Chapter 5703-3 Property Tax

5703-3-01 Property excepting oil, gas and water production plants.

(A) For the purpose of classifying property for taxation, items of property devoted primarily to the general use of the land or buildings thereon are to be considered as real property and all other items of property including their foundations and all things accessory thereto which are devoted primarily to the business conducted on the premises are to be considered as personal property.

(B) The following items are hereby classified as real property for the purpose of taxation. This list is not all-inclusive and items similar to those herein classified are to be considered as real property if they meet the test as set forth in the preceding paragraph.

(1) Land and improvements to land, including retaining walls, piling, and mats for the general improvement of the site, private roads, walks, paving, areaways, culverts, bridges, viaducts, subways and tunnels, fencing, artificial lakes, reservoirs, spray ponds, dykes, dams, ditches and canals, drainage, storm and sanitary sewers, water lines for drinking, sanitary and fire protection purposes.

(2) Buildings, structural and other improvements to buildings, including their foundations, floors, partitions, insulation, walls, roof, stairways, loading and unloading platforms and canopies, systems for heating, air-conditioning, ventilating, sanitation, fixed fire protection, lighting, plumbing and drinking water, awnings and shades, building elevators, building escalators and package chutes.

(3) Generating equipment:

(a) Steam generating equipment primarily for furnishing heat to buildings and steam power for generators described in paragraph (3)(b), including all equipment and appurtenances and service lines auxiliary thereto.

(b) Electric generating equipment primarily for furnishing lights for buildings and yards, including all equipment and appurtenances auxiliary thereto and including all electric lighting circuits and equipment incidental thereto.

(4) Permanent standard gauge railroad trackage, bridges and trestles.

(5) Permanent crane trackage which is an integral structural part of a building.

(6) Fixed river or lake wharves and docks.

(7) Stationary car dumpers, other than mechanical dumpers, including track hoppers and bins.

(8) Silos used in farming.

(9) Walls forming storage yards.

(10) Mine shafts and entries.

R.C. 119.032 review dates: 05/22/2014 and 05/22/2019
Promulgated Under: 5703.14
Statutory Authority: 5703.05
Rule Amplifies: 5701.02 , 5701.03
Prior Effective Dates: (former TX-1-01); 7/8/58

5703-3-02 Oil, gas and water production plants.

Certain tangible property used in the oil, gas and water production industry shall be classified as real property or personal, property as follows:

General Plant Facilities

(Common to general oil, gas and water production plants, separate units)

(A) Real property

(1) Land and improvements to land, including retaining walls, piling, and foundations for the improvement of the site; private roads, walks, paving, areaways, culverts, bridges, viaducts, subways and tunnels; fencing, artificial lakes, reservoirs, spray ponds, dams, ditches, and canals; drainage, storm, plant waste, and sanitary sewers.

(2) Buildings and improvements to buildings, including foundations, floors, frames, permanent partitions, walls, roofs, stairways, loading and unloading platforms, and canopies; built-in system for heating, air-conditioning, ventilating, sanitation, fixed fire protection, lighting, plumbing and drinking water; awnings and shades, built-in inter-communicating system including private telephone, telegraph, and auto-call equipment, building elevators, (freight and passenger) and escalators.

(3) Power plant machinery and equipment:

(a) Steam power generating equipment including boilers, settings, breechings, and stacks; fuel storage tanks and bunkers; fuel preparation and handling equipment; special burners for coal, coke, oil or gas; ash handling equipment; fans, motors, turbines, or engines, pumps, piping, valves, fittings and insulation; condensing equipment, cooling towers, and spray pond equipment, air compressors, receivers, etc., and all auxiliary equipment.

(b) Electric power generating equipment including engines, turbines, generators, motors, exciters, pumps, condensers, coolers, fans, instruments, and all auxiliary equipment; piping, valves, fittings, and insulation; main switchboard complete; transformers, electric power circuits complete with wires, cables, conduits, towers, poles, and incidental equipment on primary side of sub-station switchboard.

(c) Electric power receiving equipment including main switchboard complete, transformers, converters, electric power circuits, complete with wires, cables, conduits, towers, poles, and incidental equipment on primary side of sub-station switchboard.

(4) Main water pumping station equipment, including deep wells, intakes, pumps, piping, valves, fittings, and insulation; storage tanks, fixed fire protection systems, storage and pressure water tanks and pressure pumps, piping, valves, fittings, and insulation; hydrants, and sprinkler systems.

(5) Main service lines for steam, electric power circuits, water or gas.

(6) Permanent trackage, bridges, trestles, and track scales; water and coaling stations.

(7) Permanent trackage, and electric power lines for gantry cranes, ore bridges and similar equipment.

(8) Wagon or truck platform scales.

(9) Fixed river or lake wharves.

(10) Gas holders.

The following items in paragraphs (A)(11) to (A)(22) of this rule, inclusive, when installed and located on the premises or leased premises of the owner and used in the recovery or production of water, will be included in the value of the right to the mineral and are to be assessed as real estate as provided in sections 5713.05 and 5713.06 of the Revised Code. The following items in paragraphs (A)(11) to (A)(22) of this rule, inclusive, when installed and located on the premises or leased premises of the owner and used in the recovery or production of oil or gas, shall not be included in the valuation of the right to the minerals pursuant to sections 5709.112 and 5715.01 of the Revised Code. The values as determined by section 5713.051 of the Revised Code shall be the true value in money of oil reserves and gas reserves constituting real property on the first day of January of each tax year. Items in paragraphs (A)(11) to (A)(22) of this rule, inclusive, are to be classified and assessed as personal property if they are not installed on the leased premises or premises of the owner or if said items are used for the transmission, transportation or distribution of oil, gas or water.

