Gross, McClain Work to Repeal Ohio's Commercial Activity Tax

COLUMBUS – The Ohio House Ways and Means Committee this week heard proponent and interested party testimony on House Bill 234, legislation which will repeal Ohio’s Commercial Activity Tax (CAT). The bill, sponsored by State Representatives Jennifer Gross (R-West Chester) and Riordan McClain (R-Upper Sandusky), will help support local businesses and bolster the state’s economic recovery from the COVID-19 pandemic.

“Ohio is one of only eight states to still have a commercial activity tax,” said Gross. “Ohio’s tax code should treat high-profit and low-profit businesses the same by replacing its gross receipts tax with a consumption-based tax.”

Currently, Ohio’s CAT subjects businesses across the state to tax liability, even if they are not generating a profit. The CAT taxes a business’ gross receipts, but does not tax a business’ revenue. Under the bill, the CAT would be eliminated over a five year period by implementing a 20% reduction each year.

“Our state’s CAT is essentially taxing a business for productivity,” added Gross. “We are setting our local businesses that serve a large customer base but turn a small profit up for failure under this taxation policy. We must do better to protect our businesses and support our state’s economy.”

Senior Policy Analyst at the Tax Foundation, Ulrik Boesen, spoke during Tuesday’s committee hearing on how repealing the CAT would improve Ohio’s competitiveness and ranking on a national tax climate index. 

“Last year, Ohio ranked 39th overall but 42nd for corporate tax design. In the next edition, Ohio is likely to improve a few places overall based on the income tax reform already signed into law this year and repealing the CAT would further improve Ohio’s rank,” said Boesen.

H.B. 234 now awaits additional committee hearings.