Commercial Activity Tax (CAT) Changes to Tiered Structure for Minimum Payments beginning in 2014

by: David Marrison, OSU Extension Educator

Most farm and agribusiness in Ohio are aware of the Commercial Activity Tax (CAT) which is the annual tax imposed for the privilege of doing business in Ohio, measured by taxable gross receipts from most business activities. Businesses with Ohio taxable gross receipts of $150,000 or more per calendar year are subject to the tax.

Background on CAT:

The CAT was enacted in House Bill 66, passed by the 126th General Assembly in 2005. Most receipts generated in the ordinary course of business are included in a taxpayer’s CAT base. This tax applies to all types of businesses: e.g., retailers; service providers, such as lawyers, accountants, and doctors; manufacturers; and other types of businesses.

The CAT applies to all entities regardless of form, e.g., sole proprietorships, partnerships, LLCs, and all types of corporations. The tax does have limited exclusions for certain types of businesses such as financial institutions, dealers in intangibles, insurance companies, and some public utilities if those businesses pay other specific Ohio taxes.

The term “gross receipts” is broadly defined to include most business types of receipts from the sale of property or in the performance of a service. Note that certain receipts are not taxable receipts and are excluded from a taxpayer’s CAT base, such as dividends, capital gains, wages reported on a W-2, interest income (other than from credit sales), and gifts.

It is important to note that, in general, persons with $150,000 or less in taxable gross receipts are not subject to the CAT.

So what are the tax rates?

Up until December 31, 2013, the rates were as follows:  The first $1 million in taxable gross receipts (from $150,000 to $1,000,000) was taxed at an annual minimum tax of $150, and then taxed at 0.26% for any receipts above $1 million.

For tax periods beginning on January 1, 2014 and thereafter, the annual minimum tax (AMT) will become a tiered structure and taxpayers will pay an amount that corresponds with their overall commercial activity (legislative change in Am. Sub. H.B. 59 of the 130th General Assembly). The additional 0.26% tax for any receipts above million has not changed and continues to apply to those taxpayer’s with taxable gross receipts over $1 million.

The taxpayer will utilize its previous calendar year’s taxable gross receipts to determine the current year’s minimum tax.  For taxpayers with $1 million or less in taxable gross receipts the minimum payment will not change.  It will stay at $150. The annual minimum tax for taxpayers with total taxable gross receipts of more than $1 million but less than or equal to $2 million will be $800.  The annual minimum tax for taxpayers with taxable gross receipts more than $2 million but less than or equal to $4 million increases to $2,100.  Finally, the annual minimum tax for taxpayers for taxpayers with taxable gross receipts over $4 million will be $2,600.

 

Taxable Gross Receipts

Annual Minimum Tax

CAT

$1 Million or less

$150

No Additional Tax

More than $1 Million but less than or equal to $2 Million

$800

0.26% x (Taxable Gross Receipts – $1 Million)

More than $2 Million but less than or equal to $4 Million

$2,100

0.26% x (Taxable Gross Receipts – $1 Million)

More than $4 Million

$2,600

0.26% x (Taxable Gross Receipts – $1 Million)

CAT examples

Marrison Farms LLC is an annual taxpayer.  The farm reports taxable gross receipts of $500,000 for the reporting period of January 1, 2013 to December 31, 2013 on its annual return in May, 2014. Marrison Farms LLC will pay an annual minimum tax for 2014 of $150 with the 2013 annual return filed in May, 2014.

John B. Landowner owns 400 acres in northeastern Ohio and is a teacher at the local high school.  He leases his land for oil & gas exploration for $3,000 per acre. He receives a bonus payment of $1,200,000. To calculate his CAT obligation, Mr. Landowner would pay $800 for the first million dollars and then apply the 0.26% tax rate for the remaining $200,000, which equals $520.  He has no other commercial business activity so his total CAT obligation would be $800 + $520 = $1,320. His wages as a school teacher are not subject to the CAT.

Note: Landowners that receive bonus and royalty dollars received for shale oil and gas leases are subject to the Ohio Commercial Activity Tax (CAT) if the payments total over $150,000 annually.

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 at: http://www.tax.ohio.gov/commercial_activities.aspx

Please contact the CAT Division at 1-888-722-8829 with questions regarding this release or any other CAT matter.

References

Ohio Department of Taxation, Commercial Activity Tax Website

http://tax.ohio.gov/divisions/commercial_activities

Monthly Webinars to Help Growers and Producers Enhance Marketing, Improve and Expand Sales

Growers and producers – have you ever wondered how to go about marketing your hops to Ohio’s microbreweries? Or how about getting your meats into area grocery stores or restaurants? Have you ever wondered how to make sure your food business or operation has a strong, income-building presence in the mobile media arena?