(11) All equipment, supplying power to pumps and pumping jacks, including motors, or engines, gas, gasoline, or diesel; driving pulley for belt to "Bull Wheel"; connector rods and supports.

(12) All casings.

(13) Foot valves and rods for operation of valves.

(14) Sucker rods.

(15) Derricks.

(16) All piping, valves and fittings and supports.

(17) Receiving and storage tanks.

(18) Compressors and engines (gas and air) piping, receivers, etc.

(19) Main distributing switchboard.

(20) Power wiring from switchboard to equipment.

(21) Gas scrubbers.

(22) Cooling water storage tanks.

(B) Personal property

General

(1) Well drilling equipment.

(2) Tool pullers.

(3) All machine shop equipment for repair of equipment and care of tools.

(4) All portable tools, including swabbing and clean out equipment, as well as all hand tools.

(5) Office furniture and fixtures.

(6) Equipment for preparation of sites, road building, grading, etc.

Compressor stations (Used in transmission, transportation or distribution)

(7) Compressors and engines (gas and air), piping, receivers, etc.

(8) Main distributing switchboard.

(9) Power wiring from switchboard to equipment.

(10) Reforming gas plant.

(11) Gas cooling towers, pumps and piping and supports.

(12) Main steam piping used in production.

(13) Gas scrubbers.

(14) Water pumps and piping and supports from compressors to spray pond.

(15) Spray pond pumps, piping and supports, spray heads.

(16) Machine shop equipment for maintenance and repair.

(17) Absorbers and dehydrators; contractors.

(18) Calorimeters.

(19) Welding shop and equipment.

(20) Yard flood lighting.

(21) Portable fire protection equipment.

(22) Hoists and cranes.

(23) Lubricating oil equipment, including storage tanks, pumps, piping, filters, dewatering equipment, settling tanks, etc.; fuel measuring equipment, meters, pressure regulators, etc.

(24) Lockers.

(25) Control room, meters, gauges and piping.

(26) Portable tools, (welders, air compressors and small tools).

(27) Cooling water storage tanks.

(28) All other engines, machinery, tools and implements of every kind, including foundations, used or designed to be used in processing, or incidental thereto, with their installation costs, including all equipment ancillary or auxiliary to any of the personalty above listed.

Freight, cartage and installation costs, including foundations and incidental materials, labor, etc., incurred in erecting any above equipment are to be included as a part of the cost of this equipment.

R.C. 119.032 review dates: 05/22/2014 and 05/22/2019
Promulgated Under: 5703.14
Statutory Authority: 5703.05
Rule Amplifies: 5701.02 , 5701.03
Prior Effective Dates: 7/25/1939, 2/29/1949, 1/14/2008

5703-3-03 Filing of balance sheets; effect of repeal and reduction of listing percentage.

(A) Taxpayers engaged in any business, profession or occupation conducted for gain, profit or income on their own account, and taxpayers or fiduciaries returning for estates or beneficial owners engaged in any business, profession or occupation conducted for gain, profit or income, who are required to file a personal property tax return shall file a balance sheet at the time of making return on appropriate forms prescribed by the department of taxation.

(B) Amended Substitute House Bill 66 of the 126th General Assembly, effective with the 2008 return year, adjusted the listing percentage for returning personal property for taxation to zero per cent; therefore, general personal property taxpayers no longer need to file returns after the 2008 return year. However, relevant rules remain effective, particularly for the 2008 return and prior years to the extent that a taxpayer has failed to comply with the law for tax years prior to its effective repeal.

(C) The following form, located on the department's website at http://www.tax.ohio.gov/Forms, is incorporated in this rule by reference: "Form 921: Ohio Balance Sheet," revised November 2007.

Effective: 08/07/2014
R.C. 119.032 review dates: 05/22/2014 and 08/07/2019
Promulgated Under: 5703.14
Statutory Authority: 5703.05
Rule Amplifies: 5711.101 , 5711.27
Prior Effective Dates: (former TX-41-01); 7-25-39

5703-3-04 Dates for listing taxable personal property.

(A) All taxpayers required by rule 5703-3-03 of the Administrative Code to file a balance sheet and make a return of taxable property used in business shall list such personal property as of the close of business of the last day of December, except those taxpayers filing an initial personal property tax return upon first engaging in business in this state pursuant to sections 5711.03 and 5711.04 of the Revised Code or unless otherwise provided by this rule.

(B) Any taxpayer required to file an income tax return with the United States internal revenue service on a fiscal year basis shall employ the same fiscal year end for listing his personal property used in business. For the purpose of listing such personal property, such fiscal year end shall be that for the fiscal year ending in the calendar year preceding the calendar year in which the property tax return is required to be filed. If a taxpayer has not been engaged in business in Ohio for a full twelve months immediately preceding such fiscal year end, he shall list all taxable personal property as of the close of business of the last day of December.

(C) A taxpayer may, by written application to the tax commissioner setting forth facts showing good cause, request permission to employ a fiscal year end for making a return of taxable property other than that used for federal income tax purposes. A taxpayer who is not required to file a return with the internal revenue service may similarly make a written application to the commissioner, requesting permission to employ a fiscal year end for making return of his taxable property other than the last day of December. Any taxpayer making written application under the provisions of this paragraph must have been engaged in business in Ohio a full twelve months immediately preceding the fiscal year end requested.

(D) A taxpayer shall employ the same listing day each year, unless upon written application to the commissioner or by order of the commissioner a different day of listing be authorized or required.

