Information Release Commercial ActivityTax “Taxablegross receipt,”defined; Revised
January, 2006; RevisedApril, 2006
CAT 200517
This is version 3 of this release. The purpose of this information release is to clarify what
constitutes a “taxable gross receipt” for purposes of the commercial activity tax (“CAT”)
imposed under Chapt er 5751 of the Revised Code. This release has been updated to address
corrections made to Chapter 5751 of the Revised Code in Am. Sub. H.B. 530, as well as to
provide anexampleof an item t hat is notagross receipt because it does not contributeto the
production of gross income. As a general practice in determining taxable gross receipts, a
taxpayer starts with its broad definition of gross receipts, taking into account any exclusions
and/or deductions fromthetotalgross receipts, andthensituses theremaininggross receipts to
determinethosereceipts thatare“taxablegross receipts.” It is importanttorememberthatnotall
gross receipts are necessarily taxable gross receipts. In general, t hose receipts received from
purchasers locatedoutsideof Ohio arenot taxablegross receipts for purposes of theCAT.
“Gross Receipts”
“Gross receipts”arebroad ly definedindivision (F) o f section 5751.01of theRevisedCodeas
“the total amount realized by a perso n, without deduction for the cost of goods sold or other
expenses incurred,that contributes to theproduction of gross incomeof theperson, includingthe
fair market valueof a ny property andany services received,andany debt transferredor forgiven
as consideration.” In otherwords, t heterm “gro ss receipts”is all encompassinga ndincludes a
widevariety of items.
An exampleof somethingthatwouldnotbeagross receipt becauseitdoes notcontributetothe
production of gross incomeis the receipt of cash from presentinganegotiable instrument (i.e. a
check) in excess o f any goods or services provided to the customer. Assume a customer
purchases seventyfivedollars worth of groceries andwrites thegrocery store acheck for one
hundreddollars. Thecashierof thegrocery storegives thecustomertwentyfivedollars in cash
back and applies the remaining seventyfive dollars toward the customer’s grocery bill. The
grocery storeis only required to include theseventyfive dollars incalculatingits gross receipts.
If, however, the store charged a customer a fee for the additional amount requested, suchfee
wouldbeincludedin thegrocery store’s gross receipts.
This definition broadly encompasses a ll receipts in money or remuneration from activities
entered into by “taxpayers” as that term is defined in division (D) of section 5751.01 of the
RevisedCode.
Exclusions
When calculating gross receipts for thetax period, thereare certain items that are specifically
excluded from the definition of “gross receipts.” These exclusions, enumerated in division
(F)(2) of section 5751.01of theRevisedCode,includethefollowing:
• Interest –(R.C. 5751.01(F)(2)(a)) Interestincome,except for interest from credit sales
is excluded from the definition of a “gross receipt”. For example, interest earned on a
1
savings account is specifically excluded from the definition of a “gross receipt.”
However, a receiptfrom amonthly interestfee onaretailinstallment cont ractis included
in thedefinition of a“gross receipt”andis thereforesubject totheCAT.
• Dividends and distributions or distributive or proportionate shares – (R.C.
5751.01(F)(2)(b)) Any dividendor distribution receivedfrom acorporation, d istributive
sharereceived from a passthrough e ntity, or proportionate sharereceived by a partner
from apartnershipareexpressly excludedfrom thedefinition of a“gross receipt”.
• Section1221or 1231assets –(R.C. 5751.01(F)(2)(c)) Receipts fr om thesaleor transfer
of an asset described in either section 1221 or 1231 of the Internal Revenue Code (in
general, depreciablecapitalassets) areexcludedfrom thedefinition of a“gross receipt”
regardless of thelength of timetheasset is held, andirrespectiveof gain or loss realized
on thetransfer. For example,ataxpayerwho sells theassets of its business may exclude
theportion of the resultinggross receipts attributed to thebusiness equipment because
this asset is de scribed in section 1221 of the Internal Revenue Code. However, the
business must include t he por tion of the gross receipts stemming from the business’s
invent ory, as this asset is not includedinthosedescribedinsection 1221of theInterna l
Revenue Code. Please see Information Release CAT 200508 for a more detailed
description of this exclusion.
