Ohio Can Impose Commercial Activity Tax on Online Retailers

Ohio can impose its commercial-activity tax (CAT) on out-of-state companies that sell products and services to Ohioans, but have no physical presence in the state, the Ohio Supreme Court ruled on Thursday, November 17, 2016.

In a 5-2 decision, the Supreme Court determined the U.S. Constitution’s commerce clause does not prevent a state from imposing a “privilege to do business” tax, such as the CAT, on online retailers. Writing for the Court majority, Justice William M. O’Neill determined that while a physical presence in a state may be required to impose the obligation to collect sales taxes and use taxes on an out-of-state seller, that requirement does not apply to a business tax on an interstate company. Ohio’s $500,000 in annual sales threshold for the CAT to apply meets the commerce clause requirement, he concluded.

Please contact your HBK representative to find out how this impacts your business.

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About the Author(s)
generic-bio-photo Shane is Hill, Barth & King's (HBK) State and Local Tax (SALT) Practice Leader and a member of HBK’s Tax Advisory Group (TAG). He has nearly a decade of experience with SALT consulting, controversy and compliance services. Shane is one the most experienced SALT consultants in the Northeastern United States having worked at Big 4 accounting firms and performed services to Fortune 500 companies in the Greater New York City, Philadelphia and Pittsburgh areas.
Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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