Ohio’s Commercial Activity Tax (CAT) is a 0.26% gross receipts tax on the privilege of doing business in the state, applied only to Ohio taxable gross receipts exceeding a $6 million annual exclusion (effective 2025 and thereafter).
The CAT replaced Ohio’s corporate franchise and tangible personal property taxes and is the primary state-level business tax for most entities.
This guide covers everything you need to know about Ohio business taxes in 2026, including CAT liability, employer withholding obligations, municipal taxes, filing deadlines, and compliance strategies.
Ohio Business Taxes at a Glance
What Is the Ohio Commercial Activity Tax (CAT)?
CAT Definition and Purpose
The Commercial Activity Tax (CAT) is a business privilege tax measured by a business’s gross receipts.
It was phased in over five years starting in 2005 and replaced Ohio’s corporate franchise tax and tangible personal property tax. Unlike a corporate income tax, the CAT applies to gross receipts rather than net profits—meaning a business can owe CAT even if it operates at a loss.
The CAT is imposed under Ohio Revised Code Chapter 5751 and applies to most business entities conducting activities in Ohio, including corporations, pass-through entities, and sole proprietorships with sufficient Ohio gross receipts.
Key Takeaway: The CAT is a gross receipts tax, not a profits tax. It applies to revenue, not income.
CAT vs. Corporate Income Tax – Key Differences
Ohio is one of the few states that does not impose a traditional corporate income tax. Instead, the CAT serves as the primary business tax. The key differences are:
| Feature | CAT | Corporate Income Tax |
|---|---|---|
| Tax Base | Gross receipts (revenue) | Net income (profits) |
| Rate | 0.26% (flat) | Varies by state (typically graduated) |
| Losses | Not deductible | Losses may offset income |
| Sourcing | Ohio gross receipts only | Apportioned income |
History of CAT in Ohio
The CAT has undergone significant changes in recent years:
| Year | Exclusion Threshold | Annual Minimum Tax | Source |
|---|---|---|---|
| 2019–2023 | $1 million | $150 – $2,600 (sliding scale) | |
| 2024 | $3 million | Eliminated | |
| 2025+ | $6 million | Eliminated |
The dramatic increase from $1 million to $6 million—enacted via Am. Sub. H.B. 33 of the 135th Ohio General Assembly—has exempted approximately 90% of former CAT taxpayers.
Who Must Pay Ohio Business Taxes?
CAT Eligibility and the $6 Million Threshold
You must pay the CAT if your Ohio taxable gross receipts exceed $6 million** in a calendar year. If your gross receipts are **$6 million or less, you owe no CAT and are not required to register for the tax.
The $6 million exclusion applies to all Ohio gross receipts—not just the amount above the threshold. For example:
- $5.5 million** in Ohio gross receipts → **$0 CAT (exempt)
- $7 million** in Ohio gross receipts → **0.26% on $1 million = $2,600 CAT
CPA Insight: Most business owners don’t realize CAT is based on gross receipts, not profit. A business operating at a loss with $7 million in revenue still owes CAT on the excess.
Nexus and CAT Registration Requirements
If your business exceeds the $6 million threshold, you must register with the Ohio Department of Taxation within 30 days of exceeding the Ohio TGR minimum. Registration is completed through the Ohio Business Gateway at gateway.ohio.gov and typically takes about 3 business days for the account to become active.
CAT registrants must file and pay electronically via the Ohio Business Gateway—paper filing is not permitted.
Who Is Exempt from CAT?
The following entities or situations are exempt from the CAT:
- Businesses with $6 million or less in annual Ohio gross receipts
- Financial institutions (subject to the Financial Institutions Tax instead)
- Certain nonprofit organizations (specific exemptions apply)
- Businesses with no Ohio nexus or Ohio-source gross receipts
Important: If your business falls below the $6 million threshold, you should formally cancel your CAT account to avoid receiving delinquency notices.
Ohio Business Tax Rates for 2026
CAT Rate and Calculation Method
The CAT rate for 2026 is 0.26% (0.0026) of Ohio taxable gross receipts above the $6 million exclusion.
