Ohio Supreme Court Hearing Arguments on CAT Constitutionality

Date May 25, 2016
Article Authors

During the week of May 6, the Ohio Supreme Court heard the oral argument for three combined commercial activity tax (CAT) cases (Crutchfield, Inc., Mason Companies, Inc., and Newegg, Inc.). The three companies have challenged the state’s authority to collect CAT because they do not have a physical presence in Ohio; the three companies in question do sell their products in Ohio.  By the end of the case, the Supreme Court of Ohio should determine, with greater clarification, the constitutionality of the Ohio CAT.

Background – Beginning July 1, 2005, Ohio enacted the Commercial Activity Tax (CAT) on a majority of taxpayers conducting business within the state in Ohio.  The Ohio CAT law is calculated based on the amount of taxable gross receipt a company generates.  The regulation also contains bright-line nexus provisions which subject anyone with at least $50,000 in payroll, $50,000 in property, or $500,000 in taxable gross receipts during a calendar year to CAT.  This means that a person or their entity might be subject to the CAT under the Ohio Revised Code, even if they have no physical presence in the Buckeye state.

We will provide more information as it becomes available on any potential changes to the CAT or any opportunities arising from these oral arguments.

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