For residents of the City of Tiffin, an annual tax is provided in Regulation 1 - 1(P). For the purpose of determining the tax on the earnings of resident taxpayers, the source of the earnings and the places at which the compensation is earned are immaterial. All such earnings, wherever earned or paid, are taxable. No taxpayer may deduct a net loss from the operation of a business from compensation earned by the same taxpayer as an employee of a business. (Ord. 87-33. Sec. 7. Passed 7-6-87.) No taxpayer may carry a net operation loss for one taxable year forward or backward to another taxable year. (Ord. 87-33. Sec. 6. Passed 7-6-87.)

1. Items which are subject to the tax include but are not limited to:

(A) All wage related compensation. Examples include but are not limited to salaries, wages, commissions, bonuses, sheltered annuities or incentive payments, pay received for vacations, periods of sickness, sub pay, severance pay, wage continuation, or other periods of absence from employment, and other compensation, regardless of label, whether received directly or through an agent and whether in cash or in property, on and after January 1, 1969, in any of the following capacities:

(1) As an officer or employee, or both, of any corporation (including charitable and other non-profit corporations), joint stock association, or joint stock company;

(2) As an employee (as distinguished from a partner or member) of a general partnership, limited partnership, or any other form of unincorporated business entity owned by one or more persons;

(3) As an employee (as distinguished from the proprietor) of a business, trade or profession conducted by sole proprietor; 

(4) As an officer or employee (whether elected, appointed, or commissioned) of a governmental agency of the State of Ohio or any of the political subdivisions thereof, or of the United States Government or any of its agencies;

(5) As an employee of any other entity or person;

(B) All wage-related compensation. Examples include but are not limited to salaries, wages, commissions, bonuses, sheltered annuities or incentive payments, pay received for vacations, periods of sickness, sub pay, severance pay, wage continuation, or other periods of absence from employment, and other compensation, regardless or label, whether received directly or through an agent and whether in cash or in property, on and after January 1, 1969, and under the following conditions:

(1) Whether based upon hourly, daily, weekly, semi-monthly, monthly, annually, unit of production or piece-work rates; and

(2) Whether paid by an individual or any other business entity, including charitable and other non-profit corporations, governmental agencies, or any other entity.

(C) Commissions received by a taxpayer whether directly or through an agent and whether in cash or in property, for services rendered on and after January 1, 1969, regardless of how computed, by whom or wheresoever paid. If amounts received as a drawing account exceed the commissions earned, the tax is payable on the gross amounts received. Amounts received from an employee by way of expenses and not by way of compensation, and used as such by the individual receiving them are not deemed to be compensation if the employer deducts such expense advances as such from his gross income for the purpose of determining his net profits taxable under the Ordinance. If such commissions are included in the net earnings of a trade, business, profession, enterprise, or activity regularly carried on by such individual and therefore subject to tax under the Ordinance, they shall not again be separately taxed. In such case, such net earnings shall be taxed as provided in Regulations 2 - 3, 2 - 4, or 2 - 5.

(D) The receipt of fees and other compensation for personal services rendered shall be deemed to be subject to taxation under the Ordinance.

(E) Domestic servants are not subject to deduction and withholding under the Ordinance; however, their compensation is subject to taxation under the Ordinance.

2. Items which are not subject to the tax are limited to:

(A) Funds received from local, state, or federal governments because of service in the Armed Forces of the United States by the person rendering such service, or as a result of another person rendering such service.

(B) Public Assistance, pensions, unemployment compensation or similar payments, including disability benefits received from private industry or local, state, or federal governments, or from charitable, religious or educational organizations.

(C) Alimony or child support received.

(D) Income of minors under eighteen years of age.

(E) Dues, contributions, and similar payments received by charitable, religious, educational or literary organizations or labor unions, lodges, and similar organizations.

(F) Receipts from casual entertainment, amusements, sports events, and health and welfare activities conducted by charitable, religious and educational organizations and associations. (Ohio Rev. Code Section 718.01).

