The state takes in $1.7 billion from out of state online retailers paying the commercial activity tax, or CAT. Now the state’s highest court says internet retailers which have no offices or employees in Ohio but sell products to Ohio residents still have to pay the CAT, which nearly all Ohio businesses pay.
Online retailers Newegg, Crutchfield and Mason Shoe Companies argued they don’t have offices here, so they shouldn’t have to pay the CAT. In the 5-2 decision, the majority said a company needs to have Ohio offices for the state to collect sales taxes, but not for the collection of the CAT, often called a “privilege of doing business” tax. The state’s Daniel Fausey told the court in May that the US Supreme Court agrees. “The Supreme Court has already said that states may ask for their fair share from companies doing business in the state. And that’s what the CAT does," Fausey said. "This isn’t, as it’s been presented, an overreach to grab out-of-staters.”
Ohio is the first state to impose a standard on out of state businesses paying a tax like the CAT, and the issue is likely to be considered at the national level again.