Calculation Formula:
CAT Liability = (Ohio Taxable Gross Receipts – $6,000,000) × 0.0026
Example: A business with $8 million in Ohio gross receipts:
($8,000,000 – $6,000,000) × 0.0026 = $5,200 CAT liability
Example: A business with $15 million in Ohio gross receipts:
($15,000,000 – $6,000,000) × 0.0026 = $23,400 CAT liability
Employer Withholding Tax Rate
Effective January 1, 2026, Ohio moved to a flat 2.75% individual income tax rate on income over $26,050. The supplemental withholding rate on bonus income and irregular compensation also decreased from 3.5% to 2.75% effective January 1, 2026. The highest withholding tax rate for 2026 is 3.64%, down from 3.8% in 2025.
| Withholding Type | 2025 Rate | 2026 Rate |
|---|---|---|
| Regular Wages | Graduated (top 3.5%) | Flat 2.75% |
| Supplemental/Bonus | 3.5% | 2.75% |
| Highest Withholding Rate | 3.8% | 3.64% |
Business Income vs. Nonbusiness Income Rates
Ohio distinguishes between business income and nonbusiness income for tax purposes:
| Income Type | 2026 Rate | Deduction |
|---|---|---|
| Nonbusiness Income (W-2 wages, retirement, interest) | Flat 2.75% | $26,050 zero bracket |
| Business Income (sole prop, partnerships, S-corps) | Flat 3% | Up to $250,000 deduction |
Warning: Don’t confuse the 2.75% individual rate with the 3% business income rate—they apply to different types of income.
Understanding Ohio’s 2026 Tax Transformation
The Flat Tax Transition (HB 96)
Amended Substitute House Bill 96 (HB 96), signed into law on June 30, 2025, implements a two-year phased transition to a flat personal income tax.
| Tax Year | Structure | Top Rate |
|---|---|---|
| 2025 | Graduated brackets (retroactive) | 3.125% |
| 2026 | Flat 2.75% on income over $26,050 | 2.75% |
Individuals making less than $26,050 pay zero Ohio state income tax. Personal exemptions are not subject to inflation indexing for 2025 and 2026.
Elimination of Graduated Tax Brackets
Prior to HB 96, Ohio had graduated tax rates with a top bracket of 3.5% (2024). For 2026, all nonbusiness income above $26,050 is taxed at a single 2.75% rate.
What the Flat Tax Means for Businesses and Employees
- Employees will see modest increases in take-home pay due to lower withholding rates
- Payroll administrators must update withholding tables to reflect the 2.75% flat rate and 3.64% highest withholding rate
- Business owners should note that the 3% business income rate and $250,000 deduction remain unchanged
CPA Tip: Ensure your payroll provider has updated to the 2026 withholding tables. The Ohio Department of Taxation’s updated percentage and option computer methods reflect the highest withholding tax rate of 3.64%.
Ohio Employer Withholding Requirements
Employer Registration and Setup
All employers with Ohio employees must:
- Register with the Ohio Department of Taxation for a withholding account
- Obtain an Ohio employer withholding identification number
- Set up payroll systems with the 2026 withholding rates
- File periodic withholding returns and annual reconciliations
Registration is completed through the Ohio Business Gateway at gateway.ohio.gov.
Form IT-4 – Employee Withholding Certificate
The Ohio Form IT-4 (Employee’s Withholding Exemption Certificate) instructs employers on how much state income tax to withhold from an employee’s paycheck. Employees complete the IT-4 upon hire or when their withholding situation changes.
Key features of the IT-4:
- Employees claim personal exemptions (self, spouse, dependents)
- Each exemption reduces the amount of Ohio tax withheld
- Employers must withhold under ORC §5747.06 if the IT-4 is not properly completed
Withholding on Supplemental and Bonus Income
Effective January 1, 2026, the Ohio withholding rate on bonus income, supplemental compensation, and irregular wage payments decreased from 3.5% to 2.75%. This aligns the supplemental withholding rate with Ohio’s flat income tax rate for 2026 and beyond.
Filing and Payment Schedule
Employers must file and pay withholding taxes according to the following schedule:
| Filing Type | Frequency | Deadline |
|---|---|---|
| Deposits | Monthly or semi-monthly | Based on liability amount |
| Annual Reconciliation (Form IT-3) | Annually | January 31 |
| Quarterly Returns | Quarterly | As required |
Employers with less than $2,000 in annual withholding may file quarterly instead of monthly.