• Proceeds attributabletotherepayment,maturity, or redemptionof an intangible –(R.C.
5751.01(F)(2)(d)) – Receipts from the r epayment, maturity, or redemption of the
principal of aloan, bond, mutual fund, certificat eof deposit, or marketableinstrument are
excluded from thegeneral definition of a“gross receipt”.
• Receipts fromarepurchaseagreementor loan –(R.C. 5751.01(F)(2)(e)) –Theamount
receivedunderarepurchaseagreement or onaloan is excludedfrom thedefin ition of a
“gross receipt”.In simpleterms, a“repurchaseagreement ”is atr ansaction in which one
party sells securities to anotherparty for aspecifiedamount. At thesametime, theselling
party agrees to repurchasetheequivalent securities at an agreedprice at aspecifiedfut ure
date.
• Contributions received bya trust, plan, or other arrangement –(R.C. 5751.01(F)(2)(f)) –
Contributions received by charitable or religious trusts, plans, or similar arrangements,
any of whicharedescribedindivision (a)of section 501of the Internal RevenueCode
(including most plans or ganizedundersections 501(c)and(d) andsection 401(a)of the
Internal RevenueCode)areexcludedfrom the general definitionof a“gross r eceipt”. As
a general caveat, it is helpful to remember that if theplan or tr ust is arrangednotfor
profit , any co ntributions r eceived by these entities are excluded from the definition of
gross receipts. If, however, theplan or trust or otherarr angementoperates for pro fit or is
not organizedin conjunction with section 501(a)of theInternal RevenueCode, theplan
will not beexcludedfrom thedefinition of a“gross receipt”,andmay thereforebesubject
to the CAT. For example, the donations to an entity that is taxexempt under I.R.C.
section 501(c) or (d) and the contributions participant s make to a pension plan under
I.R.C. section 401(a) are excluded from gross receipts for purposes of the CAT.
However, otherreceipts from atrade or business conductedby such o rganizations arenot
2
excludablefrom thedefinitionof gross receipts andmay therefor ebesubject to theCAT.
For additional information onthis exclusion, pleasesee Information ReleaseCAT 2005
14, includingparagraph (D)of proposedAdm. Rule57032910.
• Compensation (R.C. 5751.01(F)(2)(g)) All compensation receivedby an employee, a
former employee for work as an emp loyee, or an employee’s legal successor (the
emplo yee’s estate), that is reportedon aW2(or wor krelatedtravel reimbursements that
may not appear on a W2), is excluded from the definition of a “gross receipt”.
Compensationreport ed on a Form 1099, however, is not excluded from this definition
andmay thereforebesubject totheCAT.
• Stock issuance – (R.C. 5751.01(F)(2)( h)) – Proceeds received from the issuance of a
taxpayer’s own stock,options, warrants, puts, or calls or from thesaleof thetaxpayer’s
treasury stockare excluded from thedefinition of gross receipts. As a general rule,the
stockreferencedin this section must beabletobeissuedby thetaxpayer.
• Life insurance proceeds – (R.C. 5751.01(F)(2)(i)) – Any payments received from life
insurance policies areexcludedfrom thedefinitiono f gross receipts.
• Gifts or charitable contributions; fundraising receipts when any excess receipts are
donatedfor charitablepurposes; proceeds receivedbyanonprofitorganization –(R.C.
5751.01(F)(2)(j) ) – Any gift s or charitable contributions, membership dues, and/or
payments received for educational courses, meetings, meals, or similar payments to a
trade, professional, or other similar association are excluded from the definition of a
“gross receipt”for purposes of theCAT. For example, an individual decides he/shewants
to hold afu ndraiser for cancer research. Theindividualorganizes agolf tournamentwith
each attendee being required to pay $100. As long as any balance remaining, after
offsettingexpenses for thetournament, goes toachar itableorganization (inthis example,
thecancer researc h foundation), theindividual canexcludethesereceipts.