(E) A taxpayer who has acquired or disposed of property subject to taxation under section 5709.01 or 5709.02 of the Revised Code, is required to employ, or may apply for, an alternate listing day with respect to such property, when:

(1) The property so acquired or disposed of constitutes an entire plant, a facility, or a division; and

(2) Such property was transferred by means of purchase or sale, merger, or reorganization; and

(3) Such property would otherwise be excluded from taxation for one year or would otherwise be taxed more than once in a year.

If such property would otherwise be excluded from taxation, the taxpayer acquiring the property shall list that property as of the last day of the month of acquisition. If such property would otherwise be taxed more than once in a year, the taxpayer disposing of such property may apply in writing to the commissioner on or before April thirtieth of that year for designation of an alternate day which will eliminate the listing of such property from the disposing taxpayer's return.

The alternate lising day provided for by this paragraph is in addition to the listing day for all other property and shall only apply to such acquired or disposed property, and shall be used for one year only.

This rule does not apply to financial institutions or to dealers in intangibles.

R.C. 119.032 review dates: 05/22/2014 and 05/22/2019
Promulgated Under: 5703.14
Statutory Authority: 5703.05
Rule Amplifies: 5709.01 , 5709.02 , 5711.03 , 5711.04 , 5711.101
Prior Effective Dates: 12/30/84

5703-3-05 Consolidated returns by corporations and joint returns by husband and wife.

(A)

(1) Any corporation desiring to file a consolidated personal property tax return must file notice thereof with the tax commissioner in writing on or before April thirtieth, or within the filing time as extended, of the year in which such return is filed. Thereafter, every such corporation must continue to file consolidated returns until the parent corporation notifies the commissioner in writing on or before April twentieth of the year in which such return is filed that it does not intend to file a consolidated return for such year. Any corporation which elects to file a consolidated return and subsequently discontinues the use of such return must comply with the provisions of the first sentence of this paragraph before it may again file a consolidated return.

(2) A corporation which does not elect to file a consolidated tax return as provided in the preceding paragraph, and which files an independent non-consolidated return, cannot thereafter amend such return or elect to file on a consolidated basis for that year, regardless of any assessment made or other action taken by the tax commissioner with respect to that independent non-consolidated return.

(3)

(a) A corporation having availed itself of the privilege of filing a consolidated return, as provided in paragraph (A)(1) of this rule, shall include therein all of its subsidiary corporations in which it owns or controls at least fifty-one per cent of the common stock.

(b) The taxable situs of intangible property of any such subsidiary corporation or corporations shall be unaffected by the fact that the return of such corporation or corporations may be included in the return of the parent corporation.

(B) Joint personal property tax returns may be filed at the option of a husband and wife provided they were living together on tax listing day.

R.C. 119.032 review dates: 05/22/2014 and 05/22/2019
Promulgated Under: 5703.14
Statutory Authority: 5703.05
Rule Amplifies: 5711.14
Prior Effective Dates: 8/27/59, 11/11/82

5703-3-06 Consolidated returns by incorporated dealers in intangibles.

Application by an incorporated dealer in intangibles for the privilege of filing a consolidated tax return must be filed with the Tax Commissioner on or before the second Monday in March or within the filing time as extended of that year in which such return is filed.

An incorporated dealer in intangibles having availed itself of the privilege of filing a consolidated return, as herein provided, shall include therein all of its subsidiary incorporated dealers in intangibles in which it owns or controls at least fifty-one percent of the common stock.

(former TX-41-04); Eff 8-9-54
Rule promulgated under: RC 5703.14

5703-3-07 Returns by fiduciaries on behalf of taxpayer.

Tax returns made by fiduciaries on behalf of taxpayers, dealers in intangibles or financial institutions shall be made in the name of such fiduciaries when such fiduciary relationship exists before tax listing day. Where such fiduciary relationship has been created on or subsequent to tax listing day in any year and the taxpayer, dealer in intangibles or financial institution has made no return for such year, such returns shall be made by the fiduciary in the name of the taxpayer, dealer in intangibles or financial institution for such year.

(former TX-41-05); Eff 7-25-39
Rule promulgated under: RC 5703.14

5703-3-09 Returns by fiduciaries on property of nonresidents.

Tangible personal property of a nonresident subject to tax in Ohio, and intangible property of a nonresident used in and arising out of business in Ohio in any of the cases mentioned in Section 5709.03 , Revised Code, whether or not in the possession of any agent, factor, bailee, lessee, consignee, or other similar fiduciary in Ohio, shall, except as hereinafter otherwise specifically or generally required by the Department of Taxation, be returned by such nonresident, in all cases where such nonresident is authorized to engage in or is engaged in business in Ohio or if such nonresident is otherwise required to file a Personal Property Tax return in this State.

All such property hereinbefore mentioned in the foregoing paragraph so owned and so held, and belonging to any nonresident not authorized to engage in and not engaged in business in Ohio and not otherwise required to file a Personal Property Tax return in this State, shall be returned by the fiduciary.

All taxable property of a resident shall in all instances, except as may be otherwise provided by law or by the Department of Taxation, be returned by such resident, although held by a fiduciary of the kind herein enumerated.

'former TX-41-07); Eff (Amended) 11-18-57; 10-11-76
Rule promulgated under: RC 5703.14

5703-3-10 Tangible personal property tax; true value of depreciable assets; application of true value or 302 computation.

(A) Tangible personal property used in business in this state must be returned, for purposes of the personal property tax, at its true value in money. The true value of depreciable tangible personal property is its book cost less book depreciation, unless the tax commissioner finds that the depreciated book value is greater or less than the true value of such property.

