Commercial Activity Tax (CAT)
As a gross receipts tax, the CAT is levied on the entirety of a company’s Ohio business receipts, without deductions for compensation, costs of goods sold, or other expenses. The Ohio gross receipts tax serves a similar purpose and applies to most businesses. If you run a business in Ohio, you will likely need to pay the CAT. For businesses where income passes through to the owners, business income gets taxed on the owners’ personal returns.
Corporation Tax Classifications
How your corporation is taxed will depend on whether it’s an S Corp or a C Corp. Anyone who takes earnings out of your corporation will need to pay Ohio income tax and will be taxed at the state’s standard rates. If the Federal return has changed and the change affects the entity’s Ohio tax liability, then an amended return must be filed.
Filing Requirements and Tax Rates
- If you are an Ohio resident or have Ohio-sourced income, and your gross income meets or exceeds specific thresholds, you need to file an Ohio tax return.
- Ohio’s state income tax rates and tax brackets are structured to be progressive, with rates ranging from 0% to 3.99%.
0%: $0 to $26,050
2.76%: $26,051 to $46,100
...You DO NOT have to file an Ohio return if your Ohio adjusted gross income (AGI) is less than or equal to $0 or your tax credits exceed your income tax liability and you are not liable for school district income tax.
Ohio requires that you use the same filing status as you used for your federal income tax return.
Other Filing Considerations
- Once your business has an Ohio sales tax license and begins to make sales, you are required to start collecting and filing sales taxes.
- Military personnel who are Ohio residents remain Ohio residents for income tax purposes until a change of home of record is made on DOD Form DD-2058.
- If you end up not liable for taxes due to an adjusted gross income of $0 or less, you do not need to file.
Ohio vs. Corporate Income Tax
While Ohio does not have a corporate income tax, the Ohio gross receipts tax, also known as the Commercial Activity Tax (CAT), serves a similar purpose. Ohio is one of a few states without corporate income tax, with similar structures in Texas, Michigan, and Washington.
Steps for Filing Sales Tax
The first step to file and pay your Ohio sales tax return is to log onto the Ohio Gateway. If you do not have a username and password, you need to click on “Never used the Gateway?”