State House lawmakers are considering a tax cut aimed at the manufacturing industry.
Like most states, Ohio does not impose a sales tax on industrial machinery. House Bill 440, however, would scrap a tax on the sale of labor from staffing agencies to manufacturers, so long as the agencies provide workers who operate industrial machinery and equipment.
The bill would also exempt any supplies or janitorial services used to clean manufacturing machinery from the sales and use tax.
The bill’s lead sponsors — Reps. Jessica Miranda, D-Forest Park, and Sara Carruthers, R-Hamilton — framed the proposal Tuesday as a rollback on a sales tax that unfairly hits a business input, not the final product.
“Taxing manufacturing inputs is poor tax policy and anti-competitive for Ohio,” Carruthers said to the House Ways and Means committee.
Miranda said Ohio is one of 10 states that taxes labor retained through a staffing agency, which puts the state at a competitive disadvantage.
“A sales tax should only be applied to a finished good,” she said.
Financial analysis from the Ohio Legislative Service Commission states the legislation, if enacted, would cost about $112.5 million in 2021 and $123.5 million in 2022. The cost would grow at about 0.5 percent annually from there.
From that pot, both the Local Government Fund and Public Library Fund, would take about a $2 million annual hit.
Additionally, counties and regional transit authorities would lose about $29 million in revenue in 2020 and $32 million in 2021. The cost would grow at about 0.5 percent annually from there.
In an interview, Jon Honeck, a lobbyist for the County Commissioners’ Association of Ohio, shared his opposition to the bill.
“As a general rule, we’re opposed to any sales tax exemption that’s going to lead to a loss of revenue for the counties,” he said.
However, Carruthers said to the committee she expects the legislation to be “a wash” financially, because the decreased cost of maintaining would increase manufacturing revenue.