By Larry Gearhardt, Director of OSU Tax Schools and David Marrison, Extension Educator, ANR, Ashtabula and Trumbull Counties
Some landowners have already discovered that lease bonus and royalty dollars received for shale oil and gas lease payments over $150,000.00 per year are subject to the Ohio Commercial Activity Tax (CAT). See OSU Extension Fact Sheet at http://ohioline.osu.edu/sh-fact/pdf/SOGD_TAX2_12.pdf written by David Marrison, Extension Educator. However, some farmers may be surprised to find that they too are subject to the CAT tax because of higher gross receipts.
The Ohio CAT tax was passed in 2005 in response to a lagging economy. In exchange for the CAT tax, businesses are no longer required to pay personal property tax and individuals pay a lower Ohio income tax rate. Ohio’s income tax rate is currently approximately 20% lower than it was in 2004.
The CAT tax is an annual tax that is imposed on most businesses in Ohio and is measured by the amount of taxable gross receipts from most business activities. A business with taxable gross receipts of more than $150,000.00 per calendar year is subject to this tax, which requires the person to register as a taxpayer with the Ohio Department of Taxation. The term “gross receipts” is broadly defined to include most business types of receipts from the sale of property or the performance of services. Certain receipts are not taxable receipts and are excluded from the taxpayer’s tax base, such as dividends, capital gains, wages reported on a W-2, interest income (other than from credit sales), and gifts.
TAX RATES:
If gross receipts are less than $150,000.00, no tax is due and no registration is required. If gross receipts are between $150,000.00 and $1,000,000.00, the business is required to register with the Ohio Department of Taxation and pay a flat fee of $150.00. If gross receipts are over $1,000,000.00, the business is required to register, pay the $150.00 flat fee, plus 0.26% on the amount over $1,000,000.00.
The $150.00 annual minimum tax is due no later than May 10th of each year, payable with the annual return for calendar year taxpayers or with the first quarter return for calendar quarter taxpayers. A taxpayer with more than $1,000,000.00 in gross receipts is required to pay the tax on a quarterly basis.
CAT EXAMPLES:
If gross receipts are below $150,000.00 = no registration and no tax;
If gross receipts are between $150,000.00 and $1,000,000.00 = registration and $150.00 tax;
Let’s assume gross receipts of $1,200,000.00 = registration, $150.00 flat fee plus 0.26% on $200,000 ($520.00) equals $670.00 and requires quarterly filing.
HOW TO PAY CAT:
Electronic registration for paying the CAT is available online through the Ohio Business Gateway at http://business.ohio.gov. Additional instructions on registering and paying the tax are available on Ohio’s CAT website at http://www.tax.ohio.gov/commercial_activities.aspx