Articles & Alerts
Ohio January 1, 2020 Nexus Changes
An out-of-state person is only required to register and pay the CAT if that person has bright-line presence in Ohio. A person has bright-line presence if any one of the following applies at any time during the calendar year:
- The person’s property in this state is at least $50,000; or
- The person’s payroll in this state is at least $50,000; or
- The person’s taxable gross receipts sourced to Ohio are at least $500,000; or
- 25% of the person’s total property or total payroll or total gross receipts is within this state; or
- The person is domiciled in this state.
An out-of-state person meeting one of the above criteria must also have at least $150,000 in taxable gross receipts situs-ed to Ohio during the calendar year to be subject to the CAT. Businesses that have less than $150,000 in taxable gross receipts for the calendar year are not subject to the tax. However, you must cancel your registration by May 10 of that year to not be subject to the minimum tax.
Each taxpayer may exclude the first $1 million dollars of taxable gross receipts for a calendar year. Calendar quarter taxpayers shall apply the full exclusion amount to the first calendar quarter return for that calendar year and may carry forward and apply any unused exclusion amount to subsequent calendar quarters within that same calendar year. For annual taxpayers, the $1 million exclusion is taken on the annual return.
“Taxable gross receipts” means gross receipts sourced to Ohio, based on the following:
- Gross rents and royalties from real property located in Ohio;
- Gross rents and royalties from personal property in Ohio to the extent the personal property is located or used in Ohio;
- Gross receipts from the sale of electricity and electric transmission and distribution services in the manner provided under section 5733.059 of the Revised Code;
- Gross receipts from the sale of real property located in Ohio;
- Gross receipts from the sale of personal property if the property is received in Ohio by the purchaser. In the case of delivery of personal property, the place at which such property is ultimately received after all transportation has been completed shall be considered the place where the purchaser receives the property. Direct delivery in this state, other than for purposes of transportation, to a person or firm designated by a purchaser constitutes delivery to the purchaser in this state, and direct delivery outside this state to a person or firm designated by a purchaser does not constitute delivery to the purchaser in this state, regardless of where title passes or other conditions of sale;
- Gross receipts from the sale, exchange, disposition or other grant of the right to use trademarks, trade names, patents, copyrights and similar intellectual property to the extent that the receipts are based on the amount of use of the property in this state;
- Gross receipts from the sale of transportation services by a motor carrier in proportion to the mileage traveled by the carrier during the tax period in this state to the mileage traveled by the carrier everywhere;
- Gross receipts from the sale of all other services and all other gross receipts not otherwise addressed in the proportion that the purchaser’s benefit in this state with respect to what was purchased bears to the purchaser’s benefit everywhere with respect to what was purchased.
A consolidated elected taxpayer is a group of entities owned by a common owner. Consolidated elected taxpayers must meet and agree to all of the following requirements:
- This group elects to include all members of the group having at least 80%, or all members having at least 50%, of the value of their ownership interest owned by common owners during all or any portion of the tax period.
- Additionally, at the election of the group, all entities that are not incorporated or formed under the laws of a state or of the United States and that meet the elected ownership test, shall either be included in the group or all shall be excluded from the group meeting the selected ownership test (80% or 50%). Please see the cautionary note on the next FAQ before making a consolidated election at 80% or an election to exclude all entities that are not incorporated or formed under the laws of a state or of the United States.
Under this election, the group must agree to file as a single taxpayer for at least the next eight calendar quarters (two years) following the election as long as two or more of the members meet the requirements. Such election also requires entities in the group that may not have enough contacts (nexus) to also be included as part of the elected consolidated taxpayer group.
A major benefit of this election is that, for most taxpayers, taxable gross receipts between members of the group are not subject to the CAT.
A group of entities, having more than 50% owned or controlled by a common owner, that chooses not to be a consolidated elected taxpayer must register as a combined taxpayer. A major difference between a consolidated elected taxpayer and a combined taxpayer is that a combined taxpayer only has to register all members that have the required contacts (nexus) to be required to be a taxpayer for this tax in Ohio.
Cautionary note: A combined taxpayer cannot exclude taxable gross receipts between its members nor exclude taxable gross receipts from others that are not members. A consolidated election must be made to obtain that exclusion. In addition, if the 80% common ownership test or election to exclude all entities that are not incorporated or formed under the laws of a state or of the United States election is made under the consolidated provision, such taxpayers with more than 50% ownership that have the requisite contacts (nexus) are required to register as a combined taxpayer or single entity taxpayer.
Similar to a consolidated elected taxpayer, a combined taxpayer must register, file returns, and pay the CAT as a single taxpayer.
Registration is available electronically through the Ohio Business Gateway. https://www.tax.ohio.gov/commercial_activities.aspx
Alternatively, taxpayers may register by submitting the CAT 1 registration form. The CAT 1 registration form is available through the Department’s Web site at Tax Forms or may be requested by calling 1-800-282-1782.