As a result of Am. Sub. H.B 33, taxpayers will see major changes to the Ohio Commercial Activity Tax (the “CAT”) starting next year. To date, the CAT has been a compliance obligation for many small businesses because of an “annual minimum tax” imposed when a taxpayer had only a relatively small amount of taxable gross receipts. This minimum tax obligation brought with it the responsibility to file an annual (or quarterly) tax return.
Beginning in 2024, however, the minimum tax concept is removed, and the annual exclusion amount is increasing significantly. For tax year 2024, the minimum tax is gone, and the taxpayer’s first $3 million of taxable gross receipts are excluded, meaning a taxpayer with $3 million or less in taxable gross receipts will not pay any CAT or be required to file a CAT return. In 2025, and thereafter, the annual exclusion increases to $6 million, and there continues to be no annual minimum tax. Combined and consolidated taxpayers generally calculate taxable gross receipts on an aggregate basis and will continue to do so under these new thresholds. The .26% general CAT tax rate remains unchanged.
The Ohio Department of Taxation is advising those taxpayers who do not anticipate more than $3 million of taxable gross receipts in 2024 to close their accounts. A taxpayer can close its account as of a certain date (e.g., December 31, 2023) on either a retroactive or prospective basis. Of course, a taxpayer should also file a final 2023 tax return even if it plans to cancel its account because of the new thresholds. The Ohio Department of Taxation instructs taxpayers to use the Ohio Business Gateway or the Business Account Update Form to close an account. There will also be a box that can be checked on the final 2023 annual or quarterly tax return whereby a taxpayer can close its account as of
December 31, 2023.
Another procedural change beginning in 2024 is that filing an annual CAT return will no longer be possible. From 2024 onward, quarterly filing will be required for all taxpayers.
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