Ohio — Gross Receipts / Business Activity Tax

Ohio levies a Commercial Activity Tax (CAT) on each person with taxable gross receipts for the privilege of doing business in Ohio. The tax applies to any activity—whether legal or illegal—that is conducted for, or results in, gain, profit, or income during a calendar year. "Doing business" is defined broadly to include persons with substantial nexus with Ohio. The CAT is not a transactional tax and is not subject to Public Law 86-272 protection. The tax is imposed on the person receiving the gross receipts, not on purchasers, and is in addition to any other Ohio taxes or fees.

Certain entities are excluded from the CAT, including financial institutions subject to other Ohio taxes, insurance companies, and nonprofit organizations.

Source: Ohio Rev. Code § 5751.02

The Commercial Activity Tax is imposed at a rate of 2.6 mills per dollar (0.26%) of taxable gross receipts after subtracting the exclusion amount for the calendar year. Each taxpayer applies the full exclusion amount to the first calendar quarter return filed that year and may carry forward any unused exclusion to subsequent quarters within the same calendar year.

Ohio law defines "excluded persons" to include any person with not more than $150,000 of taxable gross receipts during the calendar year, meaning such persons are not subject to the CAT. Recent legislative amendments reportedly increased this threshold to $3 million (effective 2024) and $6 million (effective 2025), but as of May 26, 2026, the codified version of Ohio Rev. Code § 5751.01(E)(1) accessible at codes.ohio.gov still reflects the $150,000 figure. Practitioners should verify the current exclusion amount directly with the Ohio Department of Taxation or through enrolled bill text, as the online statutory databases may not yet reflect the most recent amendments.

Source: Ohio Rev. Code § 5751.03 | Ohio Rev. Code § 5751.01

Ohio establishes "bright-line presence" in the state if a person meets any one of five tests during the calendar year: property in Ohio with an aggregate value of at least $50,000; payroll in Ohio of at least $50,000; taxable gross receipts of at least $500,000; at least 25% of total property, total payroll, or total gross receipts in Ohio; or is domiciled in Ohio. Meeting any single test creates substantial nexus for CAT purposes for the reporting period and the remaining portion of the calendar year.

Source: Ohio Rev. Code § 5751.01(I)

Beginning with tax periods on or after January 1, 2024, all Commercial Activity Tax taxpayers must file quarterly returns. Each quarterly return is due on or before the tenth day of the second month after the end of the calendar quarter—May 10 for Q1, August 10 for Q2, November 10 for Q3, and February 10 for Q4. This quarterly filing requirement applies to all CAT taxpayers regardless of the amount of their taxable gross receipts.

Source: Ohio Rev. Code § 5751.051

"Gross receipts" means the total amount realized by a person, without deduction for cost of goods sold or other expenses incurred, that contributes to the production of gross income of the person. The definition includes the fair market value of any property and services received, and any debt transferred or forgiven as consideration. Amounts from sales of goods, performance of services, rents, royalties, and leases are included.

Numerous items are excluded from gross receipts under Ohio Rev. Code § 5751.01(F)(2), including interest (other than from credit sales), dividends, capital gains from IRC § 1221 or § 1231 asset sales, receipts from transactions outside Ohio, sales and use taxes collected and remitted, and contributions to capital.

"Taxable gross receipts" means gross receipts sitused to Ohio under the sourcing rules in Ohio Rev. Code § 5751.033. Only taxable gross receipts sitused to Ohio are subject to the CAT.

Source: Ohio Rev. Code § 5751.01(F), (G)

Ohio uses market-based sourcing to determine which gross receipts are "taxable gross receipts" sitused to Ohio for Commercial Activity Tax purposes. The sourcing rules vary by type of receipt and are codified in Ohio Rev. Code § 5751.033. Only gross receipts properly sitused to Ohio enter the CAT base.

Tangible personal property (§ 5751.033(E)) — Gross receipts from the sale of tangible personal property are sitused to Ohio if the property is received in Ohio by the purchaser. For deliveries by motor carrier or other transportation, the place at which the property is ultimately received after all transportation has been completed is controlling. This "ultimate destination" rule means that drop-shipments or goods passing through Ohio distribution centers en route to a final out-of-state destination are not sitused to Ohio, even if title passes or initial delivery occurs in Ohio. The statute disregards where title passes or other conditions of sale; only the final destination of the goods matters.

Real property (§ 5751.033(A) and (D)) — Gross rents and royalties from real property located in Ohio, and gross receipts from the sale of real property located in Ohio, are sitused to Ohio.

Tangible personal property rentals and royalties (§ 5751.033(B)) — Gross rents and royalties from tangible personal property are sitused to Ohio to the extent the property is located or used in Ohio.

Intellectual property (§ 5751.033(F)) — Gross receipts from the sale, exchange, disposition, or grant of the right to use trademarks, trade names, patents, copyrights, and similar intellectual property are sitused to Ohio to the extent the receipts are based on the amount of use of the property in Ohio. If the receipts are not based on the amount of use but rather on the right to use the property, they are sitused to Ohio to the extent the receipts are based on the right to use the property in Ohio.

Transportation services (§ 5751.033(G)) — Gross receipts from the sale of transportation services by a motor carrier are sitused to Ohio in proportion to the mileage traveled by the carrier in Ohio during the tax period to total mileage everywhere during the tax period.

Services and catch-all (§ 5751.033(I)) — Gross receipts from the sale of all other services, and all other gross receipts not otherwise sitused under divisions (A) through (H) of § 5751.033, are sitused to Ohio in the proportion that the purchaser's benefit in Ohio bears to the purchaser's benefit everywhere. The physical location where the purchaser ultimately uses or receives the benefit of what was purchased is paramount in determining the proportion of the benefit in Ohio. This is a market-based approach: the question is where the customer receives value, not where the seller performs the service (cost-of-performance is irrelevant). If the taxpayer's records do not allow determination of the benefit location, the taxpayer may use an alternative method if it is reasonable, consistently and uniformly applied, and supported by the taxpayer's records as they exist when the service is provided or within a reasonable period thereafter.

Ohio Admin. Code 5703-29-17 provides service-specific guidance. For example, accounting services performed for a purchaser located only in Ohio are sitused 100% to Ohio regardless of where the services are performed. If the purchaser has operations within and outside Ohio, the receipts are sitused to Ohio if the services performed are of benefit to specific operations located in Ohio. Contract manufacturing is sitused the same as tangible personal property under division (E)—to the location where the manufactured product is ultimately received.

Alternative apportionment (§ 5751.033(J)) — If the sourcing provisions of divisions (A) through (H) do not fairly represent the extent of a person's activity in Ohio, the person may request, or the Tax Commissioner may require or permit, an alternative method. The request must be made within the applicable statute of limitations.

Source: Ohio Rev. Code § 5751.033 | Ohio Admin. Code 5703-29-17