Ohio School District Income Tax (SDIT)
What Is School District Income Tax?
Ohio has approximately 700 school districts that impose an income tax on residents. The tax rates vary by district, typically ranging from 0.5% to 2%. The Ohio Department of Taxation publishes a complete list of school district tax rates effective for each year.
Employer SDIT Withholding Obligations
Employers must withhold school district income tax for employees who:
- Live in a school district that imposes an income tax
- Work in Ohio (if the district taxes nonresidents)
The school district withholding is separate from state income tax withholding and is reported on the same withholding returns (Form IT-3).
SDIT vs. State Income Tax – Key Differences
| Feature | State Income Tax | School District Tax |
|---|---|---|
| Rate | Flat 2.75% | 0.5% – 2% (varies) |
| Who Pays | All Ohio taxpayers | Residents of taxing districts |
| Form | IT-1040 | SD-100 |
| Withholding | Required for all employees | Required for residents of taxing districts |
Ohio Municipal Income Tax – What Business Owners Must Know
Overview of Ohio Municipal Income Tax
Ohio has extensive municipal income taxes levied by approximately 600 cities and villages on both wages and business net profits. Major-city rates for 2026 include:
| City | Rate | Administration |
|---|---|---|
| Columbus | 2.5% | Self-administered |
| Cleveland | 2.5% | Self-administered |
| Akron | 2.5% | Self-administered |
| Cincinnati | 1.8% | Self-administered |
| Most other cities | 1.8% – 2.5% | RITA or CCA |
RITA (Regional Income Tax Agency) and CCA (Central Collection Agency) administer municipal taxes for most of the smaller municipalities in Ohio.
Employer Municipal Withholding Obligations
Employers must withhold municipal income tax for employees who:
- Work in a city that imposes a municipal income tax
- Live in a city that imposes a municipal income tax (if the city taxes residents)
Municipal withholding is typically filed through:
- RITA (for municipalities in the Regional Income Tax Agency)
- CCA (for municipalities in the Central Collection Agency)
- City self-administration (for Columbus, Cleveland, Akron, Cincinnati, and others)
Municipal Tax Nexus for Remote and Out-of-State Workers
Remote workers may create municipal nexus for employers, depending on:
- Where the employee performs services
- Where the employee resides
- The specific rules of each municipality
Some cities tax both residents and nonresidents who work within city limits, while others tax only residents.
Warning: Municipal taxes are often the hidden trap—even if you’re exempt from CAT, you likely owe municipal net profit tax if you do business in a taxing city.
Municipal Tax Credits and Reciprocity
Some cities offer credits for taxes paid to other municipalities to prevent double taxation. However, reciprocity agreements vary by city, and not all cities offer full credits. Consult with a tax professional to determine your specific obligations.
How to File Ohio Business Taxes
CAT Filing – Quarterly Returns
Businesses with taxable gross receipts exceeding $6 million must file quarterly CAT returns electronically via the Ohio Business Gateway at gateway.ohio.gov.
CAT Filing Deadlines for 2026:
| Quarter | Quarter End | Filing Deadline |
|---|---|---|
| Q1 2026 | March 31, 2026 | May 11, 2026 |
| Q2 2026 | June 30, 2026 | August 10, 2026 |
| Q3 2026 | September 30, 2026 | November 10, 2026 |
| Q4 2026 | December 31, 2026 | February 10, 2027 |
Employer Withholding Filing
Employer withholding returns are filed through the Ohio Business Gateway or OH|TAX eServices. The annual reconciliation (Form IT-3) is due January 31 following the tax year.
OH|TAX eServices – The Digital Portal
OH|TAX eServices is the Ohio Department of Taxation’s digital platform for filing returns, making payments, requesting forms, and checking refund statuses for most Ohio tax types online. Over 900,000 taxpayers have created OH|TAX eServices accounts.
Currently, OH|TAX eServices supports:
- Individual Income Tax
- School District Income Tax
- Employer and School District Withholding
Note: CAT is not yet available in OH|TAX eServices. CAT filing must be completed through the Ohio Business Gateway at gateway.ohio.gov.
