Why Ohio Is Different: No Corporate Income Tax
Ohio is one of six states (along with Nevada, South Dakota, Texas, Washington, and Wyoming) with no traditional corporate income tax. Instead of taxing net profits, Ohio levies the Commercial Activity Tax (CAT) on gross receipts — total revenue before any expenses. This fundamentally changes the math for choosing an entity type.
The CAT applies to all business entities — LLCs, S-Corps, C-Corps, and even sole proprietorships — at 0.26% on gross receipts above $6 million. That $6 million exclusion was raised dramatically by HB 33: it was $150,000 before 2024, $3 million in 2024, and $6 million for 2025 onward. The old $150 minimum tax payment was also eliminated. For the vast majority of Ohio small businesses, the CAT is now $0.
Ohio also charges $0 in annual LLC or corporate filing fees — there’s no annual report, no franchise tax, and no minimum entity-level tax. For businesses under $6 million in gross receipts, there is no recurring state entity-level cost at all.
The Commercial Activity Tax After HB 33
The CAT is simple in structure, but the threshold changed significantly:
- Rate: 0.26% on gross receipts above the exclusion
- Exclusion: $6 million (2025+); was $3 million (2024), $150,000 (pre-2024)
- Applies to: all entity types, all industries
- Filed: annually (quarterly for large filers)
At different revenue levels (2025+ rules):
| Annual Revenue | CAT Owed | Effective Rate |
|---|---|---|
| $500,000 | $0 | 0% |
| $1,000,000 | $0 | 0% |
| $3,000,000 | $0 | 0% |
| $6,000,000 | $0 | 0% |
| $10,000,000 | $10,400 | 0.10% |
| $25,000,000 | $49,400 | 0.20% |
A business with $500,000 in revenue pays $0 in CAT — well below the $6 million exclusion. Even at $5 million, the CAT is $0. The tax only starts at $6 million, meaning most Ohio businesses have been effectively removed from the CAT entirely.
Who the CAT Still Affects
With the $6 million exclusion, the CAT now hits only larger businesses. A grocery distributor with $10 million in revenue pays $10,400 in CAT — modest relative to its scale. The gross-receipts structure still penalizes low-margin, high-volume businesses disproportionately: that $10,400 is 10.4% of a 1% net margin ($100,000 profit) but just 0.5% of a 20% margin ($2 million profit).
Industries most affected at scale: wholesale distribution, manufacturing, retail chains, construction firms, and any business that buys and resells physical goods at high volume. But these businesses now need to clear $6 million in revenue before the CAT applies at all.
Ohio’s Business Income Deduction (BID)
While the calculator above estimates entity-level costs (filing fees, CAT, corporate tax), Ohio also provides a significant break at the owner level. The Business Income Deduction exempts the first $250,000 of qualifying business income per return from Ohio income tax. Business income above $250,000 is taxed at a flat 3.0%.
This matters for pass-through entities (LLCs, S-Corps, sole proprietorships) because business income flows to the owner’s personal return. An LLC owner with $200,000 in Ohio business income pays $0 in state income tax on that income — it’s fully covered by the BID. An owner with $350,000 pays 3.0% on $100,000 ($3,000) — the first $250,000 is exempt.
Non-business income (wages, interest, dividends) is taxed separately at Ohio’s graduated rates. Under HB 96 (effective 2026), non-business income is taxed at a flat 2.75%.
The BID means Ohio’s effective state tax rate on smaller pass-through businesses is often $0 — making the total cost picture better than the entity-level calculator alone suggests.
How Ohio Compares for Entity-Level Costs
The calculator above shows entity-level costs only — filing fees, minimum taxes, and gross receipts taxes. Here’s how Ohio compares for an LLC earning $500,000 in revenue:
- Ohio — $0/year (below $6M CAT threshold, $0 filing fees)
- Wyoming — $60/year (annual report only, no income tax, no GRT)
- Texas — $0 (margin tax exempt under $2.65M, $0 annual fee)
- California — $800/year (minimum franchise tax alone, before any income tax)
- New Jersey — ~$575/year ($75 annual report + potential income tax)
- New York — $9 filing fee + potential entity tax
At $500,000 in revenue, Ohio and Texas are tied at $0 for entity-level costs. Wyoming’s $60 annual report is the only cost for small businesses there. These comparisons cover only entity-level costs — the full picture depends on personal income tax on pass-through profits. Ohio’s BID exempts the first $250,000 of business income, which is more generous than most states, but less favorable than states with no income tax at all (Wyoming, Texas, Nevada, Florida, etc.).
