Farmers with gross sales of over $150,000 join other commercial businesses subject to a new Ohio tax. (and no, it is not a tax on your barn cats!) As result of this years Ohio Budget Bill, the Commercial Activity Tax (CAT) came into being. In a question to the Ohio Department of Taxation, whether farms were included, the reply was as follows: “The CAT was intended as a broad based, low rate privilege tax. As such it applies to farmers and other agricultural enterprises, once these entities reach $150,000 in taxable gross receipts.” A second question was asked about milk and other livestock sales from Ohio farms to out-of-state markets. Would these sales be a part of the gross income figure and subject to the tax? The answer was that “the gross receipt has to be sitused to Ohio. If the dairy farm milk is sold outside Ohio, the farm is not subject to CAT. See the Ohio Revised Code 5751.033 for situsing provision.”
For businesses with gross receipts below $150,000, no CAT is due. For businesses with gross receipts between $150,000 and 1 million dollars, a flat $150 tax will be paid. A tax rate schedule will kick in for businesses with gross receipts over 1 million dollars. All businesses with receipts of over $150,000 per year must pay a one time registration fee, $20 will cover most farms (a $200 maximum fee). Registration deadline is November 15th and on line registration is encouraged (a reduced $15 is charged for web registration). A web link is available to explain more about the CAT and other new Ohio tax information at: http://tax.ohio.gov/ . It is very important to register, even if you later determine that you may not be subject to the tax, since a penalty may be imposed at $100 per month, up to $1000, for failure to timely register.
More information from an information letter at a Ohio Department of Taxation site: http://tax.ohio.gov/divisions/communications/cat_general_information.stm. Also, a draft of the tax form is available by clicking the link below:
http://ohioagmanager.osu.edu/resources/CAT_CAT10_Semi-Annual_2005_101405.pdf
Furthermore, the term “situsing” is new to a lot of us, especially as it relates to sales of products outside of Ohio. Peggy Hall, Director of Agricultural and Rural Law Program – Ohio State Universtiy, was good enough to define it for us:
“The ‘situs’ term is used to determine the place over which jurisdiction exists for taxing purposes. The state creates situsing rules to determine whether or not it has taxing powers over property. If a good is ‘sitused’ to Ohio, then the taxing power will exist. In the case of CAT, those goods that are sitused to Ohio will be included within the gross receipts upon which the tax applies. I reviewed the situsing rule for goods such as milk and livestock, and it states that the situs will be Ohio if the good is received in this state by the purchaser. If the good is received outside the state, then the gross receipts from that sale would not be included in the amount to determine if the CAT is applicable.”