(G) Receipts of any association, organization, corporation, club or trust, which is exempt from federal taxes on income by reason of its charitable, religious, educational, scientific, etc., purposes.

(H) Gains from involuntary conversion, cancellation of indebtedness, interest on Federal obligations, and income of a decedent's estate during the period of administration, except income from the operation of a business.

(I) Interest on Investments and Dividends

(J) Income of:

(1) Public Utilities. (2) Carriers operating under the regulations of Interstate Commissions. (3) Dealers in intangibles. (4) Financial Institutions (including small Loan Companies) to the extent that such income is derived from interest earned. 

In the case of individuals who are non-residents of Tiffin, there is imposed an annual tax as provided in Regulation 1 - 1(P) for work done or services performed or rendered within the City of Tiffin, whether such compensation or remuneration is received or earned directly or through an agent and whether paid in cash or in property. When the principal office or workstation of a non- resident is located within the City, only time spent working outside of the City is excluded from tax. The taxable income can be calculated by multiplying the income by the number of days worked in Tiffin and dividing by the total number of days worked. (The standard is 260 days for a calendar year.) The items subject to tax under this section are the same as those listed and defined in Regulation 2 - 1. 

1. In the case of unincorporated business conducted by residents of the City of Tiffin, there is imposed an annual tax as provided in Regulation 1 - 1 (P).

2. The term "residents" in the phrase "conducted by residents of the City of Tiffin" will ordinarily be construed to have reference to the business entity itself, as distinguished from the partners, co-owners, proprietors, or other participants in its profits.

3. Generally, an unincorporated business entity owned by two or more persons will be taxed as a single entity. However, in the case of a non-resident unincorporated business entity which cannot be reached or taxed directly by the City of Tiffin, or if only part of its earnings may be directly taxed, then in either such case, resident owners or other resident participants in the profits thereof must include in their declaration and tax return or returns their distributive shares of such profits, or portion thereof not taxed to the business enterprise as a single entity, and must pay the tax thereon.

4. The tax imposed under the Ordinance is levied upon the entire net profits of the resident business, wherever earned, paid or accrued and regardless of the fact that any part of such business may have been conducted at or through a place or places of business located outside the City of Tiffin. Net operating losses shall not be carried forward or backward but must be allocated to the year realized. 

1. In the case of a non-resident unincorporated business entity engaged in the conduct of any business, there is imposed an annual tax as provided in Regulation 1 - 1(P) of such business to the extent conducted in or derived from activity in Tiffin.

2. A non-resident unincorporated business entity which has a branch or branches, office or offices and/or store or stores, warehouse, or other place or places in which the entity's business is transacted, located in the City of Tiffin, shall be considered to be conducting a business to the full extent of the sum total of all transactions originating or consummated in, by or through such Tiffin branch, office, store, warehouse or other place of business, including (a) goods, chattels, merchandise, etc., sold, or (b) commissions, fees or other compensation earned or paid.

3. In the case of any unincorporated business entity owned by one or more persons the tax, generally, shall be upon said unincorporated business entity as a single entity and not ordinarily upon the partners or members thereof. However, the provisions of Regulation 2 - 3(3) are applicable to render taxable against such resident partners or members their distributive share of any profits of such non-resident entity not taxable under this Ordinance.

4. In determining the proportion or amount of the taxable net profits of a non-resident unincorporated business entity having a place or places of business within and outside the City of Tiffin, such business entity may at its option use and apply the Business Allocation Percentage formula set forth in Regulation 2 - 6. Net operating losses may not be carried forward or backward but must be allocated to the year realized. 

1. In the case of a corporation doing business in the City of Tiffin, whether domestic or foreign, and whether domiciled in the City of Tiffin or elsewhere, there is imposed an annual tax as provided in Regulation 1 - 1(P) on such corporations, as a result of work done or services performed or rendered and business or other activities conducted in the City of Tiffin.

