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The Ohio Commercial Activity Tax (CAT) was established as part of the Ohio tax reform law, which passed in 2005. The bill included a phase-in of the CAT rate of 0.26% (.0026) of gross receipts, while phasing out corporate franchise tax and personal property tax (to name a few phase-outs). Effective April 1, 2007, the CAT phase-in rate is 0.156% (up from the previous rate of 0.104%).
The original plan was to keep the tax simple. However, after only two years since its initial implementation, there have already been 30 CAT information releases issued by the state, each ranging anywhere from one to 30 pages long.
Some notable exclusions from the tax include receipts from:
- Interest income
- Dividend income
- Capital gains
- Tax refunds
- Out-of-state sales
Some lesser known exclusions relate to:
- Sale or transfer of motor vehicle as customer preference (Auto dealerships)
- Agents working on a commission or fee basis (Insurance/real estate agents)
- Transportation services performed both in-state and out-of-state (Trucking companies)
Due to the number of clarifications to this tax, treatment of your business gross receipts may have changed. If you are currently preparing your business's Commercial Activity Tax return, remember to periodically contact your Rea advisor to review the calculation.
Taxpayers who elected consolidated status on their original registration may cancel this election if done so by June 30. Please contact your Rea advisor immediately to perform an updated analysis on whether electing out is now more advantageous.
-By Carlos Mullet, CPA (Senior Accountant, Millersburg office)
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