Effective January 1, 2024, significant changes to Ohio’s Commercial Activity Tax (CAT) will eliminate or reduce the tax for many companies doing business in the state.
Overview of Tax Changes Starting January 1, 2024
Under current laws, the CAT is imposed on Ohio gross receipts in excess of $1 million from business activities in the state at the rate of 0.26% with a tiered minimum tax base. Companies with at least $150,000 in gross receipts, but less than $1 million, are required to only pay the annual minimum tax.
Starting on January 1, 2024, the following changes will become effective:
- The annual minimum tax is eliminated.
- The annual exclusion rate increases from $1 million to $3 million. This increase, with the elimination of the minimum tax, means gross receipts of $3 million or less will no longer be subject to the CAT.
- Quarterly taxpayers that anticipate less than $3 million in taxable gross receipts should file their final returns, which are due February 12, 2024. Annual taxpayers’ final returns are due May 10, 2024.
After filing their final returns, annual and quarterly filers with taxable gross receipts of $3 million or less should cancel their CAT accounts. Failing to cancel these accounts may result in delinquency notices, even though no tax is due.
Effective January 1, 2025, the annual exclusion amount increases from $3 million to $6 million.
What CAT Changes Mean for Small and Medium Size Businesses
Together, the changes over the next two years means the CAT will be eliminated for many small-to-medium businesses operating in Ohio. Taxpayers with $3 million or less in taxable gross receipts in 2024, or $6 million or less in 2025, will no longer be required to file a return.
The state has published a web page with additional information about changes to the CAT.
Evaluating and Seeking Guidance
Businesses should evaluate the implications of these changes for their specific facts and circumstances. With the increased exclusion thresholds and the elimination of the annual minimum tax, many companies will have one less gross receipts tax to worry about.
To discuss these Ohio Commercial Activity Tax changes and how they affect your company, contact us.
