New Tax Law
COSE’S COMMERCIAL ACTIVITY TAX (CAT) RESOURCE GUIDE
The enactment of Am. Sub. H.B. 66 (“H.B. 66”) effects the most significant changes to Ohio taxation since the adoption of the personal income tax and the net income base of the corporate franchise tax in 1971. This report highlights the key changes to Ohio taxation enacted by H.B. 66.
COMMERCIAL ACTIVITY TAX (“CAT”): Effective July 1, 2005, with some limited exceptions, persons doing business in Ohio will be subject to the CAT on their Ohio taxable gross receipts. The CAT is being phased-in over five years, and it will ultimately be levied at a rate of 0.26% (the initial rate for the balance of 2005 is .06%) on a taxpayer’s Ohio taxable gross receipts in excess of $1,000,000. Businesses with Ohio taxable gross receipts of $150,000 - $1,000,000 will pay a minimum tax of $150. Businesses with Ohio taxable gross receipts of less than $150,000 are not subject to the CAT.
CORPORATION FRANCHISE TAX: This tax is being phased-out at a rate of approximately 20% per year from 2006 – 2009, with the tax generally eliminated as of January 1, 2010. The corporate franchise tax will remain in place for financial institutions and certain affiliates of insurance companies and financial institutions.
PERSONAL INCOME TAX: The personal income tax rates for all tax brackets will be cut 4.2% from their 2004 levels in each of the years 2005 – 2009. Starting in 2010, the fully phased-in personal income tax rate cut will be 21% for each bracket. The tax on trust income has been made permanent.
REAL PROPERTY TAX: Effective for the 2005 tax year and thereafter, the 10% rollback in real property tax is eliminated for all real property used in business (other than real property used or leased in farming or in the development or leasing of single-family, two-family or three-family houses). The 10% rollback remains for all other real property.
SALES TAX: Effective July 1, 2005, the state sales tax rate will decrease from 6.0% to 5.5%. The vendor discount will remain 0.9% for timely filed returns.
TANGIBLE PERSONAL PROPERTY TAX (“TPP TAX”): This tax is being phased-out between 2006-2008, with the tax generally eliminated as of January 1, 2009. This phase-out of the TPP Tax applies to most businesses and includes the TPP Tax on furniture and fixtures, machinery and equipment, and inventory. New manufacturing machinery and equipment first reportable on the TPP Tax return for 2006 or subsequent years is not subject to the TPP Tax.
REGISTERING FOR THE CAT
Businesses with taxable gross receipts of $150,000 + must register for the CAT. For information on the CAT registration and filing procedures please go HERE.
More information can be found at the Ohio Department of Development HERE. Please check back to the ODOD site for a detailed explanation of the new tax system.