Ohio worker argues workers cannot be taxed when working remotely outside of municipality
CINCINNATI, Ohio - An Ohio man living in a suburb around the Cincinnati area is arguing that the city can only tax non-residents when their work is done within the municipality.
According to Court News Ohio, at the start of the COVID-19 pandemic, Josh Schaad began working remotely for his job, which is based in Cincinnati at his home in Blue Ash, a city about twenty minutes north of Cincinnati according to its website.
Around that same time, state lawmakers passed an emergency measure with direction on local tax procedures, which states that the days an employee worked from a location other than the principle place of work would be considered as days spent at the principle place of work for tax purposes.
Schaad's employer withheld taxes from his 2020 pay for the City of Cincinnati. The city gave him a partial refund based on the number of days he worked outside of the city before the pandemic, but refused to reimburse the local taxes from when he worked remotely from Blue Ash.
Schaad argues that this is unconstitutional and that local governments can only tax non-residents when they perform work within the municipality. Schaad's appeal will be heard by the Ohio Surpreme Court on Wednesday.
He argues that Section 29 of House Bill 197 contradicts a long line of decisions from the state Supreme Court, which conclude that a municipality can tax income based on work performed within its jurisdiction or income connected to the taxpayers activity in the municipality.
Shaad argues that while the General Assembly has jurisdiction over Ohioans, only the municipality can impose its local income tax and Cincinnati did not have the authority to tax him for his work in Blue Ash.
Organizations such as the Ohio Society of Certified Public Accountants jointly contended that the Section 29 was enacted to assist employers.
The organizations assert that the law gave employers a reprieve from a 20-day rule requiring employers to withhold local taxes from all municipalities in which employees work for more than 20 days each year.
They also assert that the purpose of Section 29 was to protect employers from having to unexpectedly set up withholding for local taxes in the municipalities where their employees worked during the pandemic and that the law also shielded the short-term cash flow of municipalities so that crucial services continued to be funded.
Other organizations supporting Schaad include the National Taxpayers Union Foundation, the Independant Women's Law Center, the Ohio Chamber of Commerce and the City of Lebanon.
The City of Cincinnati argues that Section 29 only applied to employees whose work location changed because of State health orders and that employees could be taxed in 2020 by the municipality where they principally worked.
The City asserts that state legislators concluded that displaced employees working remotely had sufficient connection to the cities where they had been working to allow employees to be taxed by that municipality.
The appeal hearing will be streamed live on the Ohio Channel, as well as the Ohio Supreme Court's website Wednesday morning at 9:00 a.m.
