Ohio Department of Taxation Commercial Activity Tax

Commercial Activity Tax (CAT) - General Information

Taxpayers - The commercial activity tax (CAT) was enacted in House Bill 66, which was passed by the 126th General Assembly. The CAT first applies for taxable gross receipts received on and after July 1, 2005. The CAT is an annual privilege tax measured by gross receipts on business activities in this state. This tax applies to all types of businesses: e.g., retailers, service providers (such as lawyers, accountants, and doctors), manufacturers, and other types of businesses. The CAT also applies whether the business is located in this state or is located outside of this state if the taxpayer has enough business contacts with this state. The CAT applies to all entities regardless of form, (e.g., sole proprietorships, partnerships, LLCs, and all types of corporations).  A person with taxable gross receipts of more than $150,000 per calendar year is subject to this tax, which requires such person to register with this department as a taxpayer. Please note that certain receipts are not taxable receipts, such as interest income.  The tax does have limited exclusions for certain types of businesses, such as financial institutions, dealers in intangibles, insurance companies and some public utilities if those businesses pay specific other Ohio taxes.

Taxable Gross Receipts - Gross receipts subject to CAT are broadly defined to include most business types of receipts from the sale of property or realized in the performance of a service. The following are some examples of receipts that are not subject to the CAT: interest (other than from installment sales), dividends, capital gains, wages reported on a W-2, or gifts. In general, for the sale of property, such receipt is only considered a taxable gross receipt if the property is delivered to a location in this state. For services, the receipt is sitused (sourced) to Ohio in the proportion that the purchaser's benefit in this state bears to the purchaser's benefit everywhere. The physical location where the purchaser ultimately uses or receives the benefit of what was purchased is paramount in making this determination. In other words, receipts from sales to out-of-state purchasers or the proportion of the services where the benefit is primarily received outside of this state are not subject to the CAT.

Registration - Taxpayers having over $150,000 in taxable gross receipts sitused to Ohio for the calendar year are required to register for the CAT. Electronic registration is available online through the Ohio Business Gateway. For better efficiency, the Department of Taxation urges taxpayers to register electronically. Taxpayers still wanting to register using paper can obtain the form through our Web site at Tax Forms or request the form by calling 1-800-282-1782.

Annual and Quarterly Filers - Annual CAT taxpayers (taxpayers with taxable gross receipts of more than $150,000 up to $1 million) must pay an annual minimum tax of $150 per year. Beginning in 2010, the annual minimum tax will be due on May 10 of the current tax year and will be paid with the CAT 12 form for calendar year taxpayers or with the first quarter return for calendar quarter taxpayers. This form may be filed electronically using eForms. Taxpayers with taxable gross receipts over $1 million are required to file and pay quarterly. Quarterly taxpayers are required to file online through the Ohio Business Gateway. Quarterly taxpayers owe the $150 annual minimum tax for receipts up to $1 million. In addition, quarterly taxpayers pay a rate component (equal to 0.26% when fully phased-in) for taxable gross receipts in excess of $1 million. The CAT was fully phased-in as of April 1, 2009, while the tangible personal property tax and the corporation franchise tax were phased-out.

Consolidated Elected Taxpayer Groups and Combined Taxpayer Groups - A consolidated elected taxpayer group is a taxpayer that has elected to file as a group including all entities that have either 50 percent or more common ownership or 80 percent or more common ownership. In addition, the group can elect to include or exclude non-U.S. entities with the same common ownership in the group. A major benefit of making this election is that receipts received between members of the group are not subject to the CAT. However, taxpayers making this election must agree that all commonly owned entities are part of the group even if nexus does not exist. This election is binding for eight calendar quarters. If such election is not made, any taxpayers with common ownership of more than 50 percent must file as a combined taxpayer group. Combined taxpayer groups may not exclude receipts between members of the group; however, such groups need only include in the group those members that have nexus with Ohio.