Ohio Commercial Activity Tax traces the history and evolution of business taxation in Ohio and provides a comprehensive analysis of the Commercial Activity Tax (CAT). Written by Thomas M. Zaino, JD, CPA, McDonald Hopkins LLC, this Portfolio begins with a detailed discussion of the entities or “persons” subject to the CAT. It then identifies the federal and state constitutional limitations imposed on the state's power to levy the CAT and analyzes the applicability of federal statutory limitation Pub. L. No. 86–272 to Ohio's power to assess the CAT.
The author provides a comprehensive overview of how to compute the CAT and thoroughly covers the situsing rules that apply to various sales, leases, and services. Credits that may be claimed against the CAT are also discussed.
In addition, this Portfolio addresses the filing requirements that apply to combined taxpayer groups, common owners, and consolidated elected taxpayer groups. The Portfolio specifies the general filing requirements—addressing such issues as financial reporting; tax periods, returns, and payments; estimated tax; and passing the CAT on to customers—for the CAT and explains the statute of limitations, collection of taxes, and record management of audit, assessment, and appeal procedures.
Ohio Commercial Activity Tax contains “Planning Points” and examples throughout the text, giving practical insights and guidance to practitioners.
Ohio Commercial Activity Tax allows you to benefit from:
This Portfolio is part of the Premier State Tax Library, a comprehensive series, which covers major state tax transactions and issues with expert, in-depth analysis, and offers commentary on a wide range of multi-state and state-specific taxation topics, including Sales and Use, Corporate Income, Individual Income, Property, Gross Receipts, Limitations on States' Authorities to Tax, Credits and Incentives, Electronic Commerce, Mergers and Acquisitions, Procedure and Administration, Special Industries, and more.
Detailed Analysis
2260.01. BACKGROUND AND INTRODUCTION
Introductory Material
A. Evolution of Business Taxation in Ohio
B. Tax Administration in Ohio
C. Taxation of Business Entities: An Overview
D. Commercial Activity Tax
E. History and Purpose of the CAT
2260.02. ENTITIES SUBJECT TO THE CAT
A. In General
B. Entities or “Persons” Subject to Tax
C. Excluded Persons
1. Persons With No More Than $150,000 of Taxable Gross Receipts
2. Certain Public Utilities
3. Financial Institutions
4. Dealer in Intangibles
5. Financial Holding Companies
6. Bank Holding Companies
7. Savings and Loan Holding Companies
8. Financial Industry Affiliates
a. Determining Ownership
b. Corporations
c. Limited Liability Companies
d. Partnerships, Trusts, or Other Unincorporated Business Organizations
e. Multiple Ownership
9. Insurance Companies
10. Securitization Facilitators and Servicers
11. Pre-Income Tax Trusts Making Qualifying Election
2260.03. CONSTITUTIONAL LIMITATIONS
A. Federal Constitutional Limitations
1. Special Provision for Appeals Based on Specific Constitutional Grounds
B. Public Law No. 86-272
C. State Constitutional Limitations
1. Limits on Excise Tax
a. Relevant Ohio Constitutional Provisions
b. CAT Paid by Sellers of Food for Off-Premises Consumption
(1) In General
(2) Arguments in Favor of the CAT's Constitutionality
(3) Arguments Against the CAT's Constitutionality
(4) Ohio Grocers Association v. Wilkins
2. CAT Paid by Sellers of Motor Fuel
3. Impairment of Contracts
D. Special Provision for Appeals Based on Specific Constitutional Grounds
E. The CAT's Statutory Nexus Provisions
2260.04. COMPUTATION OF THE CAT
A. Basic Calculation of the CAT
B. Gross Receipts
C. Taxable Gross Receipts
D. Excluded Gross Receipts
1. Interest Income
2. Dividends, Distributions and Distributive Shares
3. Disposition of I.R.C. 1221 and 1231 Assets
