HAMILTON — The city of Hamilton’s natural-gas customers will dodge about a 10 percent rate increase prompted by the Ohio Department of Taxation if a bill that sailed through the Ohio House of Representatives on Wednesday also is approved by the Ohio Senate.
The bill, sponsored by state Reps. Wes Retherford (R-Hamilton) and Tim Schaffer (R-Lancaster), would spare Hamilton ratepayers about $1.3 million per year in sales taxes, said Doug Childs, Hamilton’s energy management administrator.
“We got a letter in September of ‘15, saying the Department of Taxation has done some research and they came to the conclusion that we should be paying Ohio sales tax on our natural gas sales,” Childs said. “It would have had a very significant impact on our customers’ bills.”
Tax officials do not merely want municipal gas customers like those in Hamilton to pay the sales tax for 2015 and going forward. They also want the city to pay three prior years’ taxes they contended should have been collected.
“The sales tax would be in effect a 6.5-percent annual increase forever,” Childs said. “You can imagine, if you had to go back three years, it probably would have been about a 10-percent rate increase for our customers, until we were able to get that paid for.”
Paying just 2015’s tax rates would cost the average Hamilton household an extra $41. If the city must pay taxes for the prior three years, that would cost the typical family an additional $106.
Hamilton, the state’s largest municipally owned natural-gas utility, would have to borrow money to pay all the taxes the Ohio Department of Taxation wants, Childs said. Lancaster, home of the bill’s co-sponsor, has the second largest municipal gas utility.
The House approved the legislation 93-0 on Wednesday. It now goes to the Senate, and nobody has voiced opposition to the bill, even the governor’s office, Childs said. Mayor Pat Moeller testified twice on the bill’s behalf in recent months.
Retherford said state tax officials have given cities an extension on paying the sales taxes while the legislation is pending.
“Nobody wants to raise taxes on anybody, especially on essentials like public utilities,” Retherford said. “The city of Hamilton natural gas serves (23,500) customers, and those are families that are using it to keep their house warm, to cook their kids dinner.”
The tax department’s interpretation could have led to “a slippery slope,” where municipal-owned electric and water utilities might be targeted for taxation, Retherford said.
“We’ve been in the gas business for well over 100 years, and have never paid any sort of state sales, excise or use tax in our history,” Childs said. “We were selling gas long before there was even an Ohio sales tax.”
