Ohio Income & Tax for eCommerce Businesses
💡 No Corporate Income Tax ≠ No Tax Obligation: Ohio repealed its traditional corporate income tax in 2005 and replaced it with the Commercial Activity Tax (CAT) — a gross receipts tax. This means Public Law 86-272 protections that shield businesses from income tax do NOT apply to the CAT. Out-of-state sellers can have Ohio tax obligations even if they would otherwise be protected in a traditional income tax state.
Part 1: Ohio's Commercial Activity Tax (CAT)
The CAT is a privilege tax of 0.26% on gross receipts from business conducted in Ohio. It applies to virtually all business entity types — corporations, LLCs, S corps, partnerships, and sole proprietors.
Who Is Subject to the CAT?
An out-of-state business is subject to the CAT if it meets Ohio's "bright-line nexus" standards, which include any of the following during the calendar year:
Ownership of property in Ohio valued at $50,000 or more
Payroll in Ohio totaling $50,000 or more
Gross receipts from Ohio sources of $500,000 or more
25% or more of the business's total property, payroll, or gross receipts are from/in Ohio
The No-Tax-Due Threshold
Ohio raised the CAT no-tax-due threshold significantly in recent years. For 2025 and beyond, businesses with Ohio taxable gross receipts of $6 million or less owe no CAT. (The threshold was $3 million in 2024 and $150,000 before that.)
Important: even if you owe no CAT due to the threshold, you may still have registration and filing obligations depending on your gross receipts level. Businesses with receipts between the old lower threshold and $6 million should review their filing history.
PL 86-272 Does Not Apply to the CAT
Federal Public Law 86-272 protects businesses from state income-based taxes when their only in-state activity is soliciting orders for tangible goods approved and shipped from outside the state. Because the CAT is a gross receipts tax — not an income tax — this federal protection does not apply. Out-of-state sellers who meet Ohio's bright-line thresholds are subject to the CAT regardless of whether they would be protected in other states.
Part 2: Ohio Sales Tax
Ohio also imposes a separate sales and use tax with different nexus rules from the CAT.
Economic Nexus Thresholds
Ohio's sales tax economic nexus threshold is:
$100,000 in gross retail sales OR 200 separate transactions into Ohio in the current or prior calendar year
Marketplace sales through certified facilitators are included in threshold calculations for individual sellers — unlike many other states
If you meet either threshold in either the current or preceding calendar year, nexus applies throughout the current year
Ohio Sales Tax Rate
Ohio's state sales tax rate is 5.75%. Counties and transit authorities can add local taxes, with the combined rate capped at 8% (Cuyahoga County, which includes Cleveland, reaches this maximum). Ohio is a destination-based state for remote sellers — you apply the rate based on the customer's location.
Ohio Municipal Taxes: The Hidden Layer
Ohio cities can impose their own independent income taxes — and many do. Columbus, Cleveland, Cincinnati, and other major cities levy municipal income taxes that are completely separate from the CAT. If you have employees or operations in Ohio cities, municipal tax obligations may apply in addition to state obligations.
FBA Sellers and Ohio
Amazon operates fulfillment centers in Ohio, including facilities in the Columbus and Cleveland areas. Storing FBA inventory in Ohio creates immediate physical nexus for both sales tax and potentially the CAT, regardless of your gross receipts level. This is one of the most common overlooked exposures for multi-state FBA sellers.
What About Sales Tax?
Ohio's $100,000 or 200-transaction threshold (with marketplace sales included in calculations) and its city-level tax complexity make it a state where errors are easy and costly.
At Tall Oak Advisors, we put together this guide as a resource for our eCommerce community. Tax rules vary significantly from state to state, and we want sellers to have the information they need to make informed decisions. More info at talloakadvisors.com
Disclaimer: The information in this article is for general informational purposes only and does not constitute legal or tax advice. Tax laws change frequently. Consult a qualified tax advisor or CPA regarding your specific situation.
Sources: Ohio Revised Code Chapter 5751 (CAT); Ohio Revised Code Chapter 5739 (Sales Tax); Ohio Dept. of Taxation; HB 33 (July 2023 CAT threshold changes); Pub. L. No. 86-272 (income tax only).