• Damages from litigation – (R.C. 5751.01(F)(2)(k)) – To the extent receipts ste m from
damages receivedas theresult of litigation andthosereceipts arein excess of what would
have been r eceived had the taxpayer not been involved in litigation, the taxpayer may
exclude theamount in excess from its calculationof gross receipts for purposes o f the
CAT. For example,ataxpayernormally allows other manufacturers to use its patented
process in exchangefor aroyalty. Thetaxpayerdiscovers that ama nufact ureris usingits
patentedprocess without payingt heroyaltyfee so thetaxpayerfiles alawsuit for patent
infringement. Thetaxpayerwins thelawsuit andis awardedcompensatory damages of $2
million andpunitivedamages of $500,000. The$2million is includedin thetaxpayer’s
gross receipts becauseit compensates the taxpayer for thero yaltyitwouldhave received
if t hedefendant hadnot violatedthepatent . However, the$500,000is not includedinthe
taxpayer’s gross receipts becausethis money wouldneverhavebeen receivedif therehad
notbeen alawsuit.
• Agent’scommission, fee, or other remuneration –(R.C. 5751.01(F)(2)(l) and5751.01( P))
–Inaprincipalagent relationship, manytimes theagent receives atotal payment fr om
thepurchaseron behalf of t heprincipal. If ataxpayeris workingas an agent on behalf o f
3
another (the principal) and receives a commission, fee, o r other remuneration for their
workas an agent, theagent must only report that po rtion of thegross receipts attr ibuted
to theagency r elationship. In o rdertoqualify for this e xclusion, thecontractmust clearly
state that an agency relationship exists and conspicuously set out the terms of the
contract. For example,an insurance compa ny contracts with an insurance agent for the
agent to sell the company’s insurance coverage, with a five per cent (5%) agent
commission built in for eachpolicy sold. These terms are conspicuously set forth in a
contract thatis signedby both parties. Theagent sells a$300,000lifeinsurancepolicy for
$800. Theagent passes $760(or 95%) on to theinsurancecompanyandretains its $40
(or 5%) commission pursuant totheterms of thecontract. This Department will issuea
separate information release in the near future which will further clarify this agency
provision.
• Taxrefunds andother taxbenefitrecoveries, includingreimbursements for CATtaxpaid
– (R.C. 5751.01(F)(2)(m)) – A taxpayer who receives a tax refund (federal, stat e, or
local) is not requiredto includetheamount of the refundin calculatingits gross receipts
for purposes of the CAT. For purposes of this section, “other tax benefit r ecoveries”
includes refundable tax credits that may beavailableto ataxpayer. In addition, an entity
thatis reimbursedby anotherentity that is eitherincluded inthesamecombined taxpayer
group or consolidated elected taxpayer group, or is not part of the combined taxpayer
group or theconsolidatedelectedtaxpayergroup for theCAT tax paidby that entitymay
exclude those r eceipts from its calculation of gross receipts. For example, A is the
primary memberof acombined taxpayergroupin which B is amember. A pays the C AT
tax liability for thegroupfor thesemiannual periodandB reimburses A for its portion of
that amount . A may exclude the amount of B’s payment fr om its gross receipts for
purposes of the CAT duringthenext tax period. Similarly, A owns sixty percent (60%)
of XandY andregisters as theprimary memberof acombinedtaxpayergroup. B is the
minority forty percent (40%) ownero f XandYandis not consideredacommon owner
for purposes of the CAT. Apays t hetaxliability for thegroup, andthen is reimbursedby
B for B’s portion of thetax paid. A may excludethat payment from its gross receipts.
• Pensionreversions –(R.C. 5751.01(F)(2)(n)) –A pension reversion is theterminationof
apension plan, undertaken by acompany with anoverfundedpension plan inorderto
reclaim thesurp lus assets. When this occurs theamount does notneedto beincludedin
thecalcu lation of thetaxpayer’s gross receipts for purposes of theCAT.
