Ohio's Commercial Activity Tax: Does It Still Apply to Your Business?

For years, business owners across Columbus and Central Ohio kept a regular date with the state to file and pay the Ohio commercial activity tax (CAT). Even young companies, operating on thin margins, paid a slice for simply holding an active vendor license or entity registration. Above $1 million in receipts, the tax scaled with revenue. Today, multiple legislative updates have changed how Ohio levies this tax. If you have been wondering whether the Ohio CAT still applies to your company, the current answer for most small and mid-sized businesses is a welcome relief, as far as the CAT alone is concerned.

What changed with the Ohio commercial activity tax

Under Ohio law, the commercial activity tax is levied on gross receipts from business activities in the state. Historically, every business with taxable gross receipts above $150,000 was required to register, file returns, and pay an annual minimum tax that started at $150.

That structure has fundamentally changed. Under House Bill 33, codified in Section 5751.01 of the Ohio Revised Code, Ohio raised the taxable gross receipts exclusion to $6,000,000. In addition, the state completely eliminated the annual minimum tax.

As a result, Ohio businesses with taxable gross receipts at or below $6,000,000 owe zero commercial activity tax. For companies with gross receipts above that $6,000,000 threshold, the tax rate is a flat 0.26% on the amount that exceeds the exclusion. This means that CAT is no longer an ongoing tax expense for many independent business owners in Central Ohio.

What counts toward your Ohio gross receipts

Even though most small businesses no longer owe the tax, it’s important to know how Ohio defines taxable gross receipts. Unlike most taxes, the state calculates the tax on your total receipts before costs of goods sold or operating expenses are deducted. In other words, CAT is calculated on gross receipts, not net income.

According to the Ohio Department of Taxation guidance on CAT gross receipts, gross receipts include:

• Total amounts received from sales of property or goods delivered to purchasers in Ohio.
• Gross revenue from services performed, to the extent the purchaser receives the benefit in Ohio.
• Rents and royalties received from real estate or tangible property located in Ohio.

However, there are some things that Ohio excludes from the calculation. Routine business financing, owner capital contributions, interest income from investments, and proceeds from selling capital assets (such as equipment or real estate) are generally excluded. Understanding these definitions ensures that you accurately monitor your progress as your company approaches larger revenue milestones.

If you previously registered for a CAT account and your annual receipts now sit well below the $6,000,000 exclusion, you may need to formally cancel your account rather than simply letting filings lapse. Cleaning up lingering registrations is an important part of routine entity hygiene, much like keeping accurate bookkeeping records to prevent administrative penalties.

Connecting Ohio rules to your broader tax picture

State tax rules do not exist in isolation. When business owners evaluate their state tax position, the CAT is only one piece of the puzzle.

For example, pass-through entity owners can often benefit from Ohio's business income deduction, which allows eligible individuals to deduct up to $250,000 of business income ($125,000 if married filing separately) on their personal Ohio return, with any excess business income taxed at a flat 3%. Similarly, many owners explore whether electing the Ohio pass-through entity tax provides a useful federal deduction against the state and local tax cap.

When you look at these moving parts together, the strategic question shifts. The goal is never just to dodge a single tax notice. It is to understand how your entity structure, your municipal filings like the Columbus city income tax, and your state obligations fit into one coherent financial design.

Moving from compliance to proactive strategy

At Mantle™, we believe that clarity comes from asking better questions about your numbers. Too many business owners spend their energy reacting to filing deadlines without ever seeing how the pieces connect.

When an advisor looks only at federal returns, state opportunities get missed. When books are kept without considering state deductions, cash flow decisions happen in the dark. That is why uncovering hidden tax opportunities requires looking at your entire financial world together.

In The Mantle Blueprint™, we examine your prior returns, entity documents, and revenue streams to create a one-page map of your financial architecture.

For more on proactive tax planning, see Hiring Your First Employee in Ohio: What Changes for You.

FAQ

Is Ohio cat tax going away?

The Ohio commercial activity tax has not been eliminated, but its reach has been drastically reduced. By raising the exclusion to $6,000,000 in gross receipts and eliminating the annual minimum tax, the state relieved most small and mid-sized businesses from owing the tax.

What is the Ohio cat tax rate for 2026?

For businesses with taxable Ohio gross receipts exceeding $6,000,000, the CAT tax rate is 0.26% on the receipts above that $6,000,000 exclusion amount. Businesses at or below the exclusion owe zero tax.

How does cat tax work?

The CAT is a privilege tax based on total gross receipts sitused to Ohio rather than net income or profit. Qualifying businesses above the statutory threshold report their gross receipts quarterly and pay the tax on receipts exceeding the exclusion amount.

What qualifies as gross receipts?

Gross receipts include the total amount realized from sales of goods delivered in Ohio, services where the benefit is received in Ohio, and rents from Ohio property, calculated without deducting expenses or cost of goods sold.

How much will my small business be taxed?

If your business generates $6,000,000 or less in taxable Ohio gross receipts, your commercial activity tax liability is zero dollars, and you no longer owe an annual minimum tax.