By Cayleb Reyes, Senior Accountant and Amy Sandlin, CPA, Tax Senior Manager at Blue & Co.
Significant changes to the Ohio Commercial Activity Tax (“CAT”) will impact businesses this year, with more changes coming in 2025.
The Ohio General Assembly passed legislation that will reduce the tax CAT liability for many companies doing business in Ohio. These changes will occur over two years (2024 and 2025).
Some Ohio business taxpayers can act now to take advantage of the changes for 2024.
2024 Changes
The annual minimum CAT is eliminated.
The 2023 tax year is the last year businesses are subject to the $150 minimum CAT.
Taxpayers can exclude $3 million in gross receipts from the Ohio CAT.
Prior to this change, taxpayers could exclude $1 million. The increased exclusion represents $5,200 in tax savings for taxpayers subject to the CAT in 2024.
Taxpayers with $3 million or less gross receipts are no longer subject to the Ohio CAT.
Taxpayers no longer subject to CAT can file a final return for the 2023 tax period.
Taxpayers with CAT receipts of $1 million or less will not have a tax liability on their 2023 final return since the 2023 minimum tax was prepaid with the 2022 CAT return.
Taxpayers with gross receipts above the exclusion for 2024 will pay a 0.26 percent tax on those receipts.
Example:
Annual CAT filings are eliminated.
The annual CAT returns are eliminated after 2023. All taxpayers subject to the Ohio CAT must file and pay quarterly.
These changes are effective for tax periods beginning January 1, 2024.
2025 Changes
The gross receipt exclusion increases to $6 million.
The increased exclusion represents an additional $7,800 in tax savings for businesses subject to CAT in 2025.
Taxpayers with gross receipts less than the $6 million exclusion are no longer subject to the Ohio CAT and can file a final return for the 2024 tax period.
Taxpayers with gross receipts above the exclusion for 2025 will pay a 0.26 percent tax on those receipts.
Example:
This change is effective for tax periods beginning January 1, 2025.
What You Need to Do
I am no longer subject to Ohio CAT.
If you do not expect your gross receipts to exceed the exclusion amount for the year, you should cancel your CAT account and file a final CAT return. A checkbox has been added to CAT returns, so you can now use the final CAT return to cancel your CAT account.
Alternatively, you can cancel your CAT account on the Ohio Business Gateway using the “CAT Cancel Account” transaction.
The final return deadlines and effective dates to cancel the CAT account for each year are:
I am no longer subject to Ohio CAT, but I will be next year.
If you do not cancel your CAT account, you must file quarterly CAT returns even if you do not have a CAT liability.
If your gross receipts for 2024 will not exceed the exclusion, but you expect receipts above the exclusion for 2025, the Ohio Department of Taxation recommends continuing to file CAT returns for 2024. No tax will be due until your receipts exceed the exclusion for the tax year.
However, if you do cancel your CAT account, you can reactivate your account when your receipts exceed the exclusion amount. You must reactivate and pay the Ohio CAT within thirty days of exceeding the gross receipts exclusion amount.
If you have questions about how the Ohio Commercial Activity Tax may affect you, please reach out to your Blue and Co. advisor.
