The Ohio House of Representatives has passed legislation that exempts municipal gas companies from collecting and remitting sales taxes on the natural gas they provide to customers.

House Bill 390 came in response to a recent situation in which the Ohio Department of Taxation contacted cities with municipal gas departments and informed them that they must begin collecting sales tax from residents with natural gas accounts. Prior to this, municipal gas departments were not subject to sales tax. HB 390 specifically exempts municipal gas departments from sales tax.

“This is a gray area in Ohio law that must be resolved in order to protect the residents and businesses in these communities from an unjust tax increase on a basic necessity,” said Rep. Tim Schaffer (R-Lancaster), who joint-sponsored House Bill 390 with Rep. Wes Retherford (R-Hamilton).

Because the state had insisted on collecting back taxes for the past three years, the legislation would also save these cities as much as $8 million in taxes in 2016 and nearly $3 million in the years that follow, costs that would ultimately be borne by the customers.

The legislation mostly impacts the select municipalities that still operate their own utilities: Lancaster, Hamilton, McComb, Deshler, Oakwood, Verona and Williamsport. But the bill sponsors stressed that failing to address this situation now could lead to a slippery slope.

“I applaud and thank my colleagues for passing HB390 today,” Retherford said. “Once we get this through the Senate, we will be able to put a stop to a pending rate hike on the citizens of my district.  A possible 10-percent hike on the rate of natural gas is ill advised and would cause many of the families and businesses in the 51st District to suffer. I will always fight for my district to prevent government overreach from affecting their lives. I also want to thank Joshua Smith, Doug Childs and Pat Moeller and their team at the Hamilton Utilities Department for stepping up and joining me in this fight.”

The legislation now heads to the Ohio Senate for further consideration.

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