Answers to these questions and more are available to growers, producers and anyone in the agriculture and food industry through a series of free monthly webinars offered by food and agriculture marketing experts from Ohio State University’s College of Food, Agricultural, and Environmental Sciences.

The webinars are designed to teach participants how to effectively use direct marketing as a way to improve their businesses’ financial bottom line, said Brad Bergefurd, a horticulturist with Ohio State University Extension and the Ohio Agricultural Research and Development Center.

Having an effective and succinct marketing plan is key to any business’ potential for success, he said.

“Everything comes down to the marketing of your products,” Bergefurd said. “Growing the crops doesn’t make growers money — marketing the crops is what makes the money.

“You have to have your marketing plan put together well in advance before you even start producing your products. You have to know where and how you can sell the products that you produce in advance of production in order to save time, money and effort and to be able to make a profit.”

The seminars hit on a broad array of topics and interests, he said.

The webinars are offered the last Thursday of every month through October, from noon to 1 p.m.

Topics include:

Feb. 27 — Top 10 Direct Marketing Trends, by Mike Hogan, an OSU Extension educator and Sustainable Agriculture coordinator. The webinar will be available to view at http://carmenconnect.osu.edu/dmtrends.

March 27 — MarketReady, Selling to Schools, also by Hogan. The webinar will be available to view at http://carmenconnect.osu.edu/schoolmarket.

April 24 — Maps & Apps, Mobile Media Marketing, by Rob Leeds, an OSU Extension educator. The webinar will be available to view at http://carmenconnect.osu.edu/mapsandapps.

May 29 — Aquaponics Production and Marketing, by Bergefurd. The webinar will be available to view at http://carmenconnect.osu.edu/marketaqua.

June 26 — Farmers Markets, by Christie Welch, a farmers market specialist at Ohio State University South Centers at Piketon. The webinar will be available to view at http://carmenconnect.osu.edu/farmersmarkets.

July 31 — Food Hubs by Tom Snyder, manager of OSU South Center’s Ohio Cooperative Development Center. The webinar will be available to view at http://carmenconnect.osu.edu/foodhubs.

Aug. 28 — Marketing Hops to Ohio Microbreweries, by Bergefurd. The webinar will be available to view at http://carmenconnect.osu.edu/hopsmarketing.

Sept. 25 — Marketing Meat, by Mark Mechling, an OSU Extension educator. The webinar will be available to view at http://carmenconnect.osu.edu/marketmeat.

Oct. 30 — Value-added Food Production and Marketing, by Emily Adams, an OSU Extension educator. The webinar will be available to view at http://carmenconnect.osu.edu/valueadded.

The webinars are free to view. For more information on the webinar series, contact Bergefurd at 740-289-2071, ext. 136 or email bergefurd.1@osu.edu. More information on direct marketing can also be found at http://directmarketing.osu.edu.
Writer(s):
 

Tracy Turner
614-688-1067
turner.490@osu.edu

 
Source(s):
 

Brad Bergefurd
740-289-2071, ext. 136
bergefurd.1@osu.edu

2014 East Ohio Women in Agriculture Conference

Ohio State University (OSU) Extension and Kent State University (KSU) -Tuscarawas Small Business Development Center have collaborated to host the 2014 East Ohio Women in Agriculture Conference.  The conference is planned for Friday, March 28, 2014 from 9:00 a.m. – 3:00 p.m. at the KSU Tuscarawas Campus Science and Technology Building.  All women and young women (high school age) who are interested, involved in, or want to become involved with food, agriculture, natural resources or small business are encouraged to attend.

According to Heather Neikirk, Extension Educator for Agriculture and Natural Resources for OSU Extension in Stark County and a member of the Women in Agriculture Conference Planning Team, “2007 USDA Census data showed that the number of women farm operators is significantly large for our area of Ohio.  In fact, Stark, Wayne, Holmes and Ashtabula counties comprise four of the nine counties in the state who had over 600 women farm operators”.

The conference program features a networking fair and twelve breakout sessions focused around the themes of community connections, food and family, business and finance, and make it, grow it, sell it.  A special youth session will also be presented by the Ohio FFA Association State Officer Team for young women participants (high school age).  Peggy Kirk Hall, Assistant Professor and Director of OSU Extension’s Agricultural & Resource Law Program will serve as the keynote speaker.

Interested individuals can register for the conference on-line at www.regonline.com/womeninageast.  Cost of the conference is $55 for adult participants and $30 for students.  Conference fee includes conference participation, continental breakfast, lunch and conference handouts.   For more information, please contact the Coshocton County OSU Extension office at 740-622-2265.  Deadline for registration is Friday, March 14, 2014.

