If you own a business in Ohio, you deal with a tax that most of the country never sees: city income tax. Ohio has more than 600 municipalities that levy their own income tax, and each one has its own rate, its own credit rules and its own filing requirements. For a small business in Greater Cleveland, getting this wrong is one of the most common ways to end up with penalty notices, sometimes years after the fact.
I am Josh Katz, a CPA in Beachwood, and I have spent more than fifteen years helping Northeast Ohio business owners keep their municipal taxes straight. Here is what you need to know.
RITA, CCA, or the city itself
Most cities in our area do not collect their own income tax. They hire one of two agencies to do it for them.
RITA (Regional Income Tax Agency) administers the tax for hundreds of Ohio municipalities. Beachwood is a RITA city, with a 2.0% rate.
CCA (Central Collection Agency) is run by the City of Cleveland and collects for Cleveland and a number of other communities. Cleveland’s rate is 2.5%.
A few cities handle collection through their own tax departments. The first step for any business is simply knowing which agency covers each city where you live, where your office is, and where your people actually do their work. Rates and credit rules change, so always confirm the current figures with RITA, CCA or the city before filing.
What your business owes: the net profit tax
Sole proprietors, partnerships, LLCs and corporations that do business in an Ohio city generally owe that city tax on their net profit. If you work in more than one city, profit is apportioned among them. A contractor who completes jobs in Solon, Shaker Heights and Cleveland in the same year may owe something to each.
For calendar year businesses, the annual net profit return is generally due April 15, and most businesses are expected to make estimated payments during the year. Some businesses can elect to have the State of Ohio administer their municipal net profit tax through the Ohio Business Gateway instead of filing with each city. Whether that makes sense depends on where you operate.
What your business owes: payroll withholding
If you have employees, you are generally required to withhold city income tax for the municipality where the work is performed, and to register with that city’s agency. A few rules cause most of the trouble:
The 20 day occasional entrant rule. If an employee works in a city 20 days or fewer in a year, you generally do not have to withhold for that city. Once they pass 20 days, withholding is required, and the rule only applies when the employee has a principal place of work.
Remote employees. An employee who works from home generally owes tax to the city where they live and work, not the city where your office sits. If you hired someone who works from Mayfield Heights while your office is in Beachwood, your payroll may be withholding for the wrong city.
Deposit schedules. How often you remit depends on how much you withhold. CCA, for example, requires monthly filing once withholding exceeds $200 a month.
Residence city credits. Not every city gives full credit for tax paid to the city where someone works. Employees can owe a balance to their home city even when withholding looks correct, and business owners who pay themselves wages face the same issue.
Rates and credits for Cleveland area suburbs
Three numbers matter for every city: the tax rate, the credit factor (how much of the tax you paid to the city where you work your home city will count), and the credit limit (the maximum rate it will credit). The RITA figures below are from RITA’s published rate table as of October 2026; Cleveland is a CCA city. Rates change by ballot, so confirm before filing.
| Municipality | Agency | Tax rate | Credit factor | Credit limit |
|---|---|---|---|---|
| Cleveland | CCA | 2.50% | 100% | 2.50% |
| Beachwood | RITA | 2.00% | 100% | 2.00% |
| Shaker Heights | RITA | 2.25% | 50% | 1.00% |
| Cleveland Heights | RITA | 2.25% | 50% | 1.00% |
| University Heights | RITA | 2.50% | 100% | 1.00% |
| Solon | RITA | 2.00% | 100% | 2.00% |
| Pepper Pike | RITA | 1.00% | 50% | 1.00% |
| Orange | RITA | 2.00% | 60% | 1.50% |
| Moreland Hills | RITA | 1.00% | 0% | 0.00% |
| Chagrin Falls | RITA | 1.85% | 75% | 1.85% |
| Mayfield Heights | RITA | 1.50% | 100% | 1.50% |
| Lyndhurst | RITA | 2.00% | 50% | 2.00% |
| Highland Heights | RITA | 2.00% | 100% | 2.00% |
| South Euclid | RITA | 2.00% | 0% | 0.00% |
| Warrensville Heights | RITA | 2.60% | 50% | 2.60% |
| Woodmere | RITA | 2.50% | 100% | 2.50% |
| Independence | RITA | 2.00% | 100% | 2.00% |
| Brecksville | RITA | 2.00% | 100% | 2.00% |
| Strongsville | RITA | 2.00% | 75% | 2.00% |
| North Royalton | RITA | 2.00% | 100% | 1.25% |
| Middleburg Heights | RITA | 2.00% | 100% | 2.00% |
| Berea | RITA | 2.00% | 100% | 1.50% |
| Rocky River | RITA | 2.00% | 100% | 1.50% |
| Bay Village | RITA | 1.50% | 100% | 1.00% |
| Westlake | RITA | 1.50% | 100% | 1.50% |
| North Olmsted | RITA | 2.00% | 100% | 2.00% |
| Mentor | RITA | 2.00% | 100% | 2.00% |
| Willoughby | RITA | 2.00% | 100% | 2.00% |
| Chardon | RITA | 2.00% | 50% | 2.00% |
| Hudson | RITA | 2.00% | 100% | 2.00% |
| Twinsburg | RITA | 2.00% | 100% | 2.00% |
Lakewood, Euclid, Parma and a few other cities collect through their own departments or CCA; check the city’s finance page for those.
