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.