2. The provisions of Paragraph 2 and of Paragraph 4 of Regulation 2 - 4 are applicable to such corporations.

3. A corporation doing business both within and outside the City of Tiffin may, in determining the part of the net profits which are taxable under the Ordinance, at its option:

(A) Use the usual accounting system of the taxpayer corporation, as long as said usual accounting system shall be one acceptable to the U. S. Internal Revenue Department as evidenced by acceptance and approval of income tax returns filed therein; or

(B) Use the Business Allocation Percentage formula set forth in Regulation 2 - 6. 

In the absence of actual records to separate the accounting thereof, a business entity may, but is not obliged to, use the formula set forth in this Regulation to compute the percentage of its entire net profit (derived from activities both within and outside the City of Tiffin) which is taxable under the Ordinance, and to determine the tax payable to the City of Tiffin hereunder.

If the taxpayer did not have a place of business outside the City of Tiffin during the period covered by any declaration and/or return required under the Ordinance, its business allocation percentage is 100 percent; in other words, the taxpayer is required to pay a tax as provided in Regulation 1 - 1(P) on the entire net profit of the business. 

If the taxpayer had a place or places of business outside the City of Tiffin and was doing business in Tiffin during such period, the business allocation percentage shall be computed on the basis of each of the three following factors as may be applicable to the particular business activity:

(a) Real and tangible property within and without the City of Tiffin; (b) Business receipts within and without the City of Tiffin; and (C) Payrolls within and without the City of Tiffin.

The business allocation percentage is computed by determining the percentages (a) which real and tangible personal property located in the City of Tiffin bears to all real and tangible personal property (including that situated in the City of Tiffin) of taxpayer wheresoever situated; (b) which business sales in the City of Tiffin bear to taxpayer's entire business sales derived (including those derived from the City of Tiffin); and which payrolls paid by taxpayer within the City of Tiffin bear to taxpayer's entire payroll wheresoever paid (including the City of Tiffin payrolls); adding together the three percentages so arrived at, and dividing the total by three.

However, if one of the factors (property, sales or payrolls) is missing, the other two percentages are added and the sum is divided by two, and if two of the factors are missing the remaining percentage is the business allocation percentage. A factor is not to be deemed missing merely because all property, or the expenditures of the taxpayer for payrolls or the gross sales of the taxpayer, are found to be situated, incurred or received either entirely within or entirely without, the City of Tiffin.

EXAMPLE 1:

Corporation having places of business in Tiffin, Detroit and Cleveland. Tiffin real and tangible personal property $10,000. All real and tangible property (Tiffin, Detroit and Cleveland). $100,000. Percentage: 10%. Tiffin sales $15,000. All sales $75,000. Percentage: 20%. Tiffin payroll $6,000. All payroll $20,000. Percentage: 30%. Business allocation percentage: 10% plus 20% plus 30% 3 equals 20% 

EXAMPLE 2:

Same corporation owning no real or tangible personal property anywhere. Tiffin sales $15,000; all sales $75,000; (percentage: 20%) Tiffin payroll $6,000; all payroll $20,000; percentage: 30%. Business allocation percentage:

20% plus 30% 2 equals 25%

EXAMPLE 3:

Same corporation owning real and tangible personal property in Tiffin valued at $10,000 and owning no real or tangible personal property outside Tiffin. Other factors same as in examples 1 and 2.

Business allocation percentage: 100% plus 20% plus 30% 3 equals 50%

After determining such business allocation percentage, the tax shall be determined by applying that percentage to the entire net profits of the taxpayer, wherever derived (thus arriving at the taxable net profit), and computing the tax as provided in Regulation 1 - 1 (P), tax on the resultant taxable net profit.

In case it shall appear to the Commissioner of Taxation that any activity, business, income or capital of the taxpayer is improperly or inaccurately reflected, the Commissioner of Taxation may adjust items of income, deductions, and capital, and disregard assets in computing any allocation percentage.

