CAT 2008-01 - Commercial Activity Tax: Voluntary Disclosure Agreements - Issued July 2008; Revised May 2009; Revised September 2010; Revised May 2012
The purpose of this information release is to explain the Ohio Department of Taxation’s (ODT) policy regarding voluntary disclosure agreements with regard to the commercial activity tax (CAT). This release is updated to stress the necessity for organizational depictions for purposes of the CAT voluntary disclosure agreements. Please direct any questions regarding this release to the CAT Division of ODT at 1-888-722-8829.
ODT offers voluntary disclosure programs for various taxes to allow taxpayers to come forward anonymously to comply with Ohio’s tax laws. By voluntarily disclosing their liabilities, taxpayers may avoid penalties for failing to file returns and for failing to pay liabilities timely. ODT now offers a voluntary disclosure program for CAT. A taxpayer is eligible for the CAT voluntary disclosure program if the taxpayer enters into and executes the CAT voluntary disclosure agreement (VDA) prior to any contact from ODT through any audit, compliance, or criminal investigation programs.
If a taxpayer desires to establish an agreement, the taxpayer must take the following steps:
First, the taxpayer or its representative shall send in writing the following information:
- The taxpayer’s activities in Ohio;
- How long such activities have been performed by the taxpayer in Ohio;
- A brief description of the source of the taxable gross receipts (i.e., services, tangible personal property, etc.) and whether such amounts will be greater than one million dollars;
- The taxpayer’s type of organization (LLC, C Corporation, sole-proprietor, etc.);
- The taxpayer’s organizational structure including ownership percentages and common owner (See additional section below); and
- Any additional pertinent information.
Such correspondence should be sent to: Ohio Department of Taxation, Commercial Activity Tax Division, Voluntary Disclosure Program, 4485 Northland Ridge Blvd., 2nd Floor, Columbus, Ohio 43229 or CATVDA@tax.state.oh.us.
Upon receipt of that correspondence, ODT will prepare a VDA in duplicate and will send the VDA to the taxpayer’s representative. Generally, each VDA will contain the following terms:
- The taxpayer must register for the tax and file all applicable returns and pay all corresponding liabilities and interest for all periods covered by the VDA.(1)
- The taxpayer waives its right to claim a refund for the three "back" years (not the current calendar year and/or calendar quarter).
- The Tax Commissioner shall waive penalties that may be associated with the failure to timely register and failure to file and pay timely.
- The Tax Commissioner may audit the CAT returns filed by the taxpayer for the years covered by the VDA.
The taxpayer must then sign the VDA and send it back to the address above.
In the final step, the taxpayer must register for the tax and file all applicable returns and pay all corresponding liabilities and interest from the agreed start date through the present date. Information regarding the specific registration and filing requirements is contained below.
The taxpayer shall provide a complete organizational chart of the business structure that reflects its common owner for purposes of the CAT. In general, if a person owns and controls, directly or constructively through related interests, more than fifty percent of the value of the ownership interest of another person, the first person is a common owner of the second person, and those persons must be members of a combined taxpayer group unless they elect to be members of a consolidated elected taxpayer group. (See R.C. 5751.011, R.C. 5751.012, and O.A.C. 5703-29-02.
A taxpayer’s election to be a consolidated elected taxpayer group will be effective from the date of the initial written request to enter into a VDA, unless a retroactive application has been requested by the taxpayer and approved by the Tax Commissioner. A taxpayer desiring to request a retroactive application of its election to be a consolidated elected taxpayer group may request such treatment and the Tax Commissioner may grant such request after reviewing all the facts and circumstances.
Annual taxpayers are those taxpayers with taxable gross receipts in excess of $150,000, but less than $1 million. As of January 2010, all annual returns are due on May 10th of each year for that calendar year reflecting receipts from the previous calendar year and pre-paying the tax for the current calendar year. Previously, beginning in calendar year 2007 and through the end of 2009, all annual returns were due on February 9th of each year for that calendar year reflecting receipts from the previous calendar year and pre-paying the tax for the current calendar year. However, pursuant to R.C. 1.14, if that date falls on a weekend or a holiday, the due date is extended to the next business day.
Quarterly taxpayers are those taxpayers with taxable gross receipts in excess of $1 million. Quarterly taxpayers pay the annual minimum tax for the first $1 million in taxable gross receipts, and remit the tax for any amount exceeding $1 million in taxable gross receipts on a quarterly basis. For information on determining the annual minimum tax, please refer to information release CAT 2013-05- Commercial Activity Tax: Annual Minimum Tax Tiered Structure- Issued October, 2013. Pursuant to R.C. 5751.07 and O.A.C. 5703-29-05, a quarterly taxpayer is required to file returns and to remit tax payments electronically. Quarterly taxpayers submit such returns and payments through the Ohio Business Gateway. Currently, pursuant to R.C. 5751.051(A)(1), a quarterly taxpayer is required to file a return no later than the tenth day after the second month after the end of each calendar quarter. Beginning in January 2010, the due dates for such returns are: February 10th, May 10th, August 10th, and November 10th of each year. Each 1st quarter return, due on May 10th, also requires pre-paying the AMT for the current calendar. However, pursuant to R.C. 1.14, if that date falls on a weekend or a holiday, the due date is extended to the next business day.
Taxpayers may obtain the applicable interest rates through the Department’s Web site at tax.ohio.gov by clicking on "Businesses" then clicking on "Interest Rates" on that page.
Taxpayers that are not currently in compliance with the CAT and have not been contacted by ODT through an audit, compliance, or criminal investigation may contact the CAT Division to discuss entering into a VDA. Contact for CAT VDA purposes includes any letters from ODT regarding suspected nexus with Ohio.
(1) Beginning January 1, 2011, the look-back period for a CAT VDA will be the current calendar year and/or current calendar quarter plus the three years prior to requesting such CAT VDA.
For example, a taxpayer requests a CAT VDA on October 7, 2011, which is in the current fourth quarter of 2011 (October 1, 2011 to December 31, 2011, return due February 10, 2012). Applying the general look-back period, a taxpayer would be required to register effective October 1, 2008.