Shippers that have sales of product destined for Ohio may be surprised to learn that they may be subject to the Ohio Commercial Activity Tax (CAT).
The CAT is an annual tax imposed on “the privilege of doing business in Ohio,” measured by taxable gross receipts for product that finds its way into the state.
Businesses located outside Ohio, but who transact sales into Ohio are subject to the tax, even if they don't maintain a place of business, or have employees or property located, in the state. The first $1 million in gross sales shipped to Ohio are exempt. For gross receipts over $1 million, the tax is measured by .26 percent of their annual Ohio destined gross business receipts.
In 2009, the Supreme Court of Ohio upheld the constitutionality of the CAT. In Ohio Grocers Assn. v. Levin the Ohio high court held that collecting the CAT from grocers based on their gross receipts is a tax upon the privilege of doing business and not an unconstitutional tax upon the sale or purchase of food.
If the Ohio Department of Taxation determines that a sufficient volume of product has been shipped to a destination in Ohio, the department can audit the company’s shipments and receipts going back seven years.
If you have been contacted by the Ohio Department of Taxation regarding this tax, please contact WG Vice President and General Counsel, Jason Resnick at (949) 885-2253.
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