Ohio State University Extension provides research and related educational programs to clientele on a nondiscriminatory basis. For more information: http://go.osu.edu/cfaesdiversity.

Understanding the “Small Farms Rider” and OSHA Inspection Authority on Farms

To read this post, please go to our new website at: http://aglaw.osu.edu/blog. Don’t forget to subscribe to our blog on the new website! If you are currently subscribed to this blog, you will need to re-subscribe to our new blog. … Continue reading →

Farm Building Lease Survey

Barry Ward, Leader, Production Business Management, Department of Agricultural, Environmental and Development Economics

Each year Extension Educators in Ohio receive questions about cash rental rates for buildings used for livestock production and storage of crops and machinery.  Landowners and tenants would benefit from knowing what typical rental rates are various structures and facilities when developing farm lease agreements.  We would like your help with a new survey being carried out by Extension farm management specialists in the north central region of the U.S.

If you have clients who are renting livestock facilities, storage structures or rural housing from an owner, or who own such facilities and are renting them to farm operators, please forward the message below to them (you may delete the top portion of this message).  We are asking them to complete our on-line survey by going to the following link:  Farm Building Lease Survey.  Your name or the respondent’s name will not be connected to the information provided in any way.  Results of the survey will be posted at http://aglease101.org/.  Survey deadline is February 21.

Ohio Farm Custom Rate Survey 2014

Barry Ward, Leader, Production Business Management, Department of Agricultural, Environmental and Development Economics

A large number of Ohio farmers hire machinery operations and other farm related work to be completed by others. This is often due to lack of proper equipment, lack of time or lack of expertise for a particular operation.  Many farm business owners do not own equipment for every possible job that they may encounter in the course of operating a farm and may, instead of purchasing the equipment needed, seek out someone with the proper tools necessary to complete the job. This farm work completed by others is often referred to as “custom farm work” or more simply “custom work”. A “custom rate” is the amount agreed upon by both parties to be paid by the custom work customer to the custom work provider.

Custom farming providers and customers often negotiate an agreeable custom farming machinery rate by utilizing Extension surveys results as a starting point. Ohio State University Extension collects surveys and publishes survey results from the Ohio Farm Custom Survey every other year. This year we are updating our published custom farm rates for Ohio.

We need your assistance in securing up-to-date information about farm custom work rates, machinery and building rental rates and hired labor costs in Ohio.

This year we have an online survey set up that anyone can access. We would ask that you  respond even if you know only a few rates.  We want information on actual rates, either what you paid to hire custom work or what you charged if you perform custom work. Custom Rates should include all ownership costs of implement & tractor (if needed), operator labor, fuel and lube. If fuel is not included in your custom rate charge there is a place on the survey to indicate this.

You may access the survey at: http://aede.osu.edu/customrate2014

The deadline to complete the survey is March 7th.

 

 

 

 

Understanding the “Small Farms Rider” and OSHA Inspection Authority on Farms

The federal Occupational Safety & Health Administration (OSHA) generated controversy recently when several of its enforcement actions against farms with grain bin storage hit the news headlines.   The enforcement actions are contrary to a general understanding in the agricultural community that OSHA does not have authority to enforce its regulations against farms with ten or fewer employees, referred to as the “small farms rider.”  While claiming that it does not intend to enforce beyond its authority, OSHA justifies its actions in an internal agency memorandum that interprets the small

2014 Farm Bill Farm Safety Net: Summary and Brief Thoughts

By: Carl Zulauf, Department of Agricultural, Environmental and Development Economics, The Ohio State University

This post contains a summary of key farm safety net provisions.  Details are minimized to focus on key features.  A few brief observations conclude the post.  Mistakes are possible given the short turn-around time and interpretation of bill language.  Apology is extended for any mistakes.

View the article by clicking on 2014 Farm Bill Farm Safety Net

Got Inflatables? New Safety Standards will apply to Agritourism Farms with “Bounce Houses” and Slides

To read this post, please go to our new website at: http://aglaw.osu.edu/blog. Don’t forget to subscribe to our blog on the new website! If you are currently subscribed to this blog, you will need to re-subscribe to our new blog. … Continue reading →

Got Inflatables? New Safety Standards will apply to Agritourism Farms with "Bounce Houses" and Slides

Ohio farms that complement their agritourism activities with inflatable “bounce houses” and slides for kids to play on will soon be subject to new safety standards proposed by the Ohio Department of Agriculture (ODA).  Based on its authority to inspect “amusement rides,” ODA is proposing the regulations to ensure public safety through minimum standards for the operation and use of inflatable devices.