Ohio CAT Tax: Rates, Filing, and Due Dates (2024)

The business world moves fast, and Ohio isn’t standing still. If you’re running a business in the Buckeye State or have employees there, you’ve probably heard about the Ohio Commercial Activity Tax (CAT).

It’s not exactly new, but the rules of the game are about to change significantly. Starting January 1, 2024, Ohio rolled out major revisions to the CAT, and if you’re not paying attention, you could miss out on some serious savings or even get caught off guard by unexpected tax bills.

In this article, we’ll review everything you need to know about Ohio’s CAT Tax and how Mosey’s business compliance management platform can help you stay compliant.

What Is the Ohio CAT Tax?

In a nutshell, the Ohio CAT tax is Ohio’s way of saying, “Thanks for doing business here.” It’s a tax based on your gross receipts, not your net income.

Think of it as a special tax for operating within the state. Whether you’re a mom-and-pop shop or a mid-sized company with a few hundred employees, if your business generates revenue in Ohio, the CAT likely applies to you.

Here’s why it matters, especially if you run a small to medium-sized business: Ohio is trying to sweeten the pot. They’re increasing the threshold for who has to pay, meaning more businesses might get a pass altogether.

Additionally, the state is changing the way the tax is calculated and filed, which could simplify your business compliance — but the devil is in the details, and that’s where Mosey comes in.

How Has the CAT Tax Changed?

Here’s how Ohio is raising the bar on who needs to pay the CAT tax in the next two years:

2024: If your business makes under $3 million in gross receipts in Ohio, you may be off the hook.
2025: That threshold could jump to $6 million.

What does that mean for you? If you’re a smaller business, it could be a game-changer. You might be able to say goodbye to the CAT altogether or at least see a significant reduction in your bill. However, there are nuances to who qualifies for the exclusion.

No More Annual Minimum Tax

Even if you’re liable for the CAT, there’s still good news for you: Ohio is scrapping the annual minimum tax.

Previously, even businesses with low gross receipts had to pay a minimum amount. This change is especially helpful for startups and small businesses that are just getting off the ground.

Quarterly Filing

Finally, say goodbye to the annual CAT tax return. Starting in 2024, you’ll be filing on a quarterly basis. That may seem like more work, but it could make your financial planning easier. You’ll have a better handle on your tax obligations throughout the year rather than facing one big bill at the end.

The 2024 changes to the CAT can be something to celebrate, especially if you run a leaner operation — but as always, there’s more to the story.

Let’s take a closer look at who these changes truly benefit and how to make sure you take full advantage of them.

Who Is Subject to the CAT Tax and How Does It Work?

Before you celebrate your newfound CAT tax freedom, let’s make sure you’re in the clear. The new exclusions don’t apply to everyone.

The CAT tax will still affect you if your Ohio gross receipts exceed the new thresholds ($3 million in 2024 and $6 million from 2025 onwards). Remember, those numbers are gross receipts, not profits. Even if your expenses are high, you could still be liable.

Check Your CAT Account

If your business no longer meets the criteria for paying the CAT, don’t assume you’re off the hook. You must actively check your CAT account and cancel if you no longer apply. Otherwise, you could be stuck filing unnecessary returns and even facing penalties.

There are two options for canceling CAT:

The Ohio Business Gateway: This online portal is your one-stop shop for many business filings in Ohio.
Form BA UF: This is the official form for requesting a cancellation.

Not sure which way to go? Mosey can help you with this process and ensure you’re not paying a penny more than you owe.

How Is the CAT Calculated?

The CAT tax rate itself hasn’t changed — it remains a flat 0.26% of your taxable gross receipts. That might not sound like much, but remember, it’s applied to your total revenue, not your profits. There are also not many deductions available to offset this tax. If you’re a high-grossing business, that 0.26% can quickly become a hefty sum.

Here’s how the math works. If your Ohio gross receipts are $10 million, your CAT tax bill would be $18,200. This is calcuated as $10M less the $3M exclusion for 2024 = $7M x 0.26% = $18,200 due. That’s enough for an expensive family vacation or a down payment on a new car. As a result, it remains critical to understand how the CAT is calculated and how it could impact your bottom line, even with the higher exclusion thresholds.

How Have Court Cases Affected the CAT Tax?

Ohio’s legal landscape regarding the CAT tax has recently seen some notable developments. While court cases might not be the most exciting, understanding their implications can determine your business’s tax strategy.

Aramark Corp. v. Harris

In this case, the Ohio Board of Tax Appeals (BTA) examined the distinction between agency relationships and standard business relationships in the context of CAT tax liability. The BTA’s ruling underscores the importance of accurately classifying your business arrangements to ensure proper compliance.

If your business collaborates with other companies, it’s essential to determine whether these relationships constitute true agency or independent business dealings. This determination can significantly impact your CAT tax obligations.

Jones Apparel Group/Nine West and VVF Intervest

These cases involved determining the location of a sale, a crucial factor for multi-state businesses with operations in Ohio. While the Ohio Board of Tax Appeals has made initial rulings, appeals are ongoing, indicating the evolving nature of this issue.

The bottom line is that if you operate across state lines and have transactions involving Ohio, you must carefully review your sales and distribution processes. The location where a sale is deemed to occur can directly affect your CAT tax liability.

NASCAR Holdings

In a notable decision, the Ohio Supreme Court determined that certain intellectual property revenues were exempt from the CAT tax. This case highlights the importance of comprehending the specific criteria to determine whether certain revenue streams are subject to the CAT.

If your business generates revenue from intellectual property, it’s worth investigating whether certain receipts might be excluded from your CAT tax calculations.

How Have R&D Tax Credits Changed?

Ohio wants to reward you if your business is pushing boundaries with research and development. The R&D tax credit, a dollar-for-dollar reduction of your CAT tax liability, remains available.

However, the state has tightened the reins a bit. The Ohio Department of Taxation now has greater authority to audit your R&D expenses, and you’ll need to keep meticulous records for at least four years.

How Mosey Can Help With CAT Tax Compliance

Juggling these changing regulations and maximizing your tax savings can feel like a maze. That’s where Mosey steps in. More than another software option, we’re your trusted compliance partner.

We’ll help you identify your state tax obligations (including the CAT), manage your filing deadlines, and update you on any new rules or deadlines. Think of us as your sidekick in the wild world of compliance.

Explore Mosey and Stay Compliant in Ohio

Ohio’s CAT tax is changing. For 2024, higher exclusion thresholds, the elimination of the annual minimum tax, and quarterly filing are all on the horizon. Staying compliant means comprehending these changes and their potential impact on your business.

Don’t let tax season sneak up on you. Take a proactive approach to understanding your obligations and take advantage of tools like Mosey to streamline your business compliance efforts. With a little preparation and the right resources, you can confidently face CAT tax challenges. Schedule a demo with Mosey and see what the future of your compliance management looks like.

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