Commercial Activity Tax
Number of Taxpayers and Tax Return Data, Fiscal Year 2007
The commercial activity tax went into effect on July 1, 2005. It is a privilege tax measured by gross receipts from activities in this state. The tax is a key component of the 2005 tax reform package enacted by Am. Sub. House Bill 66 (126th General Assembly). The major business tax components of the tax reform act consist of the phase-out of both the tangible personal property tax and the corporate franchise tax and the phase-in of the commercial activity tax.
The tax is levied and paid on a quarterly or annualized basis. Taxpayers with annual taxable gross receipts above $1 million must report and pay the tax quarterly. Taxpayers whose annual taxable gross receipts are between $150,000 and $1 million are considered annual taxpayers and are subject only to the $150 minimum tax. Taxpayers with annual gross receipts below $150,000 are not subject to the commercial activity tax.
The attached CAT-1 and CAT-2 tables reflect information reported on tax returns that were due and filed during fiscal year 2007, specifically on returns that were due and filed in August 2006, November 2006, February 2007 and May 2007. Additional factors affecting the data in these tables are explained below.
- The attached tables reflect the 0.104% tax rate in effect for the April 2006 to March 2007 period. Ohio law phases up the commercial activity tax rate over a five-year period that began in July 2005. The next increase will take effect for the 12-month period beginning April 1, 2007 (impacting fiscal year 2008 tax revenues), and the applicable tax rate during that year will be 0.156%. The fully phased-in 0.26% tax rate is scheduled to take effect on April 1, 2009 (impacting fiscal year 2010 tax revenues).
- Each combined and consolidated taxpayer group is shown as a single entity for purposes of these tables. In the CAT-1 table, the combined or consolidated group is reported under the primary filer’s industry code. In the CAT-2 table, the entire group’s gross receipts determine the size category in which the group is placed.
As shown in these tables, the total reported commercial activity tax liability for fiscal year 2007 was $563.7 million. Of this amount $25.7 million was attributable to the minimum tax and $538.0 million was attributable to the 0.104% tax rate. Taxable gross receipts amounted to $599.3 billion but the exclusion available on each return reduced taxable receipts by $82.0 billion, or 24.3%; the resulting net taxable gross receipts amounted to $517.3 billion.
Table CAT-1 shows tax return information for 19 industrial sectors. The industrial sector data is based on each taxpayer’s reported primary industrial code, using the North American Industry Classification System (NAICS). The retail sector comprises the largest group of taxpayers, accounting for 13.0% of all taxpayers. This is followed by unclassified (11.1%) and construction (10.5%) taxpayers. In terms of tax liability, manufacturers account for the largest share at 30.6% of the total. The retail (18.7%) and wholesale sectors (12.4%) account for the next largest shares of total liability.
Table CAT-2 provides tax return information based on the size of each taxpayer’s taxable gross receipts (prior to the exclusion). Filers whose fiscal year 2007 taxable gross receipts were $1 million or below accounted for 75.1% of all returns but only 3.6% of the total liability. Filers with taxable gross receipts above $100 million comprised only 0.4% of all returns but accounted for 55.2% of total tax liability.
Data contained in these tables is derived from commercial activity tax returns filed by taxpayers with the Ohio Department of Taxation.