1. Explanation of "Property" factor.

The percentage of the taxpayer's real and tangible personal property within the City of Tiffin is determined by dividing the net book value (during the period covered by the report) of such property within the City of Tiffin, without deduction of any encumbrances, by the average net book value similarly computed of all such property within and without the City of Tiffin. Only property owned by the taxpayer is considered in determining such percentage.

2. Explanation of "Business Receipts" factor.

"Business Receipts" means ascertaining the percentage which the gross sales of the taxpayer within the City of Tiffin, plus the gross credits or charges for the work done and performed or services rendered in the City of Tiffin bears to the total gross sales wherever made, plus the total gross credits or charges for work done and performed or services rendered. "Within the City" sales shall be deemed to include:

(A) Work done and performed or services rendered in the City of Tiffin.

(B) Rentals from property situated in the City of Tiffin, where the rental of such property is a usual or normal part of the taxpayer's business activity.

(C) All other business receipts earned in the City of Tiffin. For the purpose of determining business allocation percentage, no account shall be given to receipts, within or without the City of Tiffin, of income derived from intangibles (including stocks, bonds, royalties and the like), the income of which is taxable under the statutes of the State of Ohio.

(D) Compensation and other receipts from work done or services rendered within the City of Tiffin are allocated to the City of Tiffin and taxable under the Ordinance. All amounts so received, credited or charged by a taxpayer in payment for such work or services are so allocable, irrespective of whether done or performed by employees or agents of the taxpayer, by sub-contractor or by any other persons. It is immaterial where such amounts were payable or where they were received.

(E) Commissions or fees received by the taxpayer are allocated to the City of Tiffin if the service for which the commissions or fees were paid were performed in the City of Tiffin. If the taxpayer's services for which commissions or fees were paid were performed for the taxpayer by salesmen or other agents or employees attached to or working out of a place of business of the taxpayer within the City of Tiffin, the taxpayer's services will be deemed to have been performed in the City of Tiffin.

(F) Where a lump sum is received by the taxpayer in payment for services within and without the City of Tiffin, the amount attributable to services within the City of Tiffin is to be determined on the basis of the relative values of, or amounts of time spent in the performance of, such services within and without the City of Tiffin.

(G) Other business receipts from the sale of capital assets (property not held by the taxpayer for sale to customers in the regular course of business) are not business receipts. Receipts from the sale of real property held by the taxpayer as a dealer for sale to customers in the regular course of business are business receipts and are allocable to the City of Tiffin if the real property was situated in the City of Tiffin. Receipts from sales of intangibles included in business capital, held by the taxpayer as a dealer for sale to customers in the regular course of business, are business receipts and are allocable to the City of Tiffin if the sales were made in the City of Tiffin or through a regular place of business of the taxpayer in the City of Tiffin.

All receipts of the period covered by the report (computed on the cash or accrual basis, in accordance with the method of accounting used in the computation of the taxpayer's entire net income) must be taken into account.

3. Explanation of "Payroll" factor.

"Payrolls" means the total wages, salaries, and other personal service compensation exclusive of compensation of general executive officers.

The percentage of the taxpayer's payroll allocable to the City of Tiffin is determined by dividing the wages, salaries and other personal service compensation of the taxpayer's employees (except general executive officer, as defined below) within the City of Tiffin during the period covered by the report, by the total amount of compensation of all taxpayer's employees (except general executive officers) during such period.

Wages, salaries and other compensation are computed on the cash or accrual basis in accordance with the method of accounting used in the computation of the entire net income of the taxpayer.

