What is the Ohio Commercial Activity Tax Rate?

The Ohio Commercial Activity Tax, often called the CAT, is a business privilege tax for activity conducted within the state. It is measured by a business’s gross receipts, which is a fundamental departure from traditional income taxes. Unlike an income tax that is calculated on profit (revenue minus expenses), the CAT is calculated on the total amount of revenue a business generates from its commercial activities in Ohio. This distinction means that even unprofitable businesses may have a CAT liability.

This tax applies to most forms of business, including sole proprietorships, partnerships, and corporations, regardless of their legal structure. Certain entities, such as financial institutions, insurance companies, and some non-profit organizations, are not subject to the CAT.

Determining Your Filing Obligation

A business establishes a substantial connection, or nexus, with Ohio for tax purposes through a “bright-line presence” standard. This standard means a company does not need a physical location in the state to be subject to the Commercial Activity Tax. A business is considered to have a bright-line presence if it meets any one of several criteria during a calendar year, including having at least $50,000 in property, $50,000 in payroll, or 25% of its total property or payroll within the state.

The most common factor that creates nexus for out-of-state businesses is the gross receipts threshold. If a business has at least $500,000 in taxable gross receipts sourced to Ohio within a calendar year, it is considered to have a bright-line presence. This means that even without employees or property in Ohio, sales into the state can trigger a tax obligation. Once a business meets any of these nexus standards, it must evaluate its total receipts to determine its filing and payment duties.

Beginning January 1, 2025, the annual exclusion amount increases to $6 million. This means businesses with $6 million or less in taxable gross receipts for the calendar year are no longer subject to the CAT. Consequently, the annual minimum tax that was previously in place has been eliminated.

Calculating the Commercial Activity Tax

For businesses with taxable gross receipts exceeding the exclusion amount, the Commercial Activity Tax is calculated at a rate of 0.26%. This flat rate applies only to the receipts that are above the annual exclusion threshold. For the 2025 tax year, this means the 0.26% rate is applied to taxable gross receipts in excess of $6 million.

The calculation begins with determining “taxable gross receipts,” which are not necessarily all revenues a business collects. The law allows for several exclusions. Common examples of receipts that are not subject to the CAT include interest income (unless it is from credit sales), dividends, capital gains from the sale of business assets, and wages reported on a Form W-2. Businesses must identify and subtract these and other qualifying exclusions from their total revenue to arrive at the correct tax base.

For example, consider a business with $8,500,000 in taxable gross receipts in 2025. The first $6,000,000 is excluded from the tax. The tax is calculated on the remaining $2,500,000 ($8,500,000 – $6,000,000). The tax liability would be $6,500 ($2,500,000 x 0.0026), which would be paid over the four quarterly filing periods.

Filing and Paying the CAT

To comply with the Commercial Activity Tax, a business must first register for an account with the Ohio Department of Taxation through the Ohio Business Gateway portal. Registration is required within 30 days of crossing the taxable gross receipts threshold.

As all taxpayers with an active account must file on a quarterly basis, the Ohio Department of Taxation encourages businesses that anticipate their gross receipts will remain under the $6 million threshold to formally cancel their CAT account. This prevents the need to file quarterly returns and avoids potential delinquency notices. Businesses that choose to keep their accounts active despite being under the threshold must still file a quarterly return showing zero tax due.

The quarterly due dates for filing returns and making payments follow a consistent schedule.

• The first quarter return, covering January through March, is due by May 10.
• The second quarter is due by August 10.
• The third quarter is due by November 10.
• The fourth quarter return is due by February 10 of the following year.

All filing and payment activities are managed through the Ohio Business Gateway. After calculating the tax owed for a quarter, a taxpayer logs into their Gateway account to submit the return and authorize the corresponding electronic payment.