Major Changes Coming to Ohio Commercial Activity Tax in 2024

  • Tax strategies
  • 12/19/2023
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Key insights

  • Significant changes to Ohio’s CAT, starting in 2024, will result in fewer businesses being subject to it.
  • For 2024, businesses with $3 million or less of Ohio sourced taxable gross receipts in 2024 and $6 million or less in 2025 (and thereafter) will not be subject to the state CAT nor required to file any returns with the Ohio Department of Taxation.
  • The CAT rate of 0.26% remains unchanged and continues to apply to those taxpayers with Ohio sourced taxable gross receipts over $3 million in 2024 and over $6 million in 2025 (and thereafter).
  • Potential CAT refund opportunities may exist based on two recent judicial decisions.

Need help figuring out the new Ohio CAT rules?

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Recent legislation will relieve or modify the Ohio commercial activity tax (CAT) obligations for businesses who have historically been subject to it.

Starting in 2024, the legislation increases exemption levels to:

Year Taxable Gross Receipts
2005 – 2023 TGR > $150,000
2024 TGR > $3,000,000
2025/thereafter TGR > $6,000,000

Businesses with Ohio sourced taxable gross receipts under these thresholds will not be subject to the state’s CAT.

The impact on annual filing obligations

Starting in 2024, the annual CAT filing requirement will be eliminated. Currently registered annual taxpayers having $1 million or less in taxable gross receipts during 2023 and anticipating having $3 million or less in taxable gross receipts (i.e., under the threshold) during 2024 should file final 2023 annual returns reporting their taxable gross receipts for 2023 (due May 10, 2024) and should cancel their CAT account.

Starting in 2024, only quarterly returns will be required by all taxpayers subject to CAT (i.e., those with taxable receipts exceeding the new thresholds).

The impact on quarterly filing obligations

Any quarterly taxpayer that anticipates having $3 million or less in taxable gross receipts (i.e., under the threshold) during calendar year 2024 should cancel its CAT account effective December 31, 2023, and file a final 2023 quarterly return. Based on the cancellation date of December 31, 2023, the final CAT return for a quarterly taxpayer is the 2023 fourth quarter tax return, which is due February 12, 2024.

The rules for higher taxable thresholds for 2024 and beyond

For taxpayers exceeding the new thresholds, quarterly returns are to be filed and taxes continue to be due as follows:

Mandatory Electronic Filing via Ohio Business Gateway
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

The rules for taxpayers within a combined/consolidated group

Affiliated taxpayers may continue to file returns on a combined or consolidated basis. Generally, combined and consolidated elected taxpayer groups are treated as one taxpayer for CAT.

Combined and consolidated elected taxpayer groups must consider the taxable gross receipts of all members of the group in determining whether the taxpayer group will exceed the exclusion amount of $3 million in 2024 and $6 million in 2025 (and thereafter).

However, intermember receipts excluded by consolidated elected taxpayers are not considered when determining whether the taxpayer has exceeded the exclusion amount for the calendar year.

Potential CAT refund opportunities may exist

Two recent Ohio court decisions may support CAT refund claims for businesses — such as manufacturers and other businesses — that ship products to Ohio wholesale or retailer customers.

In applying the location rules for the sales of tangible personal property, the Ohio Board of Tax Appeals rejected a non-statutory requirement that the seller know the ultimate destination of goods at the time of sale to claim an Ohio CAT exemption for the sale.

In a similar case, the Ohio Board of Tax Appeals ruled that an intervening sale between the sellers’ customer and a third-party ultimate customer does not break the chain of transportation between the original seller and the ultimate customer.

As a result of these two decisions, businesses shipping products to Ohio but whose products’ ultimate destination is outside Ohio may be entitled to a CAT refund.

How we can help

CAT thresholds for years prior to 2024 remain unchanged. Going forward, the increased Ohio CAT thresholds will relieve numerous taxpayers of filing obligations. Refund opportunities also may exist for businesses that ship products to retailers and wholesalers within Ohio. Contact CLA to help you navigate through these important Ohio tax saving developments.

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