(B) Application of the composite annual allowance procedure provided for in rule 5703-3-11 of the Administrative Code shall determine the prima facie true value of depreciable tangible personal property used in business. The prima facie valuations can be rebutted by probative evidence of higher or lower valuation.

(1) When an item of tangible personal property is acquired in an arms-length transaction, its true value at the time of purchase is the acquisition cost, including all costs incurred to put the property in place and make it capable of operation, which are normally capitalized in accordance with generally accepted accounting principles.

(2) The true value in money of any tangible personal property may be proved by establishing the amount for which the property would sell in an open market by a willing seller to a willing buyer in an arm's-length transaction. If market value is estimated by an appraisal, the property must be appraised as part of an ongoing business unless the taxpayer can demonstrate that the property is more accurately appraised on the basis of piecemeal liquidation or disposal.

(3) If a taxpayer believes that the composite annual allowance procedure as determined by the commissioner does not accurately reflect the true value in money of the taxpayer's depreciable tangible personal property on hand, the taxpayer may establish more accurate annual allowances by probative evidence.

(a) Such evidence must show that the published composite annual allowance procedures are inappropriate because they cause an unjust or unreasonable result, or must be modified because of special or unusual circumstances.

(b) Such evidence may include, but is not limited to, an aging of disposals study and any other studies, data, or documentation the taxpayer wishes to submit for consideration by the commissioner.

(c) Such evidence must cover a sufficient number of years to demonstrate a pattern in the history of the useful life of the subject property.

(C) A taxpayer must file a claim for deduction from book value for every tax return on which depreciable tangible personal property is returned at a value less than depreciated book value. Such claim must be made in writing at the time of filing the return on form 902, as prescribed by the commissioner, or in a format containing substantially all information as required on form 902.

Eff 2-21-86
Rule promulgated under: RC 5703.14
Rule authorized by: RC 5703.05
Rule amplifies: RC 5711.02 , 5711.03 , 5711.09 , 5711.18

5703-3-11 Tangible personal property tax; true value or 302 computation.

(A) To assist taxpayers in returning the true value of depreciable tangible personal property used in business in this state, as required by Chapter 5711. of the Revised Code and rule 5703-3-10 of the Administrative Code, and to assist in the efficient administration of the personal property tax, the tax commissioner shall determine a composite annual allowance procedure for use in computing the true value of such property. The application of the composite annual allowance procedure to the original cost of tangible personal property may be referred to as the"true value computation" or the "302 computation."

(B) The valuation determined by the true value computation shall be the prima facie true value in money of taxable tangible personal property.

(C) The composite annual allowance procedure shall take into consideration the type of business conducted, the types and classes of property, the useful life of the property in such classes, physical deterioration, functional and economic obsolescence, repair and maintenance practices, salvage value of property assigned to such classes, and any other factors that the commissioner considers proper in determining the true value of depreciable tangible personal property used in business in this state.

(D) The commissioner shall publish and make available the composite annual allowance procedure, with such instructions and examples as the commissioner deems useful or necessary to assist taxpayers in computing their proper tax liability.

(E) The commissioner shall review and, if necessary, modify the composite annual allowance procedure, from time to time, to assure that such allowance procedure reflects current technology and business experience.

Eff 2-21-86
Rule promulgated under: RC 5703.14
Rule authorized by: RC 5703.05
Rule amplifies: RC 5711.03 , 5711.18 , 5711.21 , 5711.22

5703-3-12 Tangible personal property tax; true value; exhaustion method; presumed disposals.

(A) As used in this rule, "exhaustion method" means a procedure for valuing tangible personal property of a business in which the cost and accumulated depreciation reserves of furniture, fixtures, and machinery and equipment are shown on the taxpayer's books and records as fully depreciated, and the taxpayer maintains no records of actual disposals of such property.

(B) Retail merchants and other taxpayers who follow the practice of showing fully depreciated assets on the books, whether or not physically disposed of, must value and list these assets for taxation as long as they are held for use in business. If the taxpayer maintains no records of disposals of fully depreciated assets, the exhaustion method may be used to compute the true value of this property for the purposes of the tangible personal property tax.

(C) A taxpayer who meets the requirements of paragraph (B) of this rule shall calculate the true value of furniture, fixtures, and machinery and equipment as follows: The costs of fully depreciated assets acquired during each of the ten years preceding the year for which that class of property reaches its minimum utility value as shown on the composite annual allowance procedure for the current year, as determined pursuant to rule 5703-3-11 of the Administrative Code, shall be included. To reflect estimated disposals, the cost shall be reduced by ten per cent for each year that the year of acquisition precedes the year of minimum utility value for the current tax year. The property is considered to be totally disposed of if acquired more than nine years before the year of minimum utility value for the current tax year. The value of this property is computed using the reduced cost and the minimum utility value percentage for that class of property for the current tax year.

(D) The tax commissioner may publish detailed instructions or examples to assist taxpayers in applying the provisions of this rule.

Eff 2-3-86
Rule promulgated under: RC 5703.14
Rule authorized by: RC 5703.05
Rule amplifies: RC 5711.03 , 5711.18 , 5711.21 , 5711.22

5703-3-13 Tangible personal property tax; replacement allowance; hotels.

(A) Taxpayers who operate hotels and motels and maintain no records of actual disposals of furniture and fixtures may compute replacement allowances used in the true value computation when replacing furniture and fixtures in the current tax year. This computation method assumes that a hotel or motel has a fixed floor plan with a constant amount of furnishings for the rooms.

(B) The cost index to be used in computing replacement allowances under this rule shall be the annual comparative equipment costs for the hotel industry published by the "Marshall and Stevens Publication Co." in "Stevens Valuations Quarterly."