• Contributions to capital – (R.C. 5751.01(F)(2)(o)) – To t he e xtent a taxpayer receives
funds thatareproperly treatedas contributions to capital, thosea mounts may beexcluded
from the calculation of the taxpayer’s gross receipts for purposes of the CAT. For
example, if a partner in a partnership makes a contribution to the capital of the
partnership, the part nership (as a taxpayer) will not be required to include this
contribution in its calculation of gross receipts.
• Sales or usetaxes collectedor other taxes required to be collected to be remittedto a
taxing jurisdiction – (R.C. 5751.01(F)(2)(p)) – Receipts fro m the sale of tangible
personal property or services, generally, are subject to the CAT, as discussed above.
However, theportion of the receipt attributedto sales or usetaxes collectedby a vendor
4
or outofstatesellerfrom aconsumeron behalf of ataxingjurisdiction areexcludedfrom
thedefinitio n of a“gross receipt”for purposes of theCAT. In addition, thevendor or out
ofstate seller is not required to subtract any discounts earned when calculating this
exclusionary amount because the exclusion is for the amount of tax collected. For
example, avendor sells acarfor $20,000toan Ohio resident andalso collects $1,400in
Ohio sales tax. Thevendor is only requiredto reportgross receipts of $20, 000(t heprice
paidfor thecar) for purposes of theCAT. The $1,400of Ohio tax is not subject to the
CAT. In addition, taxes that a taxpayer is required by law to collect directly from a
purchaser and then remit to a local, state, or federal taxing authority may be excluded
from the taxpayer’s gross rece ipts. For example,a wireless telephone company collects a
tax for E911service directly from its customer. Thecompany is r equiredby lawto remit
thepayment toagovernmentaltaxingauthority. Thecompany may excludethis amount
from its gross receipts, as this amount is required to be collected directly from the
customer (and is not imposedon thecompany, itself) and must bere mittedto ataxing
jurisdiction.
• Certain excise taxes paid – (R.C. 5751.01(F)(2)(q) to (s)) – Receipts from the sale of
cigarettes or tobacco products, motor fuel, and beer or intoxicating liquor aregenerally
subject to theCAT. However, thefederal andstate excisetaxes may bedeductedon the
receipts received from thoseproducts, including excisetaxes collectedand remittedon
cigarettes, beer and wine for the construction or renovation of certain sports facilities.
Because motor fuel is excludedpursuant to atemporary lawprovision, no deduction is
allowedonmotor fuel untilJuly 1, 2007. Whendeterminingtheexcisetaxes that can be
deducted, thedeductionis only fo r theportion of federal andstat eexcisetaxes received
fromthese products during the taxable period. For example, assumea beer wholesaler
purchases 10,000 cases of beer duringthetax period, butonly sells 8,000 cases during
that tax reporting period. The wholesaler can only deduct from its gross receipts the
federal andstateexcisetaxes on the8,000cases actually soldduringtherepo rtingperiod.
Thereceipts from theremaining2.000cases will beclaimedby thewholesa lerwhenthe
cases areultimately sold. An informationrelease and/or rule will be issued concerning
the current federal and state excise tax rates. This Department will issue a separate
information releasethat provides t heexcisetax rates andfurtherclarifies this exclusion
for certain excisetaxes paid.
• Saleor transfer of motor vehicleas customer preference –(R.C. 5751.01(F)(2)(t) –To
theextent areceipt is realizedfor thesaleor transferof a motor vehiclefrom onedealer
to another for t he purpo se of resale by the second dealer, the gross receipt shall be
excluded from the transferordealer’s calculation of gro ss receipts for purposes of the
CAT ifandonlyif thesaleor transferwas made tomeet aspecificcustomer’s preference.
It is strongly advised that such transfer be documented by both dealers to verify such
transferis excludedfrom theCAT uponinspection/auditby this Departme nt. Aform that
dealers are strongly advised to use will be available on the department of taxation’s
website at tax.o hio.gov. It is important to note that receipts from transfers between
dealers other thanfor customer preferenceare subjecttotheCAT.
