Key Takeaways

• • Under a bill signed by Governor DeWine this year, companies subject to Ohio’s Commercial Activity Tax (CAT) will receive a significant tax break beginning in 2024.
  • Beginning January 1, 2024, taxpayers will only pay CAT on taxable gross receipts exceeding $3.0 million or $6.0 million for tax year beginning January 1, 2025.
  • Taxpayers with gross receipts less than $3.0 million ($6.0 million for 2025) will no longer be required to file any CAT return with the Department of Taxation

Ohio’s Commercial Activity Tax

Under a bill signed by Governor DeWine this year, companies subject to Ohio’s Commercial Activity Tax (CAT) will receive a significant tax break beginning in 2024. In 2025, this tax law change could result in savings of over $15,000. Beginning on January 1, 2024, the new law eliminated the CAT annual minimum tax and increased the exclusion amount from $1.0 million to $3.0 million.

Commercial Activity Tax is an annual privilege tax assessed on the gross receipts of a company’s business activities within Ohio. Gross receipts is a fairly broad term but does not include interest income, dividends, capital gains, or W-2 wages. CAT applies to various businesses, including limited liability companies (LLCs), partnerships, and corporations. In addition, this tax applies to most types of industries, including retail, manufacturers, and service providers.

No Annual Minimum Commercial Activity Tax

Under previous law, a company registered for CAT upon reaching $150,000 in taxable gross receipts with a minimum tax of $150.00. Any gross receipts after the $1.0 million exclusion were subject to a tax rate of .26% of taxable gross receipts. However, beginning January 1, 2024, there is no minimum annual tax. Beginning January 1, 2024, taxpayers will only pay CAT on taxable gross receipts exceeding $3.0 million or $6.0 million for tax year beginning January 1, 2025.

Taxable Gross Receipts Exclusion Increases

Under previous law, only the first $1.0 million was excluded from taxation. However, beginning in January 2024, the first $3.0 million will be excluded, and beginning January 1, 2025, the first $6.0 million of taxable gross receipts will be excluded. Therefore, taxpayers will only pay CAT if their taxable gross receipts exceed $3.0 million (2024) or $6.0 million (beginning 2025).

Annual Filing Eliminated

Taxpayers with gross receipts less than $3.0 million ($6.0 million for 2025) will no longer be required to file any CAT return with the Department of Taxation. Therefore, such taxpayers are encouraged to cancel their CAT account to avoid an assessment for failure to file. In addition, beginning January 2024, all taxpayers will only be required to file quarterly reports instead of an annual report.

This significant tax change will result in substantial tax savings and limit the filing burden for taxpayers.