Employees within the City of Tiffin include all employees regularly connected with or working out of a place of business maintained by the taxpayer in the City of Tiffin, irrespective of where the services of such employee were performed. However, if the taxpayer establishes to the satisfaction of the Commissioner of Taxation that because of the fact that a substantial part of its payroll was paid to employees attached to a place of business in the City of Tiffin who performed a substantial part of their services outside the City of Tiffin, the computation of the payroll factor according to the general rule stated above would not produce an equitable result, then the Commissioner of Taxation may, in his discretion, permit the payroll factor to be computed on the basis of the amount of compensation paid for services rendered within and without the City of Tiffin. On the other hand, wherever it appears that, because a substantial part of the taxpayer's payroll was paid to employees attached to places of business outside the City of Tiffin who performed a substantial part of their services within the City of Tiffin, the computation of the payroll factor according to the general rule would not properly reflect the amount of the taxpayer's business done within the City of Tiffin by its employees, the Commissioner of Taxation may require the payroll factor to be computed on the basis of the amount of compensation paid for services performed within and without the City of Tiffin. In any such case, where an employee performed services both within and without the City of Tiffin, the amount treated as compensation for services performed within the City of Tiffin shall be deemed to be (a) in the case of an employee whose compensation depends directly on the volume of business secured by him, such as a salesman on a commission basis, the amount received by him for the business attributable to his efforts within the City of Tiffin; (b) in the case of an employee whose compensation depends on other results achieved, the proportion of the total compensation which the value of his services within the City of Tiffin bears to the value of all his services; and (c) in the case of an employee compensated on a time basis, the proportion of the total amount received by him which the working time employed in the City of Tiffin bears to the total working time.

Personal service compensation paid to general executive officers of the taxpayer for acting as such should not be included in the computation of the payroll factor. General executive officers include the chairman, president, vice president, secretary, assistant secretary, treasurer, assistant treasurer, comptroller, director and any other officer charged with and performing general executive duties of the corporation. In the case of unincorporated entities, an executive officer shall be deemed to be a partner, co-owner, proprietor or other active participant in the profit of the enterprise. An executive officer whose duties or services are primarily restricted to one place of business of the taxpayer, whether within or without the City of Tiffin, is not a general executive officer for the purpose of this Regulation.

4. Adjustment of business allocation percentage formula.

Generally, the formula will result in a fair apportionment of the taxpayer's net profits within and without the City of Tiffin. However, due to the peculiar circumstances of certain businesses, the formula may work a hardship in some cases or result in a tax avoidance in others, and thus not do justice to the taxpayer or the City of Tiffin. Accordingly, in such cases, the Commissioner of Taxation may substitute factors calculated to bring about a fair and proper allocation in any case where the taxpayer has chosen to use the business allocation percentage formula. 

Where the fiscal year of a business differs from the calendar year, the tax shall be applicable to the net profits of the fiscal year. A fiscal year will be recognized only if it ends on the last day of some calendar month, and has been or may be recognized by the Internal Revenue Service.

In amplification of the definition contained in Regulation 1 - 1(E) of these Regulations, but not in limitation thereof, the following additional information and requirements respecting net business profits are furnished:

(A) Where necessary to properly reflect income, inventories must be used. The basis of pricing used for the purpose of the Federal Income Tax must in each instance be used.

(B) Where the books and records are kept on an "Accrual basis", "long-term contract basis" or "installment basis" or such basis is used in the filing of Federal Income Tax Returns, such basis must be used for the purpose of this tax.

(C) If the return is made on a "cash basis", Gross Profit shall include receipts from commissions, fees and interest as well as the gross profit or loss from sales of merchandise, chattels, goods, wares, securities, notes, and services, except as hereinafter provided.

(D) If the return is made on an "accrual basis", Gross Profit shall include (1) commissions, fees and interest earned, plus (2) the gross profit or loss from sales of merchandise, chattels, goods, wares, securities, notes, and services earned except as hereinafter provided.

(E) From Gross Profit there shall be subtracted allowable expenses to arrive at the net profits subject to tax.

(F) All ordinary and necessary expenses of doing business, including reasonable compensation paid employees, shall be allowed, but no deduction may be claimed for "salary" or withdrawals of a sole proprietor or of the owners of an unincorporated business entity.

