Commercial Activity Tax
Number of Taxpayers and Tax Return Data, Fiscal Year 2010
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). Major business tax components of the 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 2010. For quarterly taxpayers, these returns reflect activity for the April 2009 to March 2010 period; the returns were due and filed in August 2009, November 2009, February 2010 and May 2010. In addition, the data include tax returns filed by annual taxpayers for the calendar year 2010 period; the returns were due in May 2010. Several notable factors affecting the data in these tables are explained below.
- Ohio law phased-in the commercial activity tax rate over a five-year period that began in July 2005. The fully phased-in 0.26% tax rate took effect on April 1, 2009 (impacting fiscal year 2010 tax revenues), and is reflected in the attached tables.
- 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 before credits for fiscal year 2010 is $1,346.7 million. Of this amount $22.5 million is attributable to the minimum tax and $1,324.2 million is attributable to the 0.26% tax rate. Taxable gross receipts amount to $585.0 billion but the exclusion available on each return reduces taxable receipts by $75.7 billion, or 12.9%; the resulting net taxable gross receipts amounts to $509.3 billion.
Table CAT-1 shows tax return information for 19 industrial sectors. The industrial sector data is based on each taxpayer’s reported primary business activity, using the North American Industry Classification System (NAICS). The retail sector comprises the largest group of taxpayers, accounting for 12.9% of all taxpayers. This is followed by taxpayers in the manufacturing (10.3%), construction (9.9%), unclassified (9.9%), and professional, scientific and technical services (9.2%) categories. In terms of tax liability, manufacturers account for the largest share at 26.5% of the total. The retail (20.5%) and wholesale (15.5%) sectors 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 2010 taxable gross receipts were $1 million or below account for 72.1% of all returns but only 1.0% of the total liability. Filers with taxable gross receipts above $1 billion comprise less than 0.1% of all returns but account for 24.2% 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.