Does Ohio Have a Corporate Income Tax?

Ohio does not impose a traditional corporate net income tax on C-corporations. Instead, the state taxes businesses primarily on gross receipts rather than net profits at the state level. Businesses operating in Ohio are subject to other state-level taxes and a complex landscape of local income taxes.

Ohio’s Approach to State Business Taxation

Ohio has shifted its state-level business taxation away from a corporate net income tax. C-corporations in Ohio are not subject to a tax on their profits at the state level.

The primary state-level tax for businesses, including C-corporations, is the Commercial Activity Tax (CAT). This tax is levied on a business’s gross receipts from sales in Ohio, rather than on its net income. Pass-through entities, such as S-corporations and partnerships, do not pay state income tax on their net income at the entity level, as this income is taxed at the individual owner’s level.

The Commercial Activity Tax

The Commercial Activity Tax (CAT) is an annual privilege tax imposed on businesses for the right to conduct operations within Ohio. This tax is measured by a business’s gross receipts generated from activities within the state. It applies to a wide array of business entities, including C-corporations, S-corporations, partnerships, limited liability companies (LLCs), and sole proprietorships. Businesses located outside Ohio may also be subject to the CAT if they have sufficient economic contacts with the state.

Taxable gross receipts are broadly defined to encompass most types of revenue from the sale of property delivered to an Ohio location or from services performed and benefited within Ohio. However, certain receipts are excluded from the CAT calculation, such as interest, dividends, capital gains, wages reported on a W-2, and gifts. The CAT rate is 0.26% of taxable gross receipts.

Significant changes to the CAT took effect in 2024 and 2025. For 2024, businesses with $3 million or less in taxable gross receipts are excluded from the tax. This exclusion amount increases to $6 million for 2025 and subsequent years. The annual minimum tax was eliminated starting in 2024.

Businesses exceeding the annual exclusion threshold must register for the CAT with the Ohio Department of Taxation. Registration can be completed electronically through the Ohio Business Gateway. Since 2024, all CAT taxpayers are required to file and pay on a quarterly basis, as annual filing options were eliminated after the 2023 tax year.

Taxation of Pass-Through Entities

In Ohio, pass-through entities (PTEs) are a common business structure where income is not taxed at the entity level for state income tax purposes. These entities include S-corporations, partnerships, limited liability companies (LLCs) taxed as partnerships, and sole proprietorships. Instead, the business income of these entities passes directly to their owners, who then report and pay Ohio individual income tax on their proportionate share.

To address the federal limitation on state and local tax (SALT) deductions, Ohio enacted an elective pass-through entity tax, effective for tax years beginning in 2022. This allows qualifying PTEs to elect to pay income tax at the entity level. The tax rate for this elective PTE tax was 5% for 2022 and reduced to 3% for 2023 and subsequent years.

When a PTE makes this election, the entity pays the tax, and its owners can then claim a corresponding refundable credit on their individual Ohio income tax returns. This mechanism helps business owners effectively bypass the federal $10,000 SALT deduction cap. The election to pay this entity-level tax is made annually and is irrevocable for that tax year.

Local Business Income Taxes

Beyond state-level taxation, many businesses in Ohio also face municipal income taxes. Numerous cities and villages throughout Ohio levy their own income taxes on businesses operating within their jurisdictions. These local taxes are separate from state taxes and are typically based on the net profits of businesses or, in some cases, gross receipts generated within the municipality.

The rates, rules, and filing requirements for municipal income taxes vary significantly from one city or village to another. This variability creates complex compliance challenges for businesses that operate in multiple Ohio municipalities. Agencies such as the Regional Income Tax Agency (RITA) and the Central Collection Agency (CCA) administer and collect these taxes on behalf of many Ohio municipalities.

Businesses are responsible for withholding municipal income tax from the wages of their employees and for remitting these withheld taxes. Businesses must also file their own annual net profit tax returns with each municipality where they have taxable income. Some businesses may have the option to file their municipal net profit tax returns centrally through the Ohio Business Gateway.