Getting an unexpected bonus is always nice, especially if you own a small business. On December 18, 2012, Ohio Governor Kasich and Tax Commissioner Joe Testa announced that the Ohio Department of Taxation (ODT) is implementing a new policy of notifying business taxpayers of potential tax overpayments, beginning with the Commercial Activity Tax (CAT). The ODT has already identified about 3,500 CAT taxpayers that may be eligible for refunds totaling $13.7M. ODT believes that approximately 11,000 CAT taxpayers will be eligible for tax refunds. ODT will send letters to all potentially eligible business taxpayers notifying them that they may be due a refund and prompting them to file for a refund.
The CAT applies to most businesses based in Ohio (with annual taxable gross receipts of more than $150,000), as well as foreign businesses operating in Ohio with any one of the following characteristics:
- Property in Ohio of at least $50,000; or
- Payroll in Ohio of at least $50,000; or
- iii. Taxable gross receipts used to Ohio of at least $500,000; or
- 25 percent of total property or total payroll or total gross receipts within Ohio.
Governor Kasich's announcement represents a major policy shift. Current Ohio law requires businesses to request refunds, but it does not obligate the state to notify those taxpayers that a refund is available. Formerly, ODT would not inform businesses of CAT overpayments, forcing businesses to audit their own accounts before requesting a refund. This new policy is similar to the policy already in place for Ohio income tax filers.
After working through the CAT accounts, ODT will analyze credit balances in other business taxes in order to identify business taxpayers eligible for refunds. The goals of these policies is to help create a jobs-friendly climate, put money back in the hands of Ohio job creators, and raise the visibility and understanding of tax refund procedures.
However, you don't have to wait until you receive a notice if you have reason to believe that your business has overpaid CAT. The best way to avoid losing money to tax overpayment is to work with competent accounting and legal professionals who can ensure accurate returns and payments, and identify available refunds.