(C) It shall be assumed that the oldest acquisitions are the first replaced.

(D) The replacement allowance is computed in the following manner: Divide the cost index applicable for the year during which the personal property being replaced was acquired by the cost index for the current tax year. The cost of the current acquisition is multiplied by this quotient to compute the estimated original cost of the property replaced. The resulting amount is deducted from the cost in the oldest year of acquisition. If there is insufficient cost in the oldest year, the index for the next oldest year should be calculated and applied to the remaining cost.

(E) Furniture and fixtures installed in a new addition or new rooms of an existing hotel or motel must be treated separately from the pre-existing portion of the facility for purposes of computing replacement allowances under this rule.

Eff 3-21-86
Rule promulgated under: RC 5703.14
Rule authorized by: RC 5703.05
Rule amplifies: RC 5711.03 , 5711.18 , 5711.21 , 5711.22

5703-3-14 Designation of person to make return of leased property.

Pursuant to provisions of Sections 5711.01 and 5711.05 , Revised Code, the Tax Commissioner hereby sets forth the manner in which tangible personal property which is the subject of a lease agreement and is located and used in business in this State shall be listed and assessed for taxation.

For purposes of personal property taxation in Ohio, it shall be the duty of the lessor of any tangible personal property located and used in business in this State to make return of all such property when the lessee is not obligated to purchase the property in question. If the lessee is obligated to purchase the property, the lessee shall be deemed to be the owner of such property and shall make return of such property.

In the event that the lessor must, by requirements of this rule, return the property for taxation, it shall be the duty of the lessee to exhibit in his return the following information concerning such property: (A) the name and address of the lessor, (B) a description of such leased property and the use to which it is put, and (C) the gross annual rental for such leased property.

(former TX-41-13); Eff 10-11-76; Eff (Amended) 11-18-57
Rule promulgated under: RC 5703.14
Rule authorized by: RC 5703.05

5703-3-15 Allowances of reserves against accounts receivable.

Any taxpayer, whether individual, fiduciary or corporation, whose accounts of assets and liabilities are kept in such a way as to show accounts receivable and notes receivable as assets at face value, with proper reserves for bad debts and the like, may, in setting forth the total amount of accounts receivable, arrive at the amount thereof by deducting from the total amount of accounts receivable as per books, the total amount of such reserve or reserves; provided that in case such reserve or reserves are carried against all the accounts or notes receivable, the deductible portion of such reserves shall be the same proportion thereof as current accounts receivable (payable on demand or within one year from date of inception) bears to total accounts receivable.

In arriving at the amount of current accounts receivable and prepaid items used and arising out of business outside of Ohio, such proportion of the net deductible reserves, etc., as defined in the preceding paragraph, shall be deducted from the face value of foreign accounts receivable and prepaid items as the accounts receivable arising out of business transacted outside of Ohio bears to total accounts receivable.

(former TX-41-14); Eff 7-25-39
Rule promulgated under: RC 5703.14

5703-3-16 Computation and assessment of average value of inventories.

The value of an inventory required to be listed on the average basis by a taxpayer in the course of his business shall be determined as provided by Revised Code 5711.15 and 5711.16 , by considering the number of months of the year ending on the day such property is required to be listed for taxation that such taxpayer has been engaged in business in Ohio either as a merchant or manufacturer, respectively.

When a taxpayer has, during a given calendar year, removed from Ohio either all merchandising or all manufacturing inventory, required to be listed on an average basis, with the intent and purpose to no longer store, keep or traffic in business in Ohio as a merchant or manufacturer, such inventory is not to be listed and assessed as of the close of business on the last day of December of such year.

(former TX-41-15); Eff 11-18-57
Rule promulgated under: RC 5703.14

5703-3-17 Average inventory value of merchandise of taxpayer using retail inventory method of accounting.

The true "average inventory value of merchandise" to be estimated for taxation shall prima facie be the "average inventory value" at cost as disclosed by the books of the taxpayer, after making proper adjustments for cash discounts and merchandise shrinkage, less the aggregate net markdowns, at cost, (taking into consideration markdown cancellations and additional mark-ups at cost) which are reflected on the books of the taxpayer for the succeeding three months following the close of the annual accounting period of the current tax year.

Any taxpayer using the "retail inventory method of accounting", who has cause to file a true value claim with his Personal Property Tax return as authorized by Revised Code 5711.18 , should request an extension of time for filing as provided by Revised Code 5711.04 , in order that such claim and return when filed will be in conformity with the foregoing.

(former TX-41-16); Eff 11-18-57
Rule promulgated under: RC 5703.14

5703-3-18 Tangible personal property tax; new taxpayers.

(A) A person who engages in business in this state on or after the first day of January in any year shall, for that year, list his taxable personal property, except inventory, as to value, ownership, and taxing district as of the first day he engages in business. Inventory shall be similarly listed, except the value shall be the probable average value intended to be used in business from the first day of business until the first day of the next January.

(B) The valuation of all property to be listed by a new taxpayer shall be calculated by multiplying the value or average value by a fraction whose numerator is the number of full months engaged in business during such first year and whose denominator is twelve.

(C) A new taxpayer who has acquired personal property, other than inventory, need not list such property for the first year of business if he can prove to the assessor, under oath or by producing a copy of the return or assessment, that the same items of property have been listed or assessed for taxation for such year in this state.

(D) A new taxpayer who acquires an on-going business may exclude from his tax return for the first year of business inventory transferred to him by the predecessor if he can prove to the assessor, under oath or by producing a copy of the return or assessment, that the predecessor has listed such inventory for such year. The exclusion is limited to the value of the inventory transferred or the predecessor's average inventory value associated with the inventory transferred, whichever is less.

