Key insights
- Recent Ohio Commercial Activity Tax (CAT) court cases clarify how and where tangible personal property is sourced for CAT purposes, offering guidance on when receipts are considered Ohio‑sourced in complex supply chain transactions.
- These decisions may significantly affect the CAT exposure of manufacturers, wholesalers, and retailers shipping products into or through Ohio, particularly when goods move through Ohio distribution centers.
- Proactive planning is essential to accurately determine liability, assess potential refund opportunities, and provide transaction structures and documentation aligning with the court’s evolving guidance.
Get proactive strategies to help combat Ohio CAT exposure.
Recent decisions from the Ohio Supreme Court provide important guidance for businesses selling and shipping goods into, within, or through Ohio.
If your company manufactures, distributes, wholesales, or retails tangible products, these rulings may affect how your Ohio Commercial Activity Tax (CAT) liability is determined and whether refund or planning opportunities exist.
Get an overview of what happened, why it matters, and what affected taxpayers should consider next.
A refresher on Ohio’s Commercial Activity Tax
Ohio’s Commercial Activity Tax is a gross receipts tax imposed for doing business in the state. Unlike a sales tax, CAT isn’t passed directly to customers. Instead, it applies to a business’s Ohio-sourced gross receipts, without deductions for costs such as cost of goods sold. The current tax rate is 0.26% of taxable Ohio receipts, after a statutory exemption.
A key question in applying CAT is to determine where receipts from the sale of tangible personal property are “sitused,” or sourced, for Ohio tax purposes. Under Ohio law, receipts are generally sitused to Ohio if the property is received in Ohio by the purchaser. The location where the property is ultimately received after all transportation is completed is critical.
Why situsing has been under scrutiny
Two recent Ohio Supreme Court cases examined how this situsing rule applies when goods are shipped into Ohio temporarily and then moved to locations outside the state. In both cases, taxpayers sought CAT refunds, arguing their products, shipped into Ohio and then shipped out, should be treated as received outside Ohio. While both refunds were denied, the court’s reasoning provides valuable guidance.
Case 1: Sales to wholesalers with Ohio distribution centers
In VVF Interest, LLC v. Harris (decided December 24, 2025), an out-of-state manufacturer sold products to a wholesaler. Those products were shipped to the wholesaler’s Ohio distribution facility and later transported by the wholesaler to the wholesaler’s retail customers, many of whom were located outside Ohio.
The court concluded the products were ultimately received by the purchaser — the wholesaler — at its Ohio distribution facility. As a result, the receipts were sitused to Ohio and subject to CAT. The fact that the goods were later shipped out of state in a second transaction didn’t change the CAT situs treatment of the manufacturer’s sale. The taxpayer’s refund claim was denied.
Key takeaway: When a seller’s customer is a wholesaler, delivery to that wholesaler’s Ohio facility may establish Ohio situs for CAT purposes, even if the goods don’t remain in Ohio.
Case 2: Direct sales to retailers
Just weeks later, the court reached a different conclusion under a different fact pattern in Jones Apparel Group/Nine West Holding v. Harris (decided January 14, 2026).
In this case, an out-of-state seller shipped products directly to retailers. Some of those retailers directed shipments to their Ohio distribution centers, where the goods were temporarily stored before being sent to their individual store locations, many outside Ohio.
Here, the court held the ultimate out-of-state destination could determine the sale situs for CAT purposes. In other words, receipts tied to merchandise ultimately delivered outside Ohio weren’t necessarily subject to CAT, even if the goods passed through Ohio first.
However, the taxpayer’s refund was still denied because it couldn’t adequately document the ultimate destinations of the products. The court emphasized taxpayers bear the burden of proof when claiming out-of-state sourcing.
Key takeaway: For direct sales to retailers, businesses may be able to source receipts based on the final destination of goods — but only if they have sufficient documentation to support that position.
What these decisions mean for Ohio taxpayers
Although the taxpayers didn’t prevail, the rulings clarify how Ohio applies its situsing rules and highlight the importance of transaction structure and documentation. Businesses most likely to be affected include manufacturers, wholesalers, distributors, and retailers that:
- Ship goods into Ohio distribution centers
- Sell to customers with multi-state fulfillment models
- Rely on temporary storage
These cases also underscore different fact patterns can lead to different CAT outcomes, even when goods follow similar physical paths.
Action steps for affected businesses
If your business sells goods that move through Ohio, consider the following:
- Review your customer relationships — Are you selling to wholesalers, retailers, or end customers? The identity of the purchaser matters for CAT situsing.
- Evaluate shipping and fulfillment practices — Temporary storage in Ohio may or may not create Ohio-sourced receipts, depending on the facts.
- Assess documentation — Shipping records, customer instructions, and proof of final destination are critical if you’re sourcing receipts outside Ohio.
- Revisit nexus and exposure — CAT nexus may arise from physical presence or economic activity, including significant Ohio-situs sales.
- Explore planning or refund opportunities — In some cases, the court’s guidance may support reduced CAT liabilities or refund claims, particularly where documentation can be strengthened.
How CLA can help with the Ohio Commercial Activity Tax
Navigating Ohio CAT rules can be complex, especially for businesses with multi-state supply chains. Our state and local tax professionals help businesses:
- Evaluate CAT exposure
- Analyze situsing positions
- Identify planning opportunities
- Prepare defensible documentation
If you believe these rulings may affect your business, we can help you understand your options and next steps.