Q. Does an Indiana employer with Indiana resident employees working at a customer jobsite in Ohio have to withhold Ohio City Income Tax from the employees wages earned?
A. Yes.
Ohio & Indiana have a reciprocal agreement, on wages. No Ohio state taxes are withheld or due and you do not need to file an OH return. But Indiana will tax you on your Ohio income.
However the reciprocity agreement does not apply to local city taxes*. You are not required to file an Ohio local city return, but you are also not entitled to a refund of the city withholding (box19 on your W-2), unless there was an error in the amount.
While IN residents are subject to OH city income tax, they are not subject to OH School District Income tax (SDIT)*, a separate local tax, in OH.
Most IN counties (but not the state) allow a credit, or partial credit for tax paid to an OH city. That will come up in the IN state interview. For details, see:
https://ttlc.intuit.com/community/state-taxes/discussion/i-see-no-separate-question-for-school-taxes...
*Ohio city income tax is imposed on both residents of the city and non residents who work in the city. SDIT is imposed only on residents of the school district.
