Ohio Commercial Activity Tax Changes for 2024

Major changes to Ohio’s Commercial Activity Tax (CAT) became effective January 1, 2024. These changes impact all businesses, including consolidated and combined filers. Here’s what taxpayers that must register for CAT need to know.

• Taxpayers with gross receipts of $3 million or less in a calendar year will no longer be subject to CAT.
• CAT no longer has an Annual Minimum Tax.
• Taxpayers no longer subject to CAT should consider canceling their CAT accounts.
• Members of consolidated elected and combined taxpayer groups have new guidance for determining their CAT filing responsibilities.

Background on Ohio’s Commercial Activity Tax

Ohio imposes an annual privilege tax on the gross receipts of commercial activity at a rate of 0.26%. The tax applies to business entities undertaking commercial activity in Ohio.

Prior to 2024, all CAT taxpayers were subject to an Annual Minimum Tax (AMT) of at least $150, depending on the taxpayer’s taxable gross receipts. CAT itself applied to taxpayers with taxable gross receipts over $1 million. The first $1 million in taxable gross receipts were excluded from the tax base calculation.

Taxpayers that made a binding election to form a consolidated elected taxpayer group under Sec. 5751.011 of the Revised Code were subject to the AMT prior to 2024, regardless of the group’s total taxable receipts. Such taxpayers calculated their CAT liability by eliminating intercompany receipts.

Combined taxpayer groups (non-elective under Sec. 5751.012 of the Revised Code) did not need to register or pay the AMT if the group’s total taxable receipts were less than $150,000 in a calendar year. Such taxpayers calculated their CAT liability without an exclusion for intercompany receipts.

2024 Changes to the Commercial Activity Tax

Beginning January 1, 2024, the exclusion for Ohio CAT has increased to $3 million and will increase to $6 million in 2025. Taxpayers who expect to have over $3 million in taxable gross receipts in 2024 and have not registered for CAT may do so through the Ohio Business Gateway.

Also, beginning in 2024, the CAT AMT will be eliminated.

Cancellation Options for CAT

Cancellation may be accomplished by:

• Cancel immediately through the Ohio Business Gateway. Select CAT Cancel Account transaction.
• Cancel by checking the cancellation check box on the final 2023 tax return.
• Alternatively, submit a Business Account Update Form to cancel the account.

If a taxpayer does not cancel their account, they must file returns, even if they do not meet the gross receipts threshold.

Consolidated Elected and Combined Taxpayer Groups

Due to the change to CAT, the Ohio Department of Taxation has revised its guidance for consolidated elected and combined taxpayer groups.

A consolidated elected taxpayer group with taxable gross receipts not exceeding the exclusion amount may cancel their account. As a note, intercompany receipts excluded from the base by consolidated filers are taken into account when determining if the consolidated filer exceeds the exclusion amount.

If a group is subject to CAT as a combined taxpayer (which requires including intercompany receipts in the tax base), but their total taxable gross receipts do not exceed the exclusion amount, then that group does not need to register for CAT.

However, within 30 days of taxable gross receipts exceeding the exclusion amount, the combined taxpayer group must register for and is subject to CAT.

These changes may impact organizations doing business in Ohio. To help ensure compliance, work alongside a trusted advisor knowledgeable in state and local taxation issues.