• Receipts from a financial institution described in R.C. 5751.01(E)(3) for services
provided to the financial institution in connection with the issuance, processing,
5
servicing, or managingloans or creditaccounts –(R.C. 5751.01(F)(2)(u)) –A taxpayer
that (1) issues, pro cesses, services, or manages loans or credit accounts for a financial
institution; and(2) is at least 50% commonly owned,alongwith thefinancial institution,
by a common owner, may excludethesereceipts from calculating its gross receipts for
purposes of theCAT.
• Administrationofantineoplasticdrugs andother cancer drugs –(R.C. 5751.01(F)(2)(v))
– Rece ipts attributable to the administration of antineoplastic drugs and other cancer
chemotherapy, biologicals, therapeutic agents, and supporting drugs are excluded from
theCAT to theextent thedrugs wereadministered inaphysician’s officeto patients w ith
cancer. Any otherdrugs or thoseantineoplastic drugs not meeting therequirements of
this exclusion shall be included in the calculation of gross receipts for purposes of the
CAT.
• Funds receivedor usedbymortgage brokers –(R.C. 5751.01(F)(2)(w)) –T his exclusion
is limited to mortgage brokers who arenot dealers inintangibles. This exclusion does not
state that mo rtgage brokers are not dealers in intangibles. Instead, it provides that if a
mortgage broker does not meet the definition of a dealer in inta ngibles under R.C.
5725.01, this exclus ion may apply. With respect to a tablefunding mortgage loan or
warehouselending mortgage loan, such a mortgage broker must report fees and other
consideration received as its gross receipt s for purposes of the CAT, but may exclude
otheramounts received,such as theloan amount notbeingretained.
• Property, money, and other amounts received by professional employer organizations
fromclientemployers –(R.C. 5751.01(F)(2)(x)) –A professional employerorganization
(“PEO”) may e xclude receipts from a c lient employer to theextent thereceipts are in
excess of theadministrat ive fee chargedby thePEOto theclientemployer. “Professional
emplo yer organization,” “client employer,” and other terms used in R.C.
5751.01(F)(2)(x) are specifically defined in R.C. 4125.01. Ohio PEOs are required to
regist er with and are regulated by the administrator of the Ohio Bureau of Worker’s
Compensation pursuant to R.C. 4125.05. This exclusion is narrow in its scope and is
limitedto theengagement of permanent ratherthantemporary emp loyees pursuant to a
written professional employer or ganization agreement of not less than a twelvemonth
duration. For example,aprofessional employerorganization charges afiveperce nt (5%)
administrat ive fee for the placement of any of its clients. Corporation A uses the
organization to findapermanentreceptionist . The organization hires individual B to fill
theposition andcharges Corpor ation A $500for this s ervice. When Corporation A pays
theprofessional employer o rganization Individual B’s salary, it included the $500 fee.
Theprofessional employerorganization neednot includetheentireamount receivedfrom
Corporation Ain calculatingits gross receipts, butrathermust only includeits $500fee.
• Amounts retained as commissions by persons holding permits to conduct horseracing
meetings – (R.C. 5751.01(F)(2)(y)) – Under Ohio law, a person holding a permit to
conduct horseracing meetings is required to paya specificstatutorypercentage of the
total of all amounts wagered as a tax, and must also set aside a specific portion of all
amount s wageredas pursemoney. R eceipts that must bepaidto or collectedby thetax
6
commissioneras atax andtheamounts to beusedas pursemoney areto beexcluded in
calculatingthepermit holder’s gross receipts for purposes of theCAT.
• Qualifying distributioncenter receipts – (R.C. 5751. 01(F)(2)(z)) – Effective January 1,
2007, cert ain receipts of asupplier may be excludedfromthat supplier’s gross receipts
for purposes of theCAT if thosereceipts stem from qualifiedproperty that is shippedto a
qualified distribution center. The department will issue an information release on this
issuein thefuture.