Ohio Business Tax Deadlines for 2026
CAT Quarterly Deadlines
| Quarter | Filing Deadline |
|---|---|
| Q1 2026 | May 11, 2026 |
| Q2 2026 | August 10, 2026 |
| Q3 2026 | November 10, 2026 |
| Q4 2026 | February 10, 2027 |
Employer Withholding Deadlines
| Filing Type | Deadline |
|---|---|
| Monthly Deposits | 15th of following month |
| Annual Reconciliation (Form IT-3) | January 31 |
Estimated Tax Deadlines
Estimated tax payments for individuals and pass-through entities are due quarterly, mirroring federal deadlines:
| Payment | Due Date |
|---|---|
| 1st Quarter | April 15 |
| 2nd Quarter | June 15 |
| 3rd Quarter | September 15 |
| 4th Quarter | December 15 |
Note: Estimated payments are required if your Ohio tax liability less withholding exceeds $500.
Pass-Through Entity (PTE) Tax Deadlines
For calendar-year filers in tax year 2026, the Q2 and Q3 estimated payment due dates for IT-4738 and IT-1140 are June 15 and September 15 (the 15th day of the 4th, 6th, and 9th months).
Payment Methods and Options
Electronic Payment via Ohio Business Gateway
All CAT payments must be made electronically via the Ohio Business Gateway. Accepted payment methods include:
- ACH debit (electronic funds transfer)
- Credit card (convenience fees may apply)
OH|TAX eServices Payment Options
OH|TAX eServices offers digital payment options for:
- Individual Income Tax
- School District Income Tax
- Employer and School District Withholding
Paper Payment (When Permitted)
Paper payments (check or money order) are generally not permitted for CAT but may be accepted for other tax types in limited circumstances. Always verify payment requirements on the Ohio Department of Taxation website.
Penalties, Interest, and Common Filing Mistakes
Late Filing and Late Payment Penalties
The Ohio Department of Taxation imposes penalties for:
- Late filing of returns
- Late payment of taxes due
- Underpayment of estimated taxes
HB 96 allows the tax commissioner to abate penalties and interest for failure to pay sufficient estimated taxes, but penalties still apply at the discretion of the tax commissioner.
Warning: Filing late can result in significant penalties. Set calendar reminders for all tax deadlines.
Interest Rates on Unpaid Taxes
Interest accrues on unpaid taxes from the due date until the date of payment. Interest rates are set by the Ohio Department of Taxation and may vary by tax type and year.
Common Ohio Business Tax Filing Mistakes
- Misunderstanding the CAT threshold – Assuming the $6M exclusion applies to net income, not gross receipts
- Failing to cancel CAT account – Businesses under $6M continue receiving delinquency notices
- Confusing business vs. nonbusiness income rates – 2.75% (nonbusiness) vs. 3% (business income)
- Ignoring municipal taxes – Many businesses overlook city-level obligations
- Missing estimated payment deadlines – Especially for the new June 15 and September 15 dates
CPA Insight: Most business owners don’t realize CAT is based on gross receipts, not profit. A business operating at a loss with $7M revenue still owes CAT.
How to Avoid Penalties
- Set calendar reminders for all filing and payment deadlines
- Make estimated payments if your tax liability exceeds $500
- Work with a tax professional for complex situations
- Cancel your CAT account if your gross receipts fall below $6M
- File electronically to ensure timely processing
Ohio Business Tax Planning Strategies for 2026
Maximizing the Business Income Deduction
The Business Income Deduction (BID) allows taxpayers to deduct the first **$250,000** of business income ($125,000 for married filing separately). The remaining business income is taxed at the flat 3% rate.
Eligible taxpayers: Sole proprietors, partners in partnerships, S-corp shareholders, and LLC members.
Pass-Through Entity (PTE) Tax Election
Ohio offers an elective Pass-Through Entity (PTE) tax under ORC 5747.38 (enacted via SB 246). Qualifying PTEs (S-corps, partnerships, LLCs taxed as partnerships) may elect to be taxed at the entity level at a rate of 3% of qualifying Ohio taxable income.
