What Is the Ohio CAT Tax? Rates, Sourcing, and Exemptions

The Ohio CAT tax, or Commercial Activity Tax, is a gross receipts tax that businesses owe for the privilege of operating in Ohio. For 2026, any business with more than $6 million in Ohio-sourced taxable gross receipts owes 0.26% on the amount above that threshold.¹ Unlike an income tax, the CAT ignores whether you turned a profit. It applies to total revenue before you subtract any expenses, which catches a lot of owners off guard on thin margins.

Who Owes the CAT

The tax reaches nearly every entity type: sole proprietorships, partnerships, LLCs, S-corps, C-corps, and trusts engaged in commercial activity.² Legal structure doesn’t determine liability; the volume of your Ohio sales does.

If your Ohio-sourced taxable gross receipts exceed $6 million in a calendar year, you owe the CAT on everything above that figure.¹ Businesses at or below $6 million owe nothing and don’t need to keep an active CAT account.

Affiliated businesses are treated as one. For a group under common ownership, the $6 million threshold applies to combined Ohio receipts rather than each member’s. Ohio recognizes two types: combined taxpayer groups, which form automatically when ownership thresholds are met, and consolidated elected taxpayer groups, which form voluntarily by election.³ If you own several companies that each stay under $6 million but collectively exceed it, the group owes the tax.

Once your receipts cross the threshold, you have 30 days to register for a CAT account through the Ohio Business Gateway.¹ Missing that window can trigger penalties, so tracking year-to-date Ohio receipts throughout the year matters.

Out-of-State Businesses

You don’t need an office or employees in Ohio to owe the CAT. Ohio applies a “bright-line presence” test, and any one of these triggers during a calendar year creates enough connection:⁴

At least $50,000 of real or tangible personal property in Ohio
At least $50,000 in payroll paid to people working in Ohio
At least $500,000 in Ohio-sourced gross receipts
At least 25% of total property, payroll, or sales attributable to Ohio
Business domiciled in Ohio

Meeting a nexus trigger and actually owing tax are two different things. A remote seller with Ohio sales above $500,000 still owes nothing unless Ohio receipts also clear the $6 million exclusion. In practice, the exclusion has made the CAT irrelevant for most occasional sellers into the state.

What Counts as Taxable Gross Receipts

Gross receipts means all revenue your business takes in, with no deduction for cost of goods sold, operating expenses, or anything else.⁵ Sales of products, service revenue, and licensing fees all count. The fair market value of property or services received as payment counts too.

Several categories are excluded from gross receipts:⁵

Interest income, except interest from credit sales
Dividends and distributions from corporations and certain business investments
Proceeds from selling capital assets like buildings, land, or equipment
Wages and salary reported on a W-2
Gifts and charitable donations

How Receipts Are Sourced to Ohio

Only receipts sourced (or “sitused”) to Ohio count. For tangible goods, the receipt is Ohio-sourced if delivered to a location in Ohio. For services, Ohio looks at where the purchaser receives the benefit.⁶ The physical location where the customer actually uses what they bought controls.

If your records don’t pinpoint that location, you can use a reasonable alternative method as long as you apply it consistently and your records support it.⁶ Service firms with multistate customers should document their allocation carefully, since this is the area most likely to draw audit scrutiny.

Calculating What You Owe

The math is simple. Take your Ohio-sourced taxable gross receipts, subtract the $6 million annual exclusion, and multiply what’s left by 0.26% (2.6 mills per dollar).⁷ The rate is fixed in statute.

A business with $15 million in Ohio taxable gross receipts in 2026 would subtract $6 million, leaving $9 million subject to tax. At 0.26%, that’s $23,400 for the year. At $50 million in Ohio receipts, the liability runs $114,400.

Because the tax hits gross revenue rather than profit, it falls harder on some businesses than others. A distributor with slim markups can have enormous receipts relative to income. A professional services firm with high margins but lower revenue owes much less. There’s no adjustment for profitability. A business running at a loss still owes the full CAT on Ohio receipts above $6 million.

Filing and Payment

Every active CAT account must file quarterly returns electronically through the Ohio Business Gateway.¹ The quarterly due dates are:

January through March: due May 10
April through June: due August 10
July through September: due November 10
October through December: due February 10 of the following year

You can file estimated returns if you can’t finalize exact receipts in time. Your estimated payment must equal at least 95% of the prior quarter’s liability and no less than 70% of the actual tax for the current quarter.⁸ Staying within those thresholds protects you from penalties and interest on the estimated portion.