(E) Paragraphs (C) and (D) of this rule do not apply to personal property acquired in the ordinary course of business.

Eff 2-3-86
Rule promulgated under: RC 5703.14
Rule authorized by: RC 5703.05
Rule amplifies: RC 5711.03

5703-3-19 Taxable situs of deposits pursuant to Revised Code 5709.02 and 5709.03 [Rescinded].

Rescinded eff 1-1-04

5703-3-20 Taxable situs of accounts receivable pursuant to Revised Code 5709.02 and 5709.03 [Rescinded].

Rescinded eff 1-1-04

5703-3-21 Personal property tax; taxable status of merchandise or agricultural products held for storage only. [Rescinded].

Rescinded eff 6-28-04

5703-3-22 Tangible personal property tax; valuation of idle equipment.

(A) Tangible personal property that is being held for disposal and is no longer being held for use in business on tax listing day may be valued separately from that personal property kept or maintained as part of a plant or business that is capable of operation. To be so valued, such personal property must be:

(1) Located in closed-off buildings or rooms or otherwise segregated, if physically possible, from areas where manufacturing or other business is being conducted;

(2) Rendered functionally inoperative; and

(3) Held for disposal on tax listing date.

(B) Property meeting the requirements of paragraph (A) of this rule shall be valued as follows:

(1) If component parts have been removed or the item is otherwise incapable of use in its present form, the actual scrap or salvage value shall be taken as the true value.

(2) If it has been offered for sale, a bona fide asking price shall be taken as the true value. If it has been sold within one year of the tax listing date through an arm's-length transaction, the selling price shall be taken as the true value.

(3) If it has not been offered for sale and visual inspection confirms that its useful life has not ended, the true value shall be the greater of its depreciated book value or the actual salvage value.

(C) Property that is temporarily idle for purpose of overhaul or repair or due to seasonal or economic fluctuations or other temporary circumstance does not qualify for separate valuation under this rule.

(D) Property being separately valued under this rule must be separately identified on the tax return, with an explanation of the circumstances and the basis for the valuation. If the value reported is less than the depreciated book value, a claim for deduction from book value must be submitted in writing at the time the return is filed, pursuant to paragraph (C) of rule 5703-3-10 of the Administrative Code.

Eff 2-3-86
Rule promulgated under: RC 5703.14
Rule authorized by: RC 5703.05
Rule amplifies: RC 5711.01 , 5711.03 , 5711.09 , 5711.16 , 5711.18

5703-3-23 Intangible personal property tax; repeal; effect of unrepealed sections.

Am. Sub. H.B. 291 of the 115th General Assembly repealed all taxes levied for state purposes against deposits for all tax years after 1983 and against productive investments, unproductive investments, and money, credits, and all other taxable intangible personal property for all tax years after 1985.

That legislation did not repeal other provisions of the Revised Code related to the reporting and collection of such taxes.

Since these taxes are no longer levied against intangible personal property, any filing or reporting requirements in the Revised Code relative to these taxes have no practical purpose and should be disregarded, as to the tax on deposits for tax years after 1983, and as to the tax on investments and money, credits, and all other taxable intangibles for tax years after 1985, except to the extent that a taxpayer has failed to comply with the law for tax years prior to its effective repeal.

This rule does not apply to procedures related to the tax levied on shares of, and capital employed by, dealers in intangibles under division (D) of section 5707.03 of the Revised Code. Since that tax remains in effect, all provisions of the Revised Code relative to its reporting and collection are fully effective.

Eff 12-31-85
Rule promulgated under: RC 5703.14
Rule authorized by: RC 5703.05
Rule amplifies: RC 5707.03 , 5707.04 , 5709.02 , 5711.06 , 5711.10 , 5711.19 , 5711.34 , 5711.341 , 5727.06

5703-3-24 Tangible personal property of nonprofit organizations.

Tangible personal property of nonprofit organizations shall be deemed "used in business" and, therefore, subject to tax, when such property is used in connection with customary activities of such organizations for the use and enjoyment of which a special rate or charge is imposed, whether or not the income so derived be accumulated or disbursed in connection with the other activities of such organizations.

The fact that the property of such organizations is put to a use which is similar to or in competition with recognized commercial enterprises, such as the renting of rooms, furnishing of lodging, serving of meals, or furnishing of dancing or other amusement or athletic enjoyment, and for which a specific charge is made, shall be prima facie evidence that the tangible personal property used in connection therewith is subject to tax.

Eff 9-16-48
Rule promulgated under: RC 5703.14

5703-3-27 Determining true value of average inventory of a manufacturer for personal property tax purposes.

The average value of taxable inventory of a manufacturer, required to be reported at its true value as provided by Sections 5711.22 and 5711.18 , Revised Code, must be ascertained in accordance with Section 5711.16 , Revised Code, and this Rule. The monthly values used in determining the average inventory must reflect the books and records of the taxpayer, to the extent that such books and records reflect the true value of the inventory.

In determining the true value as provided in Sections 5711.22 and 5711.18 , Revised Code, the taxpayer must employ a method that reflects full absorption of all direct and indirect costs and expenses. All fixed, semi-variable and variable costs and expenses incurred in the manufacture of such inventory must be included in determining the true value thereof.

Eff 5-5-73 (former TX-41-27)
Rule promulgated under: RC 5703.14

5703-3-28 Certain corporations to file county supplemental returns.

Under the provisions of section 5711.131 of the Revised Code, a corporation required to file a combined return with the tax commissioner may also be required to file informational returns with one or more county auditors. The tax commissioner hereby prescribes tax form 945-S, county supplemental return, for that purpose.

