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Online Retailers Doing Business in Ohio Must Pay the Commercial Activity Tax

Ohio Supreme Court Gavel statue
Creative Commons
Gavel sculpture outside the Ohio Supreme Court.

The state's highest court has ruled that online retailers who do business in Ohio must pay the Commercial Activity Tax, even if the businesses have no physical offices in Ohio. The decision will affect about $1.7 billion in revenue each year.

Online retailers – Newegg, Crutchfield and Mason Shoe Companies – argued they don’t have offices here, so they shouldn’t have to pay the tax. In the 5-2 decision, the court 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 U.S. 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. 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.