The need for HB 390 arose due to a September 2015 Ohio Department of Taxation memorandum to the cities of Hamilton and Lancaster. Both cities own and operate municipal natural gas utilities. In its memo, the Department of Taxation stated that its legal team was unable to identify the specific language in the Ohio Revised Code exempting municipal natural gas utilities from collection of Ohio sales tax.
The Department of Taxation offered two options: either cite Ohio Revised Code provisions exempting municipal natural gas utilities from sales tax or begin collecting sales tax on natural gas bills and also remit sales tax on the previous three years' natural gas sales.
Hamilton has owned and operated a natural gas utility for more than 120 years. As a not-for-profit municipal utility, sales tax has never been applied to its customer bills. Recovery of such a tax on the three previous years' of customer bills would have required a rate increase coupled with the ongoing collection of 6.25% sales tax.
The estimated cost of the Department of Taxation proposal to Hamilton natural gas customers was $4.8 million in 2016 and $1.3 million each year thereafter. A typical residential customer would have faced $106 in additional costs in 2016 and $36 per year more in 2017 and beyond. Low income customers struggling to heat their homes would have been hit the hardest by the Department of Taxation proposal.
Hamilton and Lancaster representatives supported the addition of municipal natural gas utility sales tax exemption language to the Ohio Revised Code to clarify this established practice. Rep. Wes Retherford of Hamilton and Rep. Tim Schaffer of Lancaster drafted and cosponsored HB 390 in Novermber 2015 to provide such a legislative fix.
Reps. Retherford and Schaffer, Mayor Pat Moeller, the cities of Hamilton and Lancaster, and Ohio Municipal Electric Association staff worked diligently to successfully shepherd HB 390 through the legislative process.
On behalf of local natural gas consumers, the City of Hamilton expresses its gratitude to Reps. Wes Retherford and Tim Shaffer for their leadership and support of HB 390, to the City of Lancaster for its cooperation, and to the Ohio Municipal Electric Association for its assistance in successfully resolving this matter.