a. In General
b. Hedging Transactions
c. Bulk Sale of Assets
d. Treatment of 338(h)(10) Transactions
4. Loans, Bonds, and Other Financial Instruments
5. Repurchase Agreements and Loans
6. Contributions to Deferred Compensation Plans
7. Wages and Other Compensation for Services Rendered
8. Proceeds From Issuance of Own Stock
9. Life Insurance Proceeds
10. Gifts and Charitable Contributions
11. Fund-Raising Receipts
12. Proceeds Received by Nonprofit Organizations
13. Damages
14. Property, Money, and Other Amounts Received by Agents
15. Tax Refunds and Other Tax Benefit Recoveries
16. Pension Reversions
17. Contributions to Capital
18. Sales or Use Tax Collected
19. Excise Taxes on Cigarette and Other Tobacco Products
20. Excise Taxes on Motor Fuel
21. Excise Taxes on Beer and Liquor
22. Certain Motor Vehicle Transfers
23. Certain Proceeds From Servicing and Managing Loans
24. Proceeds From Administering Cancer Drugs
25. Table-Funding Loans and Warehousing-Lending Mortgage Loans
26. Certain Proceeds of a Professional Employer Organization
27. Proceeds Retained by Horse Race Track Permit Holders
28. Certain Proceeds From Motor Fuel Sales
29. Proceeds From Property Shipped Into a Qualified Foreign Trade Zone Area
30. Qualifying Distribution Center Receipts
31. Commissions of Real Estate Brokers and Salespersons
32. Receipts Protected by the U.S. or Ohio Constitution
E. Deductions From Gross Receipts
F. Method of Accounting
G. The One-Year Rule on Purchases
2260.05. SITUSING THE CAT
A. Situsing in General
B. Sales, Rents, and Royalties From Real Property
C. Sales, Rents, and Royalties From Tangible Personal Property
D. Lease and Rental of Mobile Property
E. Sales of Services
1. In General
2. Administrative Rule
a. When the Purchaser Is Only Located in Ohio
b. When the Purchaser Is Not Only Located In Ohio
3. The Reasonable, Consistent, and Uniform Safe-Harbor Method
4. Principal Place of Business Election
F. Situsing Specific Services
1. Accounting Services
2. Advertising Services and Broadcast Advertising
3. Agents/Managers of Athletes and Entertainers
4. Agency Services – Other
5. Appraisal Services
6. Architecture and Drafting Services
7. Athletes and Owners of Animals Used in Sporting Events
8. Barbershop, Beauty Salon, and Spa Services
9. Billing and Ancillary Services
10. Cable and Satellite Services
11. Call Center Services
12. Child Care Services
13. Collection Agency and Repossession Services
14. Computer Programming Services
15. Construction Contracting Services
16. Contract Manufacturing Services
17. Data Processing Services
18. Day Care Services
19. Directors' Fees
20. Education Services
21. Electric Transmission and Distribution Services
22. Employment Services
23. Engineering Services
24. Entertainer Services
25. Entertainment and Amusement Services
26. Exterminating Services
27. Facility Management Services
28. Financial Planning Services
29. Funeral Services
30. Gambling Services
31. Healthcare Provider Services
32. Independent Writers and Artist Services
33. Installation Services
34. Internet and Web Hosting Services
35. Investigation Services
36. Landscaping Services
37. Legal Services
38. Linen, Uniform Supply, and Dry Cleaning Services
39. Logistics Services
40. Magazines and Newspapers
41. Maintenance Services
42. Management Consulting Services
43. Market Research Services
44. Membership Fees
45. Money Orders
46. Moving and Packing/Unpacking Services
47. Payroll Services
48. Promoters
49. Real Estate Broker Services
50. Repair Services
51. Security Services
52. Storage Services
53. Tax Preparation Services
54. Technical Assistance Services
55. Telecommunication Services
56. Testing Laboratories
57. Towing Services
58. Transportation Services
59. Travel Arrangement Services
60. Veterinarian Services
61. Waste Management Services