(G) If not claimed as part of the cost of goods sold or elsewhere in the return filed, there may be claimed and allowed a reasonable deduction, the depreciation, depletion, obsolescence, or losses resulting from theft or casualty not compensated for by insurance or otherwise, of property used in the trade or business, but the amount may not exceed that recognized for the purpose of the Federal Income Tax. Provided, however, that loss on the sale, exchange or other disposition of depreciable property and real estate used in business, shall not be allowed as a deductible expense.

(H) Bad debts in a reasonable amount may be allowed in the year ascertained worthless and charged off, or (if the reserve method is used), a reasonable addition to the reserve may be claimed, but in no event shall the amount allowed exceed the amount recognized as a deduction for the purpose of the Federal Income Tax.

(I) Taxes. Only taxes directly connected with the taxpayer's business and actually paid may be claimed as deduction. The following taxes are not deductible from income:

(1) The tax under the Ordinance; (2) Any Federal or other taxes based upon income; (3) Gift, estate or inheritance taxes; (4) Taxes or assessments for local benefits or improvements to property which tend to appreciate the value thereof.

(J) Capital gains and losses (including gains and losses from the sale, exchange, or other disposition of depreciable business property and real property used in the taxpayer's business) shall not be taken into consideration in arriving at net business profits.

(K) If the taxpayer is a non-resident, only the amount of net profits applicable to the activities of the business in the City of Tiffin shall be subjected to tax. If the non-resident taxpayer's records do not disclose the actual net profits for the Tiffin branch, office, store, or activity separately, then the basis of allocation shall be disclosed in the return. If such basis of allocation is not deemed correct, in view of all the known circumstances, the Commissioner of Taxation may make a re- allocation based upon gross receipts or any other basis or bases which shall, under the circumstances of the case, more accurately reflect the net profits.

(L) In general, all business expenses recognized and allowed as such for the purpose of determining Federal Income Tax will be recognized and allowed for determining Tiffin Income Tax under the provisions of the Ordinance. However, no expenses connected with the acquisition or carrying of securities, the income from which is not recognized as taxable under the Ordinance, may be deducted in determining taxable net profits hereunder.

(M) In general, unearned income is not to be included in computing the tax levied hereunder. Gain or loss from the sale, exchange, or other disposition of capital assets, including depreciable property and real estate used in business, shall not be included in determining net profits. Income from intangibles such as dividends, interest and the like, should not be included if the property from which such income is derived is subject to taxation under the Intangible Personal Property Tax Laws of the State of Ohio, or is specifically exempted from taxation under said laws.

(N) Rentals including real property will be treated like any other business activity and the net profit shall be taxable.

(1) Real property, as the term is used in this Regulation, shall include commercial property, residential property, farm property, and any and all other types of real estate.

(2) In determining the taxable net profits from rentals, the deductible expenses shall be of the same nature, extent, and amount as are allowed by the Internal Revenue Service for Federal Income Tax purposes.

(3) Residents of Tiffin are subject to taxation upon the net income from rentals to the extent above specified regardless of the location of the real property owned. Non-residents of Tiffin are subject to such taxation only on net profits from real property situated within the City of Tiffin.

(O) Income from royalties or copyrights is not taxable under the ordinance.

In a form satisfactory to the Commissioner of Taxation, there shall be submitted with each return filed by a taxpayer subject to tax under Regulation 2 - 3, 2 - 4, and 2 - 5, a reconciliation between the net profit shown in the return filed with the Commissioner of Taxation and the adjusted gross income reported to the Internal Revenue Service.

If, as a result of a change made in the Internal Revenue Code or Regulations or by a judicial decision, an additional amount of tax will result under the Ordinance, a report of such change shall be filed by the taxpayer within thirty days after receipt of the final notice of such change from the Internal Revenue Service or after final decision of a Court adjudicating any such Federal Income Tax liability.