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Are You Confused by the Commercial Activity Tax?

Mar 19, 2019 9:03:00 AM Cheryl Coyle Small Business, Nonprofit

Tax Payment ConceptCommercial Activity Tax (CAT) is a tax imposed for the privilege of doing business in Ohio. CAT is calculated on taxable gross receipts from most business activities in Ohio, or activities that benefit an Ohio-based business.

For example, if your Ohio small business sells a product to a customer in California, the proceeds of that sale are not subject to the tax. If you sell the same product to a business in Ohio, that revenue is subject to Ohio’s CAT.

Does every Ohio business pay CAT?

In short, the answer is no. There are a few businesses that are exempt from the CAT, including:

  • Nonprofit organizations
  • Most governmental entities
  • Some public utilities
  • Dealers in intangibles that pay the Ohio dealers intangibles tax
  • Financial institutions that pay the business franchise tax
  • Certain affiliates of financial institutions
  • Businesses with less than $150,000 of taxable gross receipts (unless they are part of a "consolidated elected taxpayer" or "combined taxpayer").
  • Insurance companies that pay the insurance premiums tax

Businesses that are subject to Ohio’s CAT

If your business does not fit into one of the categories above, and gross sales are over $150,000 during the calendar year, it is subject to the tax. Included industries are:

  • Retail
  • Wholesale
  • Service
  • Manufacturing
  • Other general businesses

Types of businesses subject to the CAT

  • Sole proprietorships
  • Partnerships
  • LLCs
  • S corporations
  • C corporations
  • Disregarded entities
  • Trusts

The Nitty Gritty

How to Calculate CAT:

Taxable Gross Receipts Annual Minimum Tax CAT
$1 million or less $150 No additional tax
More than $1 million but less than or equal to $2 million $800 (paid quarterly) .26% x (taxable gross receipts - $1 million)
More than $2 million but less than or equal to $4 million $2,100 .26% x (taxable gross receipts - $1 million)
More than $4 million $2,600 .26% x (taxable gross receipts - $1 million)

When Is My CAT Due?

Annual Filers – Less than $1 million in annual sales

Filing Period Filing Due Date
Jan. 1 - Dec. 31 May 10
  • If the filing due date falls on a weekend or holiday, the return is due on the next business day.
  • CAT is a prepaid tax; therefore, the annual minimum tax is due in advance on May 10 of the current tax year.

Quarterly Filers – More than $1 million in annual sales

Filing Period Filing Due Date
Jan. 1 - March 31 May 10
April 1 - June 30 Aug. 10
July 1 - Sept. 30 Nov. 10
Oct. 1 - Dec. 31 Feb. 10

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Cheryl Coyle

Written by Cheryl Coyle