62. Wire Transfer Services – See Money Orders
G. Sales and Royalties From Intellectual Property
H. Dividends, Interest, and Other Income From Financial Instruments
I. Sales of Electricity and Electric Transmission and Distribution Services
J. Alternative Situsing Methods
2260.06. CONSOLIDATED ELECTED TAXPAYER (CET) GROUPS
B. Choosing the Ownership Interest Threshold
C. Who Must Be Included in the Group
D. Registering for the CAT and Making the CET Election
E. Changing or Revoking the CET Election
F. Excluding Gross Receipts Between Members
G. Impact on Nexus Protections
H. Joint and Several Liability
I. Adding and Deleting Members
J. 50 Percent Owned Entities
2260.07. COMBINED RETURNS
B. Who Must Be Included in the Combined Taxpayer Group
C. Registration Fee
D. Adding and Deleting Members
E. Gross Receipts Between Members of a Combined Taxpayer Group
F. Joint and Several Liability
2260.08. COMMON OWNERS
B. Statutory Provisions
C. Administrative Rule
D. Statute v. Rule – A Different View
E. De Minimis Exception for Individuals, Trusts and Estates
F. Ownership and Control Thresholds
2. Ownership and Control Defined
3. Determining Value of Interests
a. Corporations
b. Partnerships, Limited Liability Companies, and Business Trusts
c. Trusts
d. Implied Partnerships
2260.09. TAX MEASURED BY GROSS RECEIPTS
A. Minimum Tax
B. Flat Rate Tax
2. Tax Rate Phase-In Percentages
3. Automatic Rate Adjustments
2260.10. TAXATION OF MULTISTATE BUSINESSES
2260.11. TAX CREDITS
B. Specific Credits
1. Jobs Creation Tax Credit
2. Jobs Retention Tax Credit
3. Qualified Research Expense Credit
4. Borrower's Qualified R& D Loan Credit
5. Net Operating Loss Transitional Credit
b. Summary of Calculation
c. Limitations on the Credit
d. Unused Credit
e. Auditing the Credit
f. Making the Election to Claim the Credit
g. Impact of Claiming the Credit on Corporation Franchise Tax
C. Excess CAT Credit
D. Order in Which CAT Credits May Be Claimed
2260.12. GENERAL FILING REQUIREMENTS
A. Registration for the CAT
B. Financial Reporting: Accounting for the Phase-In of the CAT
1. Non-Refundable CAT Credit Carryforwards
2. Refundable CAT Credit Carryforwards
C. Tax Periods, Returns, and Payments
1. Calendar Year Taxpayers
2. Calendar Quarter Taxpayers
b. Quarterly Tax Calculation
D. Estimated Tax
1. Statutory Estimation Method
2. Rule Estimation Method
3. Alternative Estimated Payment Methods
E. Refunds
F. Passing the CAT on to Customers
G. Buying and Selling a Business
1. Acquiring a Business – Successor Liability
2. Disposing of a Business – Accelerated Liability
2260.13. AUDITS, ASSESSMENTS, AND APPEALS
A. Statute of Limitations
B. Records and Confidentiality
C. Audits
1. Audit Procedures and Taxpayer Rights
2. Common Audit Issues
3. Sampling
D. Assessments
E. Appealing Assessments
1. Petition for Reassessment
2. Tax Appeals Division
a. Personal Appearance Hearings
b. Corrected Assessment Procedure
3. Board of Tax Appeals
4. Ohio Supreme Court or Court of Appeals
F. Appealing Denied Refund Claims
G. Collection of Assessed and Delinquent Taxes
1. Interest
2. Penalties
a. Failure to File or Pay
b. Additional Tax Due
c. Failure to Become Calendar Quarter Taxpayer
d. Failure to Register
e. Failure to Pay Registration Fee
f. Improper Timing of Gross Receipts
g. Fraudulent Refund
h. Non-Compliance
i. Penalty Abatement
Working Papers
Item Description Sheet
Worksheet 1 Commercial Activity Tax: Nexus Standards, Ohio Dept. of Taxn., Information Release CAT 2005-02 (September 2005)
Worksheet 2 Ohio Department of Taxation, Information Release-Commercial Activity Tax: CAT 2005-16
Worksheet 3 CAT Credit for Unused Franchise Tax NOLs
Worksheet 4 BNA 2008 Survey of State Tax Departments: Ohio Questionnaire
Worksheet 5 Petition for Reassessment
Worksheet 6 Declaration of Tax Representative
Bibliography
BIBLIOGRAPHY