Ohio Updates Commercial Activity Tax
September 28, 2023 - A recent change in Ohio’s tax law, passed by the 135th Ohio General Assembly, will affect businesses with taxable gross receipts of $3 million or less.
Beginning in 2024, Am. Sub H.B. 33 states that businesses with taxable gross receipts of $3 million or less and, for tax periods beginning in 2025 and thereafter, businesses with taxable gross receipts of $6 million or less will no longer be subject to the commercial activity tax (CAT).
In addition, the new tax law eliminated the annual minimum tax beginning in 2024 and increased the annual exclusion amount to $3 million in 2024 and to $6 million in 2025 and thereafter. Taxpayers will deduct the exclusion amount from their taxable gross receipts for the calendar year, and any taxable gross receipts in excess of the exclusion amount are subject to the 0.26% tax rate.
Summary of Changes to the Ohio CAT:
Effective January 1, 2024
- The annual minimum tax is eliminated, for tax periods 2024 and thereafter.
- The annual exclusion amount is increased to $3 million.
- Taxpayers with taxable gross receipts of $3 million or less per calendar year will no longer be subject to the CAT.
- The 2023 annual return due May 10, 2024 or the quarterly return due February 12, 2024 is the final return required for qualified filers.
- Taxable gross receipts exceeding $3 million will be taxed at 0.26%
Effective January 1, 2025
- The annual exclusion amount is increased to $6 million.
- Taxpayers with taxable gross receipts of $6 million or less per calendar year will no longer be subject to the CAT.
- Taxable gross receipts exceeding $6 million will be taxed at 0.26%.
Quarterly and annual taxpayers that anticipate having $3 million or less in taxable gross receipts in 2024 should cancel their account effective Dec. 31, 2023, after they have filed their 2023 returns.
Starting in 2025, quarterly taxpayers that anticipate $6 million or less in taxable gross receipts in 2025 should file their final returns, due February 10, 2025, and cancel their CAT accounts with an effective date of December 31, 2024.
Taxpayers with more than $3 million in Ohio gross receipts in 2024 and more than $6 million thereafter, will continue to have quarterly filing requirements.
Combined and consolidated taxpayers are treated as one taxpayer and must consider the taxable gross receipts of all members to determine if they qualify for the $3 million or $6 million gross receipts exclusion.
If you have further questions or concerns about the changes to the Ohio Commercial Activity Tax, you can reach one of our experts here.
Teri Grahn, CMI
Teri Grahn, senior manager is the sales and use tax service area leader and is a certified member of the Institute for Professionals in Taxation. She educates and assists commercial entities with multi-state sales and use tax procedures and compliance, and works with clients to review internal records and practices and educates their staff on processes. She also helps clients navigate the unknowns of entering new states and jurisdictions by researching specific products and services, system and invoice set up to remain compliant with future transactions. Teri also supports clients through sales and use tax audits by investigating assessments and answering questions throughout the process. Teri works with clients in various industries including manufacturing and distribution, construction and real estate, and technology. Prior to joining Redpath and Company in 2003, Teri performed sales and use tax audits for the Minnesota Department of Revenue for 9 years.
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