Sante Ghetti

Recent Court Ruling Continues Taxing of Out-of-State Online Retailers

Sante Ghetti |

In mid-November the Ohio Supreme Court ruled remote sellers—those with no physical presence in our state—will still be subject to the Ohio Department of Taxation imposing the commercial activity tax (CAT) on those companies that sell services or products to Ohioans. The CAT has been collected in Ohio for a little more than 10 years and the tax is levied for “the privilege of doing business in Ohio”, and applies to any taxpayer having substantial nexus with Ohio. 

The court’s ruling is noteworthy for in-state GCP members leading up to next year’s state budget talks because tax challenges will need to be addressed in the upcoming state budget and it will require continued GCP engagement. For example, a federal requirement that will no longer allow Ohio to levy a sales tax on Medicaid managed care organizations will result in lost sales tax revenue that could impact GCP priorities and services that our state and the region rely on. In addition, the overall tax revenue coming in the first quarter of the fiscal year has been down, tax receipts last month were reportedly 5% lower than expectations, and total state revenue was more than 2% below projections. 

The bottom line today: Ohio will still have the ability to legally pursue companies that make sales to Ohio customers and they will need to pay the CAT even if they have no physical presence here. The taxpayers will have 90 days from the date the Court issues its mandate to decide whether to seek a discretionary review by the U.S. Supreme Court.

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