• Realestatebrokers –(R.C. 5751. 01(F)(3)) –A person actingas areal estatebroker is not
required to include the entire commission amount received in conjunction with its
brokeragetransaction in its calculation of gross receipts for purposes of the CAT. The
real estatebrokercan exclude theamountof the commissionremit tedt ootherbrokers or
real estateagents. For example,assumeareal est atebrokerreceives acommission from
thesaleof a$200,000homefor its client. Thebr okerreceives a7% commission, whichit
is requiredtosplit as follows:3% to abuyerbroker; 2% toits real estateagent; andthe
remaining2% is retainedby thebroker. Thebrokeronly needs to report$4,000 (or its 2%
commission) as agross receipt. Theseller’s rea lestateagent must only report $4,000(or
its 2% commission) as agross receipt. Thebuyerbrokerneeds t oreportthat portion of its
3% that is not passed onto the buyeragent, for which it can deduct any amounts it is
required topay tooneif its rea l agents for assistingin thesaleof thehome.
• Temporarymotor fuelexemption –(Uncodifiedsection 557.09.06of Am. Sub. H.B. 66,
126
th
G.A.) –H.B. 66specifically provides for atemporary exemption for receipts from
thesaleof motor fuel from thecalculation of a“gross receipt”for purposes of theCAT.
This exemption expires on June 30, 2007. It is important to note that this temporary
exemption does notapply toproducts notusedon theroad( e.g. heatingoil, aviation fuel,
and kerosene). For more information on this temporary exemption, please refer to
Information ReleaseCAT 200518.
• Temporaryqualifiedforeigntradezoneareaex clusion –(Uncodifiedsection 557.09.09
of Am. Sub. H.B. 66, 126
th
G.A.) – H.B. 66 specifically provides that receipts from
shipments into and/or out of a qualified foreign trade zone area are excluded from a
taxpayer’s gross receipts until December 31, 2006. For mor e information on this
temporary exemption, pleasereferto InformationReleaseCAT 200510, andfor amap
andalist of addresses of t he locations thatmeet therequirements of this temporary law,
pleasesee Information ReleaseCAT 200511.
• Anyreceipts for which CA Tis prohibitedby theconstitutionor laws of theUnited States
or theconstitutionof thisstate –(R.C. 5751.01(F)(2)(aa)) –If eithertheconstitution of
theUnitedStates or o f thestateof Ohio or other laws of theU nitedStates prohibit the
state of Ohio from imposing the CAT on certain receipts, these receipts will not be
includedin ataxpayer’s ca lculation of its gross receipts for purposes of theCAT.
Deductions
7
After acco unting for all available exclusions, the taxpayer may take any available deductions
from its totalgross receipts if it such amount is included inthe current period, or may deduct
from its taxablegross receipts if such amount was includedin aprior tax period. Thereareonly
four deductions available to taxpayers. T hese deductions are enumerated in division (F)(4) of
section 5751.01 of theRevisedCodeandincludethefollow ing:
• Cashdiscounts allowed and taken – A taxpayerwho allows its customers toreceivea
cash discount for timely payment, for example,may deduct theamount of thediscount if
thecustomermeets therequirements necessar y to takethediscount dur ingthetax period.
This deduction also applies to incentivebased rebates anddiscount s that are basedon
makingtimely payments andthat arereceivedby apurchaserbut not by t hepurchaser’s
customer. It is important to note, however, that the portion of thediscountor rebatemust
have been included on the seller’s books initially in order to qualify as a deduction.
Plea sesee proposedrule57032914for moreinformation on this deduction.
• Returns andallowances –Any receipt connectedto an asset thatis laterreturnedtothe
taxpayer by its purchaser may be deducted from the taxpayer’s gross receipts for
purposes of theCAT, as longas that receipt was includedinthetaxpayer’s gross receipts
initially.
• Baddebts –If theCAT imposedo n receipts from baddebts was paidin aprior quarterly
tax payment period, the taxpayer may deduct any bad debt amounts it suffers in the
current tax period. “Baddebts”is definedindivision (F)(4)(c)of section 5751.01of the
RevisedCode.(This definitionis similarto thatunderOhio sales andusetax law.)
• Amount realized from the sale of an account receivable – If the receipts from the
underlying transaction of an account receivable were originally included in the gro ss
receipts of the taxpayer, any amount realized from the saleof this acco unt receivable
may bedeductedfrom thetaxpayer’s gross receipts for purposes of theCAT.
