Many companies do business with consumers in Ohio without having a physical location in the buckeye state- without having any operations here at all. Those that do should be aware of commercial activity tax and bright-line presence.
The Ohio Board of Tax Appeals (BTA) recently upheld two rulings in regards to CAT assessments for retailers that service Ohio customers from out of state locations. In both situations the retailer exceeded $500,000 in gross receipts in Ohio sales during a specified period, opening them up to the bright-line presence test for nexus with Ohio.
The two companies involved were California-based online retailer, Newegg, Inc. and Crutchfield, Inc. out of Virginia. Both parties objected to the BTA’s decision arguing that the gross receipts shouldn’t be subject to commercial activity tax because it lacked substantial nexus with Ohio.
The BTA referred to a prior ruling involving L.L. Bean, Inc. as is reiterated that nexus existed. The 2014 ruling determined that the major retailer had bright-line presence in Ohio due to their gross receipts exceeding $500,000. L.L. Bean is now registered for CAT purposes. At this time is unknown if Newegg, Inc. or Crutchfield, Inc. will appeal the BTA decision to the courts.
Gross receipts are just one element that can play into determining if nexus exists. If you have questions about other criteria or the bright-line presence test in Ohio, please contact Holbrook & Manter today. We can help you make that determination.