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CAT 2008-01 - Commercial Activity Tax: Voluntary Disclosure Agreements - Issued July 2008; Revised May 2009; Revised September 2010
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 reflect an addition of a look-back period for 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
- Any additional pertinent information.
Such letter should be sent to: Ohio Department of Taxation, Commercial Activity Tax Division, Voluntary Disclosure Program, 30 E. Broad Street, 19th Floor, Columbus, Ohio 43215.
Upon receipt of that letter, 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.
Annual taxpayers are those taxpayers with taxable gross receipts in excess of $150,000, but less than $1 million. Annual taxpayers may obtain forms through the Department’s website at tax.ohio.gov by selecting “Tax Forms” and “Commercial Activity Tax” from the drop-down menu. Beginning in calendar year 2007, all annual returns are 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. Then, beginning in January 2010, all annual returns are due on May 10th of each 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 of $150 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. 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.