent on behalf of the employer for purpose of health, rest, recuperation, or other reward are deemed to have the same tax situs as the primary job assignment or job location of the employee and are taxable on the same ratio as the normal earnings of such employee for his primary job assignment.

    7) An employer shall withhold the tax on the full amount of any advances made to an employee on account of commissions.

    8) An employer required to withhold the tax on compensation paid to an employee shall, in determining the amount on which the tax is to be withheld, ignore any amount allowed and paid to the employee for expenses necessarily and actually incurred by the employee in the actual performance of his services, provided such expenses are incurred in earning compensation, including commissions, and are not deducted as business expense by the employee.

    9) An employer whose records show that an employee is a nonresident of the Municipality and has no knowledge to the contrary, shall be relieved of the responsibility of withholding tax on personal service compensation paid to such employee for services rendered or work done outside the Municipality by such employee, provided, however, that such employer must withhold the tax on all personal service compensation paid such employee after the tax commissioner notifies said employer in writing that such employee is a resident of the Municipality. All employees are required to notify the employer of any change of residence and the date thereof.

    10) An employer shall not be required to withhold the tax from the qualifying wages earned by a resident of the Municipality for work done or services performed in another municipality that imposes a tax upon such qualifying wages of such resident if such employer withholds the tax on such resident's qualifying wages for such other municipality. Except, where such municipal tax is for a smaller amount than the tax imposed by Chapter 311 of the Cincinnati Municipal Code, the employer shall withhold and remit the difference to the Municipality.

    B. Return and Payment of Tax Withheld and Status of Employers

    1) Paying Electronically

    A) Employers who are required by Section 311-31(d) to deposit payments electronically for the purposes of paying employee withholding taxes shall remit payroll taxes by one of the electronic filing programs deemed acceptable by the tax commissioner.

    B) Exceptions to the electronic payment requirement may be requested from the tax commissioner by identifying the specific hardship that prohibits compliance.

    2) Employers not required to remit deposits electronically must mail the payment to the address identified by the tax commissioner as the depository. Payments delivered to the offices of the Tax Commissioner will be considered received the date they are received by qualified personnel.