Keep records supporting your filings for at least four years from the later of the tax due date or the date filed.¹ Hold anything that documents gross receipts, sourcing method, and any exclusions claimed.

If your Ohio receipts drop below $6 million and you don’t expect them to climb back, cancel your CAT account. An open account with no filed returns generates delinquency notices and potential tax bills even when nothing is owed.¹ You can cancel through the Ohio Business Gateway, check the cancellation box on your final return, or submit a Business Account Update Form. If receipts later rise back above the threshold, you have 30 days to re-register.

Who’s Exempt

Certain organizations are excluded from the CAT regardless of their Ohio receipts:⁹

Nonprofit organizations
Most government entities
Certain public utilities: natural gas, pipeline, water, heating, and telegraph companies (electric companies are not exempt)
Financial institutions that pay Ohio’s financial institution tax
Insurance companies that pay Ohio’s insurance premiums tax
Dealers in intangibles that pay Ohio’s dealers in intangibles tax

The pattern behind the exemptions: these entities already pay a separate Ohio tax that serves the same revenue purpose. If you think your business qualifies, confirm that you’re actually paying the alternative tax that triggers the exclusion.

Penalties for Noncompliance

A late-filed return triggers a penalty of up to 10% of the tax due, or $50, whichever is greater. If an audit turns up additional tax owed, the state can add another 15% on the underpayment. The hardest penalty hits unregistered businesses: once the Department of Taxation notifies you that you should be filing, failing to register and pay within 60 days adds another 35% of the tax due.¹⁰ These stack, so a business that ignores registration, gets notified, and still doesn’t comply can see combined penalties above 50% of the underlying tax.

Unpaid balances also accrue interest. For calendar year 2026, the rate is 7% per year, calculated from the original due date.¹¹

One quirk: Ohio law prohibits businesses from passing the CAT along to customers as a separate invoice line item. The first violation carries a penalty of up to $500, and each subsequent violation is a flat $500.¹⁰ You can build the tax into your prices; you just can’t itemize it as a separate charge.

Appealing an Assessment

If you disagree with a CAT assessment or audit finding, you can appeal to the Ohio Board of Tax Appeals. You have 60 days from receiving the Tax Commissioner’s final determination to file your notice of appeal.¹² Late appeals are rejected outright. The notice must include a copy of the final determination and a clear explanation of the errors you believe were made, and copies go to both the Board of Tax Appeals and the Tax Commissioner.

Federal Deductibility

The CAT is deductible as a business expense on your federal return. Sole proprietors report it on Schedule C, Line 23, which covers state and local taxes paid in connection with the business.¹³ Partnerships, S-corps, and C-corps deduct it on their entity returns. Because the CAT is based on gross receipts rather than income, it’s treated as an ordinary business tax rather than a state income tax subject to the individual SALT deduction cap. For businesses with meaningful CAT liability, the federal deduction offsets part of the cost.

1
Ohio Department of Taxation. Commercial Activity Tax (CAT)
2
Legal Information Institute. Ohio Admin Code 5703-29-02 – Application of Common Owners and Joint Ventures
3
Ohio Department of Taxation. Ohio Administrative Code 5703-29-04 – Registration of Combined and Consolidated Groups
4
Ohio Department of Taxation. Commercial Activity Tax Nexus Standards
5
Ohio Department of Taxation. Commercial Activity Tax Taxable Gross Receipts
6
Ohio Legislative Service Commission. Ohio Revised Code 5751.033 – Situsing of Gross Receipts to Ohio
7
Ohio Legislative Service Commission. Ohio Revised Code 5751.03
8
Ohio Department of Taxation. Commercial Activity Tax Estimated Payments for Calendar Quarter Taxpayers
9
Ohio Department of Taxation. Commercial Activity Tax (CAT) FAQs
10
Ohio Legislative Service Commission. Ohio Revised Code 5751.06 – Penalties
11
Ohio.gov. Administrative Journal Entry – Determination of Interest Rates for Calendar Year 2026
12
Ohio Department of Taxation. Appeals Process
13
Internal Revenue Service. Instructions for Schedule C (Form 1040) (2025)