Marketing Tax Nexus?

November 2, 2005

You know state revenue officials are overreaching when they have to advertise a new tax to out-of-state taxpayers.

Ohio’s new Commercial Activity Tax (CAT), which will replace the old franchise tax, contains an expansive definition of nexus, the minimum activities a corporation can have in Ohio before it must pay the CAT. According to the new rules, a corporation will have to pay the CAT if it makes at least $500,000 in sales to Ohio customers, even if it has not a dime of property or payroll in Ohio.

To give fair warning to out-of-state taxpayers, Ohio placed an advertisement in the Wall Street Journal, warning potential taxpayers that they have until November 15 to register with the state.

Ohio’s new nexus rule is a straightforward adoption of the idea of economic presence. We’ve written before about the dangers of this doctrine, and instead believe that a physical presence standard is more consistent with uniformity and simplicity.

Was this page helpful to you?


Thank You!

The Tax Foundation works hard to provide insightful tax policy analysis. Our work depends on support from members of the public like you. Would you consider contributing to our work?

Contribute to the Tax Foundation

Related Articles