What you need to know about the commercial activity tax

Buckeye Farm News

By Amy Milam

This is the third in a series of articles discussing the various parts of Ohio’s overall tax structure. In each issue of Buckeye Farm News, we are providing background information on the different types of taxes or about a tax-related issue. These articles will assist in members’ ongoing discussion of Ohio’s tax structure.

If you do business in Ohio, you may be familiar with the commercial activity tax, or CAT, as it is commonly known. Whether or not a business or individual taxpayer is subject to the CAT depends on whether the threshold for taxable gross receipts has been met for the given year. Currently, the threshold is $150,000 or more in taxable gross receipts from business activities conducted in Ohio. Taxpayers with Ohio gross receipts under the $150,000 threshold are currently exempt from the CAT. The Ohio General Assembly continues to discuss the structure of Ohio taxes through the biennial budget process, and lawmakers will consider changing various aspects of all taxes, including the CAT in the coming months.

An important consideration is whether or not the gross receipts can be sufficiently tied to business activities conducted in Ohio to count toward the CAT threshold. The Ohio Revised Code sets forth the guidelines for determining which activities are considered conducted in Ohio for CAT purposes. For example, with the sale of personal property, the proceeds from that sale will count toward the gross receipt threshold for CAT purposes if that property is ultimately received in Ohio by the buyer. Therefore, the location of the buyer of goods and services will be an important consideration for determining CAT qualification.

Those who meet the gross receipts threshold must register and file a return for the CAT. Currently, those with Ohio taxable gross receipts between $150,000 and $1 million will pay an annual minimum tax. Those with Ohio taxable gross receipts in excess of $1 million will file and pay on a quarterly basis.

Amy Milam is Ohio Farm Bureau’s director of legal education.