How the resident credit works, with two examples
A Shaker Heights resident who works in Beachwood. Beachwood withholds 2.0%. Shaker Heights credits 50% of the tax paid to Beachwood, which is 1.0%, and its credit limit is also 1.0%, so the credit is 1.0%. Shaker’s rate is 2.25%, so the resident still owes 1.25% to Shaker Heights on the same wages, for a combined 3.25%. If nothing is withheld for Shaker, that 1.25% arrives as a balance due in April and should be covered by quarterly estimates once it passes $200 a year.
A Pepper Pike resident who works in Cleveland. Cleveland withholds 2.5%. Pepper Pike’s rate is 1.0% and it credits 50% of tax paid elsewhere up to 1.0%; half of 2.5% is 1.25%, capped at 1.0%, which wipes out the Pepper Pike tax. Nothing more is due, but a Pepper Pike return is still required.
Business owners who pay themselves W-2 wages from their own company are in exactly the same position as any other employee, which surprises a lot of S corporation owners the first April after they move.
Estimated payments and the $200 rule
Both RITA and CCA require quarterly estimated payments when the tax expected for the year, after withholding and credits, is $200 or more. That applies to the business’s net profit tax and to the owner personally. Due dates track the federal schedule: April 15, June 15, September 15, and January 15 for individuals, and for calendar-year businesses the same dates with the fourth payment due December 15. Under-paying estimates triggers a penalty even if the return is filed on time. My Ohio small business tax calendar has every date in one place.
The state-administered option for net profit tax
Businesses, but not individuals, can elect to have the Ohio Department of Taxation administer their municipal net profit tax centrally. You file one return through the Ohio Business Gateway covering every city, and the state distributes the money. The election is made on the Gateway by the first day of the third month of the tax year (March 1 for calendar-year businesses) and stays in place until you opt out. It is a genuine simplification for a contractor or consultant working in eight cities; it is pointless for a business that operates in one. Payroll withholding is not part of it and still goes to each city or its agency.
Which cities does my business actually owe?
Work through it in this order:
- Where is the business physically located? That city gets a net profit return and withholding for anyone who works there.
- Where do employees actually perform the work? Job sites, client offices, and home offices each count once an employee passes 20 days there in a year. Each of those cities may need withholding and may share in the net profit apportionment.
- Where do the owners live? Owners of pass-through businesses report their share of the profit on their home city return, with whatever credit that city allows for tax the business paid elsewhere.
- Is any of it in a township? Townships generally have no income tax, except inside a JEDD (joint economic development district) where a city rate applies. Beachwood, Orange, and Warrensville Heights all have JEDDs nearby, and the rate there is the city’s rate with no resident credit.
Mistakes I see most often
Paying workplace city tax for employees who now work from home in a different city. Never registering with a new city after sending a crew there for a long project. Skipping net profit returns because the business had a loss, when a return is still required. Missing estimated payments and paying penalties that could have been avoided. Assuming the payroll company has everything handled, when it can only withhold for the cities it has been told about.
These problems usually do not show up right away. They surface when a city matches data and sends a bill with penalties and interest attached.
How I help
Municipal tax is a big reason local businesses hire a local CPA. When I handle your monthly bookkeeping, I keep track of which cities your business owes, check that payroll is withholding for the right ones, and make sure net profit returns and estimates go out on time. Monthly bookkeeping starts at $350, with flat fees quoted up front. You can see everything that is included on my services page.
If your business is growing, it is also worth knowing where you stand on the Ohio Commercial Activity Tax, which changed significantly in 2024 and 2025.
Frequently asked questions
Is Cleveland Heights RITA or CCA?
Cleveland Heights is a RITA city, at 2.25% with a 50% credit factor and a 1.0% credit limit.
What is the municipal tax rate in Solon, Strongsville and Rocky River?
All three are RITA cities at 2.0%. Solon credits 100% up to 2.0%, Strongsville credits 75% up to 2.0%, and Rocky River credits 100% up to 1.5%.
Is Beachwood a RITA or CCA city?
Beachwood’s municipal income tax is administered by RITA. The current rate is 2.0%.
Who collects Cleveland city income tax?
Cleveland’s income tax is collected by CCA, the Central Collection Agency. The rate is 2.5%.
Do I have to withhold city tax for an employee who works from home?
Generally, withholding follows where the work is performed. For an employee who works from home, that is usually their home city, not your office location.
Does my business have to file a city return if it lost money?
In many cases, yes. A net profit return can be required even when no tax is due, and filing it preserves the net operating loss, which Ohio municipalities now allow you to carry forward for five years.
Can I just let my payroll company handle city tax?
They will withhold for the cities you set up. They will not know that an employee moved to Mayfield Heights or that a crew spent six weeks on a job in Solon unless someone tells them.
Let us talk
The first conversation is free. Tell me which cities your business operates in and how payroll is set up, and I will tell you whether anything needs attention.
Call (216) 249 6013, email info@joshkatzcpa.com, or send a message through the contact form. My office is at 3401 Enterprise Pkwy, Suite 340-387, Beachwood, OH 44122.