Choosing Your Entity Type in Ohio
Because Ohio has no corporate income tax and a $6 million CAT exclusion, the entity-type decision for most small businesses comes down to federal taxes and liability protection:
Sole Proprietorship
- State filing fees: $0
- CAT: applies only if gross receipts exceed $6 million
- Federal: income taxed at your individual rates + 15.3% SE tax on net earnings
- Best for: side businesses, freelancers, and small operations wanting simplicity
LLC (Single-Member or Multi-Member)
- State filing fees: $0/year (one-time $99 filing fee to form)
- CAT: same as sole prop — applies only above $6M gross receipts
- Federal: pass-through to individual return (same as sole prop for single-member), SE tax applies
- Best for: liability protection without entity-level complexity
S-Corp
- State filing fees: $0/year
- CAT: applies only above $6M gross receipts
- Federal: pass-through income, but only wages are subject to SE tax — distributions are not. Must pay yourself a “reasonable salary.”
- Best for: profitable businesses where the SE tax savings from distributions exceed the cost of payroll. Generally worth it above ~$50,000 in annual profit. Use the S-Corp Salary vs Distribution Calculator to model the break-even point.
C-Corp
- State filing fees: $0/year
- CAT: applies only above $6M gross receipts
- Ohio corporate tax: $0 (no corporate income tax)
- Federal: 21% flat corporate rate, then dividends taxed again at shareholder level (double taxation)
- Best for: businesses seeking outside investors, planning to retain significant earnings, or qualifying for the federal Qualified Small Business Stock exclusion (Section 1202)
The absence of a state corporate income tax means C-Corp double taxation only happens at the federal level in Ohio. For a business retaining all profits below $6M in revenue, the only Ohio cost is $0 — no corporate tax, no CAT, no filing fees.
The CAT vs. Other States’ Gross Receipts Taxes
Ohio isn’t the only state that taxes revenue instead of (or in addition to) profit. With the $6 million exclusion, Ohio’s CAT is now among the most business-friendly:
- Ohio CAT — 0.26% on gross receipts above $6M
- Washington B&O — ~0.484% (most categories), no exemption threshold
- Texas Margin Tax — 0.75% on adjusted revenue, but exempt under $2.65M
- Nevada Commerce Tax — ~0.128% on gross receipts above $4M
- Oregon CAT — 0.57% on gross receipts above $1M
At $5 million in revenue: Ohio owes $0 (below $6M threshold), Washington owes ~$24,200, Oregon owes ~$22,800, Nevada owes $1,280, and Texas owes ~$17,625 (0.75% on $2.35M above its $2.65M threshold). At $10 million: Ohio owes $10,400, versus Washington’s ~$48,400, Oregon’s ~$51,300, and Texas’s ~$55,125.
Ohio Municipal Income Tax
Ohio’s unique municipal income tax system adds a cost the calculator above does not estimate. Over 600 cities and villages levy their own income taxes on business net profits — typically 1% to 3% (Columbus 2.5%, Cleveland 2.5%, Cincinnati 1.75%). These apply to net income (not gross receipts like the CAT).
For pass-through entities (LLCs, S-Corps), the business net profit is allocated to the municipality where the work is performed. If your LLC operates entirely in Columbus, expect to pay 2.5% of net profits to the city. Some municipalities offer credits for taxes paid to other cities, but the system is notoriously complex for businesses operating across multiple Ohio municipalities.
Municipal taxes can add 1%–3% on net profits — a significant factor that shouldn’t be overlooked when comparing Ohio to states without local business taxes.
Filing Deadlines and Practical Details
- CAT annual return: May 10 (for calendar-year filers); only required if gross receipts exceed $6 million
- Ohio personal income tax (pass-through income): April 15, conforming to federal deadline
- LLC formation: $99 one-time filing with the Ohio Secretary of State; no annual report required
- Corporation formation: $99 filing fee; no annual report required
Ohio’s lack of an annual report is unusual — most states require one with a fee. For businesses below $6 million in gross receipts, there’s essentially no ongoing state compliance burden beyond the personal income tax return. The BID exempts the first $250,000 of business income from that return, further reducing the effective cost.