FAQ's: Commercial Activity Tax CAT - Commercial Activity Tax...... The CAT also applies whether the business is operated in this state or is located outside of this state if the taxpayer has enough business contacts with this state. The CAT applies to all entities regardless of form, such as sole-proprietorships, partnerships, LLCs, and all types of corporations (e.g., S Corporations and C Corporations). A person with taxable gross receipts of more than $150,000 per calendar year is subject to this tax, which requires such person to register with this Department as a taxpayer.  Please note that certain receipts are not taxable receipts, such as the wages most persons earn for doing work is not subject to this tax nor are such wages part of the $150,000 threshold for having to register for this tax.  The tax does have limited exclusions for certain types of businesses such as financial institutions and their affiliates, dealers in intangibles, insurance companies and their affiliates, and some public utilities. TAXABLE GROSS RECEIPTS: Gross receipts subject to CAT are broadly defined to include most business types of receipts from the sale of property or realized in the performance of a service. The following are some examples of receipts that are not subject to the CAT: interest (other than from credit sales), dividends, capital gains, wages, amounts in excess of commissions, gifts.  In general, for the sale of property such receipt is only considered a taxable gross receipt if the property is delivered to a location in this state.  For services, the receipt is sitused to Ohio in the proportion that the purchaser's benefit in this state bears to the purchaser's benefit everywhere.  The physical location where the purchaser ultimately uses or receives the benefit of what was purchased is paramount in making this determination.  In other words, receipts from sales to out-of-state purchasers or the proportion of the services where the benefit is primarily received outside of this state are not subject to the CAT.  Please refer to our Web site for a more comprehensive list and explanation of items that are included and excluded from the CAT. tax.ohio.gov TAX START DATE, FILING DATE AND TAX RATE: The CAT first applies for taxable gross receipts received on and after July 1, 2005.  The first measurement period for all taxpayers is for receipts received from July 1, 2005 to December 31, 2005.  This return is due February 10, 2006.  Because the tax is being phased in over five years, the tax rate on the first $500,000 in taxable gross receipts for that period is $75 while receipts over that amount are taxed for that measurement period at 0.06% (0.0006).  Taxpayers that are required to use accrual accounting for federal tax purposes must use the same reporting method for the CAT.  Beginning January 1, 2006 taxpayers with taxable gross receipts in excess of $1 million per calendar year will file and pay quarterly.  All other taxpayers will pay annually unless they register to file quarterly.  The due date for the return is forty days after the end of each tax period.  For the 2006 tax year, all taxpayers will be required to pay the annual privilege tax of $150 for the first $1 million in taxable gross receipts by May 10, 2006.  Taxpayers subject to quarterly tax reporting will also have to make payment of the first quarter tax at that time.  The minimum tax for the 2007 privilege tax year and all tax years thereafter will be paid upon the filing of the annual return for the previous calendar year for annual taxpayers and on the fourth quarter return for the previous year for quarterly taxpayers.

**REGISTRATION: Taxpayers having over $150,000 in taxable gross receipts are required to register for the CAT.  A one-time registration is required for all taxpayers (annual and quarterly taxpayers. The deadline for registration is November 15, 2005.  If a person first becomes subject to the CAT after November 15, 2005 the taxpayer is required to register within 30 days.  All registrations are subject to a one-time fee; single taxpayers are subject to a $15 fee if filed electronically and $20 fi filed via paper, consolidated and combined taxpayers are subject to a maximum fee for all its members of $200. Registration is available online through the Ohio Business Gateway at www.obg.ohio.gov. For better efficiency, the Department of Taxation urges taxpayers to file electronically.  Taxpayers still wanting to file using paper can obtain the form at www.tax.ohio.gov or request the form by calling 800-282-1782. All registration fees will be applied as a credit toward the tax liability on the first tax return. CONSOLIDATED ELECTED TAXPAYERS and COMBINED TAXPAYERS: A Consolidated Elected Taxpayer is a taxpayer that has elected to file as one consolidated taxpayer for itself and other entities that have either 50% or more common ownership or 80% or more common ownership. In addition, the group can elect to have foreign corporations (non-U.S.) with the same common ownership all excluded or all included in the group. A major benefit of making this election is that receipts received between members of the group are not subject to the CAT. However, taxpayers making this election must agree that all commonly owned entities are part of the group even if the requisite contacts with the state for it to exert its taxing powers do not exist (nexus). The election is binding for two years. If such election is not made, any taxpayers with common ownership of more than 50% must file as a combined taxpayer. Combined taxpayers may not exclude receipts between members of the group. However, combined taxpayers need only include in the group, those members who have nexus in Ohio. ADDITIONAL INFORMATION: This overview is only a brief summary of the CAT. For more details you may wish to visit the Ohio Department of Taxation's website www.tax.ohio.gov.