| Last Updated July 8, 2008
Standard Mileage Rate Increase
The standard mileage rate for 2008 has been increased mid-year to 58.5 cents per mile for business driving from 50.5 cents for the first half of the year. The new rate was effective July 1, 2008. Reimbursements that exceed 58.5 cents per mile will be taxed as income to the recipients and will be subject to payroll taxes as well. Those tracking mileage for personal/business usage will want to split your log and notate your June 30th odometer reading for tax reporting purposes.
Streamlined Sales Tax
The Ohio Department of Taxation has taken measures to streamline Sales Tax calculations. The "Streamlined Sales Tax Effort Takes Step Forward," legislation signed by Governor Ted Strickland allows Ohio-based businesses that engage in delivery sales to return to the traditional method of calculating sales tax based on the origin of the sale.
The legislation, House Bill 429, sponsored by Rep. Bob Gibbs, R-Lakeville – allows businesses to make this switch as early as May 1, if they choose. But they also have the option of taking more time - merchants who had already begun charging sales tax on delivery sales based on the destination of the sale have, in total, until Jan. 1, 2010 to switch back to the traditional origin method.
The new law is, in part, a response to small business owners who considered destination sourcing more complex than Ohio’s traditional “origin” method. The vast majority of Ohio merchants have always collected and remitted sales tax based on the location of their store. H.B. 429 also means no change for out-of-state retailers selling into Ohio; they continue to collect sales taxes based on the rate at the destination of the sale, as they do today.
This transition was part of Ohio’s effort to become a full member of the Streamlined Sales Tax Project, a multi-state effort to harmonize sales tax rules across state lines and simplify compliance for multistate businesses. For years, the multistate group required states to move to destination sourcing in order to become full members. But in December 2007, the Governing Board of the Streamlined Sales Tax Project decided to allow “origin states” to become a full member of the organization starting in 2010 as long as at least four other “origin states” are also ready to become full members.
Merchants who switched to the new destination sourcing system and who will now be switching back per H.B. 429 will eventually be eligible for compensation of up to $1,000 (for mandatory switches to destination sourcing) and $600 (for voluntary switches). The compensation won’t be available until July 1, 2009 at the earliest.
Change in Extension Due Dates
The IRS has issued a change to the extended due date of certain tax forms. The change affects forms 1065 - U.S. Return of Partnership Income, 1041 – U.S. Income Tax Return of Estates & Trusts, and 8804 – Annual Return for Partnership Withholding Tax. Beginning with tax years ending on or after September 30, 2008, the extension of time to file your return has been reduced from six months to five. This means a December 31, 2008, Form 1065 on extension would be due on September 15, 2009.
Business Tax Breaks Expiring
Some business tax breaks will be expiring at the end of 2008. You will need to plan accordingly to take advantage of the following breaks before the expiration date.
Bonus depreciation – Companies can write off 50% of the cost of new assets placed in service in 2008. The remaining 50% of the cost is recovered under the normal depreciation rules. Most assets depreciated less than 20 years are available for the bonus depreciation.
Section 179 depreciation – Business can expense up to $250,000 in assets placed in service during the 2008 tax year. The full $250,000 can be claimed until $800,000 of assets are put in use during the year.
Business automobiles – The write off for 2008 is $10,960 for the first year. The limit is higher for new SUVs with loaded weights over 6,000 pounds and in service prior to Dec. 30th is $25,000 plus 20% of the remaining value can be depreciated. Pickup trucks over 6,000 pounds can be fully written off if the beds are at least six feet long and are separate from the cab.
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