“TaxableGross Receipts”
After a taxpayer calculates its gross receipts and su btract s any available exclusions and/or
deductions, the taxpayer may then determine its “taxable gross receipts.” For purposes of the
CAT, a“taxablegross receipt”is agross receipt situsedtothestate of Ohio.
As a general rule, gross receipts are sitused based on the benefit to the purchaser. Section
5751.033of theRevisedCodesets forth therules for determininghowto situs gross receipts that
include, but arenotlimitedto, thefollowing:
• Gross rents and royalties from and the sale of real property – (R.C. 5751.033(A) and
(D)) If the real propertyis located in this state, thesereceipts shall besitused to this
state. Receipts from real pro perty not locatedin t his statear esitusedoutsideof Ohio.
8
• Gross rents and royalties f romtangiblepersonal property –(R.C. 5751.033(B)) To the
extent thepro perty is locatedo r usedin this state, theserece ipts shall besitusedto this
state.
• Sale of tangible personal property – (R.C. 5751.033(E)) Receipts from the sale of
tangiblepersonal propert y aresitusedbasedon wheretheproperty is received.In thecase
of property delivered by common carrier, the place theproperty is ultimately received
after all transportation has been completed is dee med to be the sitused location. This
locationmustbe known bythe seller at the timeof thesale. For example,a Wisconsin
company sells $30,000 worth of widgets to ABC Company, an Ohio wholesaler and
$20,000 worth of widgets to XYZ Company, a Pennsylvania wholesaler, but ships the
entire $50,000 worth of widgets to a warehouse in Columbus, Ohio. XYZ Company
sends a common carrier to the Ohio warehouse to pick up its widgets. Since the
Wisconsincompany knew atthetimeof thesale that $20,000worth of thewidgets sold
to theOhio warehousewould beshippedto Pennsylvania, theWisconsincompany can
exclude thegross receipts received from XYZCompany from its calculat ion of taxable
gross receipt s.
• Intellectual property – (R.C. 5751.033(F)) Receipts from the sale, exchange,
disposition, or othergrant of theright to usetrademarks,trade names, patents, copyrights,
andsimilar intellectual pro perty is situsedbasedon either(1) theamount of useinthis
state;or (2) theright to usethepr operty inthis state.Thefirst methodto determinet he
situsing of intellectual property is to lookto the amount of use in this state versus the
amount of useeverywhere. If thepr operty is used in this state, receipts from thesaleof
theproperty are situsedto this state.I f theamount of useis not available,thetaxpayer
should determine the situs based upon where the person having the right to use the
property actually uses it. If the person who has the right to usetheproperty uses it in
Ohio, receipts from thesaleof this property aresitusedto Ohio. If, however, theright to
usetheproperty rest s with an individual inIndiana, receipts from the saleof this property
shouldbesitusedtoIndiana.
• Transportation services by common carrier – (R.C. 5751. 033(G)) Receipt s from the
saleof theseservices aresitused to this statebased on theratio of themileagetraveled by
thecarrierduringthe tax periodon roadways, wat erways, airways, and railways inthis
statetothemileagetraveledby t hecarriereverywhere.
• Mostother services –(R.C. 5751.033(I)) Thegeneral ruleof situsingservices is based
on thebenefit tothe purchaser. Receipts stemming from services performed where the
benefit is to aperson outsidethestateof Ohio aresitusedoutsidethestateof Ohio and
arethereforenot consideredin calculatingtaxablegross receipts andarenot subject tothe
CAT. This Department has issueda separateinformationrelease,CAT 2005 06, which
specifically addresses the situsing of various services for purposes of the CAT. The
physical location where the purchaser ultimately receives the benefit of the service is
paramount in determining the proportion of benefit within this state to the benefit
everywhere.
9
All gross rece ipts sitused to the state of Ohio are considered “taxable gro ss receipts” and are
subject to theCAT inaccordance with Chapter5751. of the RevisedCode.Thosereceipt s not
situsedto this stateare not taxablegross receipts andarethereforenotsubject to theCAT.
10