If a corporation is required to file an inter-county corporation return of taxable property with the tax commissioner, it must also file a separate county supplemental return, with the auditor of each county in which any of the following conditions exists:

(A) The listed value of tangible personal property reported by the corporation in any taxing district increases or decreases by five hundred thousand dollars or more from that reported by the same corporation in the same taxing district for the previous year, or

(B) The corporation is not required to list tangible personal property in a given taxing district for the current year, but the listed value reported by that corporation in the same taxing district for the previous year was five hundred thousand dollars or more, or

(C) The corporation was not required to list tangible personal property in a given taxing district for the previous year, but the listed value of tangible personal property reported by that corporation in the same taxing district for the current year is five hundred thousand dollars or more, or

(D) A claim for deduction from book value is filed pursuant to section 5711.18 of the Revised Code, and the listed value in any taxing district resulting from such claim is reduced by five hundred thousand dollars or more from the listed value reported by the same corporation in the same taxing district for the previous year.

The county supplemental return must be filed with the auditor of each county so affected at the same time the inter-county corporation return of taxable property is filed with the tax commissioner. In the event the tax commissioner has granted an extension of time in which to file the inter-county corporation return of taxable property, the same extension shall automatically apply to the filing of a county supplemental return with a county auditor.

Eff 11-26-80
Rule promulgated under: RC 5703.14
Rule authorized by: RC 5703.14
Rule amplifies: 5703.14 and 5711.131 of the ohio Revised Code and enactment as contained in section 1 of Amended Substitute House Bill No. 44 as enacted by 113th General Assembly

5703-3-29 Personal property leased and used exclusively for agricultural purposes not subject to personal property tax.

(A) Pursuant to section 5701.08 of the Revised Code, leased property used by the lessee exclusively for agricultural purposes is not considered "used in business" and, therefore, not subject to personal property tax under the provisions of division (B)(1) of section 5709.01 of the Revised Code.

(B) In order to verify that leased property is used by the lessee exclusively for agricultural purposes, the owner-lessor shall obtain a certificate from each lessee claiming to be using the leased property exclusively for agricultural purposes. The certificate shall be retained with the pertinent lease records. If the use of the property changes from exclusive agricultural use the lessee shall so notify the lessor who shall thereafter list the property for taxation. A form not required to be prescribed by rule is available for use as a certificate of exclusive agricultural use. The form is not prescribed by or a part of this rule. The form may be obtained from the department of taxation and is available on the department's web site. The form may be reproduced as needed.

Eff. 3-29-84; 6-3-04
Rule promulgated under: RC 5703.14
Rule amplifies: RC 5703.14 , 5701.08 , 5709.01
R.C. 119.032 review dates: Exempt

5703-3-30 Personal property in inventory of a merchant manufactured for agricultural use not subject to personal property tax.

Pursuant to division (A) of section 5701.08 of the Revised Code as amended by Am. Sub. H.B. 291 of the 115th General Assembly, effective July 1, 1983, new or used machinery and equipment and accessories therefor which are designed and built for agricultural use and owned by a merchant, as defined in section 5711.15 of the Revised Code, are not considered "used in business" and, therefore, not subject to personal property tax under the provisions of division (B)(1) of section 5709.01 of the Revised Code.

To qualify for this exception such property must meet all of the following conditions:

(A) It must be owned by a merchant. Property consigned to a merchant does not qualify. Also, a manufacturer is not a merchant with regard to property he manufactures.

(B) It must be machinery and equipment, or accessories therefor. Tools and implements do not qualify. Qualifying accessories are those that are usable only when attached to or coupled with qualifying machinery and equipment.

(C) It must be designed and built for agricultural use. Typical qualifying items include balers, combines, cultivators, driers, feed grinders, harrows, rotary hoes, mills, pickers, planters, plows, shellers, and silo fillers. Also qualifying are farm-type loaders, spreaders, tillers, tractors, and wagons. However, neither home lawn and garden-type items, nor general-use items such as bulldozers, graders, trenchers, and trucks, shall be considered as designed and built for agricultural use.

A merchant shall be required to disclose in his personal property tax return all property held for sale, segregating property qualifying for this exception from non-qualifying property, and list the monthly-ending values of all non-qualifying property in "Schedule 3A."

Eff 2-21-84
Rule promulgated under: RC 5703.14
Rule amplifies: RC 5703.14 , 5701.08 , 5709.01

5703-3-31 Personal property tax valuation of completed goods owned by the manufacturer-lessor and held for lease or on lease to others.

As a result of the Ohio supreme court decision in "Boothe Financial Corp. v. Lindley," 6 Ohio St. 3d 247 (1983), for purposes of preparing and filing Ohio personal property tax returns, the prima facie true value of completed goods owned by the manufacturer-lessor and held for lease or on lease to others shall be the price at which the property would be sold outright to the lessee prior to the commencement of lease payments, less the appropriate annual true value allowance.

Eff 12-30-84
Rule promulgated under: RC 5703.14
Rule authorized by: RC 5703.05
Rule amplifies: RC 5703.14 , 5711.18 , 5711.22

5703-3-32 Dealer in intangibles tax definition of primarily.

(A)

(1) Division (B)(1) of section 5725.01 of the Revised Code defines "dealer in intangibles." Paragraphs (B) through (D) of this rule define "primarily" as used in section 5725.01 of the Revised Code. In addition to the primarily requirement defined in this rule, a person must meet all other legal requirements in order to meet the definition of "dealer in intangibles."

