Changes to Ohio Commercial Activity Tax Mean Potential Savings for Taxpayers
If you anticipate that your Ohio Gross receipts will be less than $3 million in 2024, you should cancel your Commercial Activity Tax (CAT) account, effective December 31, 2023. If your gross receipts are more than $3 million but less then, $6 million, you should file the 2024 tax returns but cancel your CAT tax as of December 31, 2024. You can cancel the CAT account now with an effective date of December 31, 2023, or you can cancel the account at the time of filing the final tax returns.
The 2022 House Bill 33 (H.B. 33) was signed by Governor Mike DeWine on July 4, 2023. The State of Ohio bill will eliminate the annual minimum tax and increase the exclusion amount for the Ohio Commercial Activity Tax next year. The 2024 exclusion amount will be $3 million, and the exclusion amount will increase to $6 million in 2025.
Taxpayers should continue to file their quarterly or annual CAT tax filings for 2023. If you have a refundable tax credit, you will need to keep the account open to take advantage of the credit. If the account is not cancelled, taxpayers will be required to continue to file quarterly tax returns until the account is closed.
Putting it all together
While the modifications to Ohio’s Commercial Activity Tax under HB 33 bring some potential tax benefits, they also introduce additional complexities. It’s crucial for businesses to stay informed and adapt their tax planning strategies accordingly. Consultation with a tax professional is recommended to navigate these changes and ensure compliance while maximizing the tax-saving potential.
For many, a good first step is a sales tax nexus checkup. Or, read about avoiding common sales tax compliance mistakes. You can also get insights into the impact of remote work on tax withholding or contact us to set up a free consultation. As always, we’re here to help.