Benefits:
- Owners claim a refundable credit for their share of the tax paid
- Provides a federal SALT deduction “workaround” (effective for tax years beginning on or after January 1, 2025)
Filing: Form IT-4738 (Electing Pass-Through Entity Income Tax Return).
Entity Selection and Tax Implications
Different entity types have different Ohio tax implications:
| Entity Type | CAT | PTE Tax | Business Income Rate |
|---|---|---|---|
| Sole Proprietor | Yes (if >$6M) | No | 3% (after BID) |
| Partnership / LLC | Yes (if >$6M) | Optional (IT-4738) | 3% (after BID) |
| S-Corp | Yes (if >$6M) | Optional (IT-4738) | 3% (after BID) |
| C-Corp | Yes (if >$6M) | No | N/A (not pass-through) |
Timing Strategies for CAT and Withholding
- Monitor gross receipts throughout the year to determine CAT liability
- Plan for estimated payments if your tax liability exceeds $500
- Consider the PTE election for federal SALT deduction benefits
- Coordinate state and municipal tax payments to avoid surprises
Official Ohio Tax Resources and Forms
Ohio Department of Taxation – Official Portal
The official website of the Ohio Department of Taxation is tax.ohio.gov. This is the authoritative source for:
- Tax forms and instructions
- Filing deadlines
- Tax rates and thresholds
- Legislative updates
- Payment options
Key Ohio Business Tax Forms
OH|TAX eServices and Ohio Business Gateway
- OH|TAX eServices: Digital platform for individual income tax, school district tax, and employer withholding
- Ohio Business Gateway: Portal for CAT registration, filing, and payment
Frequently Asked Questions
What is the Ohio Commercial Activity Tax (CAT)?
The CAT is a 0.26% gross receipts tax on the privilege of doing business in Ohio, applied only to Ohio taxable gross receipts exceeding $6 million (effective 2025 and thereafter).
What is the Ohio CAT rate for 2026?
The CAT rate for 2026 is 0.26% (0.0026) of Ohio taxable gross receipts above the $6 million exclusion.
What is the Ohio CAT threshold for 2026?
The CAT exclusion threshold for 2026 is $6 million in annual Ohio taxable gross receipts.
Do I have to pay CAT in Ohio?
You must pay CAT if your **Ohio taxable gross receipts exceed $6 million** annually. If your gross receipts are $6 million or less, you owe no CAT and need not file.
When are Ohio CAT taxes due?
CAT returns are due quarterly: May 11 (Q1), August 10 (Q2), November 10 (Q3), and February 10 (Q4).
What is the Ohio income tax rate for 2026?
Ohio has a flat 2.75% individual income tax rate on income over $26,050, effective January 1, 2026.
What is the Ohio employer withholding rate for 2026?
The withholding rate for regular wages is flat 2.75% (2026). The supplemental/bonus withholding rate is also 2.75% (down from 3.5%).
How do I register for Ohio CAT?
Register through the Ohio Business Gateway at gateway.ohio.gov within 30 days of exceeding the $6 million threshold.
What is Form IT-4 in Ohio?
Form IT-4 is the Employee’s Withholding Exemption Certificate, which instructs employers on how much state income tax to withhold from an employee’s paycheck.
What is the Ohio pass-through entity tax?
The PTE tax is an elective entity-level tax (Form IT-4738) for S-corps, partnerships, and LLCs, allowing owners to claim a refundable credit and benefit from the federal SALT deduction “workaround.”
How does Ohio tax business income?
Business income from sole proprietorships, partnerships, and S-corps is taxed at 3% after a **$250,000 deduction** ($125,000 MFS).
What are Ohio school district income taxes?
Ohio has approximately 700 school districts that impose income taxes ranging from 0.5% to 2% on residents.
What is the Ohio municipal income tax rate?
Municipal rates vary by city. Major cities: Columbus 2.5%, Cleveland 2.5%, Akron 2.5%, Cincinnati 1.8% (2026 rates).
Disclaimer: This guide is for informational purposes only and does not constitute professional tax advice. Tax laws and rates are subject to change. Always consult with a qualified tax professional for advice specific to your situation and refer to the Ohio Department of Taxation for the most current information.