(2) As used in this rule:

(a) "Affiliated group" means two or more persons related in such a way that one person owns or controls the business operation of another member of the group. In the case of corporations with stock, one corporation owns or controls another if it owns more than fifty per cent of the other corporation's common stock with voting rights.

(b) "Dealer activities" means lending money, or discounting, buying, or selling bills of exchange, drafts, acceptances, notes, mortgages, or other evidences of indebtedness, or buying or selling bonds, stocks, or other investment securities, whether on the person's own account with a view to profit, or as agent or broker for others, with a view to profit or personal earnings. "Dealer activities" includes the servicing of loans originated or purchased by or on behalf of the person or another member of the person's affiliated group.

(c) "Gross income," except as otherwise provided in this rule, has the same meaning as in section 61 of the Internal Revenue Code, as amended. In no event shall "gross income" include the recovery of basis from the sale, exchange, or other disposition of an asset.

(d) "Hedging transactions" means transactions engaged in for the purpose of reducing exposure to risk from market fluctuations in price or availability.

(B)

(1) As used in division (B)(1) of section 5725.01 of the Revised Code, and except as otherwise provided in this rule, a person's business consists primarily of dealer activities if either paragraph (B)(1)(a) or (B)(1)(b) of this rule applies:

(a) For a person that had an office or other place of business in Ohio at the end of each of the three preceding calendar years, such person's gross income from one or more dealer activities exceeds fifty per cent of the person's total gross income in at least two of the three preceding calendar years; or

(b) For a person that had an office or other place of business in Ohio at the end of the immediately preceding calendar year but did not have an office or other place of business in Ohio at the end of one or both of the other two of the three preceding calendar years, such person's gross income from one or more dealer activities exceeds fifty per cent of the person's total gross income in the immediately preceding calendar year.

(2) For purposes of paragraph (B)(1) of this rule, the computation of the applicable percentages shall not include, in the numerator or the denominator, any gross income from hedging transactions.

(C)

(1) A person whose business does not meet the percentage test in paragraph (B) of this rule may show that such person's business nonetheless consists primarily of dealer activities. Paragraph (C)(1) of this rule applies only if the person files a written notice with the tax commissioner, in person or by certified mail, of the person's intent to apply such paragraph to the tax year no later than the later of the following:

(a) The due date, without extension, for filing the dealer in intangibles tax return for that tax year;

(b) Sixty days from the date the person receives written notice from the tax commissioner that it appears that the person does not meet the percentage test in paragraph (B) of this rule for that tax year.

(2) The tax commissioner may show that a person's business that meets the percentage test in paragraph (B) of this rule nonetheless does not consist primarily of dealer activities. Paragraph (C)(2) of this rule applies only if the tax commissioner sends to the person a written notice, in person or by certified mail, of the tax commissioner's intent to apply such paragraph no later than two years after the date the person files a dealer in intangibles tax return for the tax year to which the commissioner seeks to apply such paragraph.

(3) Whoever seeks to apply paragraph (C) of this rule bears the burden of showing, based on the totality of the circumstances, that the person's business consists primarily of activities other than as shown by the percentage test in paragraph (B) of this rule. Factors to consider in addition to the person's gross income from dealer activities include, but are not limited to, the proportion of the person's assets related to dealer activities, the proportion of time the person or the person's employees spend engaging in dealer activities, the proportion of costs incurred in performing dealer activities, and substantial changes in the character of the person's business.

(D) As used in division (B)(1) of section 5725.01 of the Revised Code, the determination of whether a person winding up a dealer business conducted on the person's own account remains in business primarily for the purpose of realizing upon the assets of the business is based on the totality of the circumstances.

(E)

(1) In accordance with division (A)(1) of section 5733.09 of the Revised Code, a corporation is exempt from the corporation franchise tax for a tax year if it is a dealer in intangibles for that tax year. The commissioner will waive any penalty for late filing or payment of the corporation franchise tax for a tax year if the corporation files all delinquent corporation franchise tax reports, including estimated reports, and pays all delinquent corporation franchise taxes, including estimated taxes, together with any applicable interest thereon, not later than sixty days after it learns or should have learned that it did not qualify as a dealer in intangibles for the tax year.

(2) In accordance with division (E)(4) of section 5751.01 of the Revised Code, a person is exempt from the commercial activity tax levied under Chapter 5751. of the Revised Code for a tax period if it is a dealer in intangibles based on one or more measurement periods that include that entire tax period. The commissioner will waive any penalty for late filing or payment of the commercial activity tax for a tax period if the person files all delinquent commercial activity tax returns, and pays all delinquent commercial activity taxes, including estimated taxes, together with any applicable interest thereon, not later than sixty days after it learns or should have learned that it did not qualify as a dealer in intangibles based on one or more measurement periods included in whole or part in the tax period.

(3) The commissioner will waive any penalty for late filing or payment of the dealer in intangibles tax for a tax period if a person having in error filed a corporation franchise tax report or commercial activity tax return files all delinquent dealer in intangibles tax returns and pays all delinquent dealer in intangibles taxes, together with any applicable interest thereon, not later than sixty days after it learns or should have learned that it qualified as a dealer in intangibles for the tax year.

(F) This rule is not intended to address whether a person meeting the definition of "dealer in intangibles" may be a "dual capacity" enterprise in accordance with Gen. American Transp. Corp. v. Limbach (1984), 15 Ohio St.3d 302.

Replaces: 5703-3-32

Effective: 04/06/2006
R.C. 119.032 review dates: Exempt
Promulgated Under: 5703.14
Statutory Authority: 5703.05
Rule Amplifies: 5725.01(B)(1)
Prior Effective Dates: 12/28/2005 (Emer.)