While the dispute over annexation of the Columbus casino seems settled, another big dispute remains. Casino operators and state lawmakers are fighting over the application of Ohio’s Commercial Activity Tax - or the CAT tax. Understanding complicated tax code is never easy, but Tom Borgerding of member station WOSU in Columbus, offers this explanation of the Commercial Activity Tax.
After a five year phase in period, Ohio’s CAT Tax took full effect last year. With few exceptions, every for-profit business operating in Ohio pays it. The CAT tax replaced two business taxes and reduces the personal income tax rate paid by Ohio residents. The goal says tax attorney Gary Harden was to simplify the Ohio tax code.
“The idea with a tax such as this is to apply it at the gross level so nobody is retaining records and auditing and adjusting with respect to every little deduction, looking for exemptions for a variety of other things.
The CAT Tax rate is 26 dollars for every 10-thousand dollars in business activity. And it touches just about every business. The tax casts a wide net over business activity.
“It reaches Ma-Pa businesses. It reaches out and touches people in the service industry so doctors, lawyers, engineers, plumbers.”
Small business - those taking in less than 150-thousand dollars a year - are exempt. Medium sized companies just pay once - a flat 150 dollars a year. Businesses that have more than one million dollars in revenue pay one quarter of one percent on gross revenue.
Last year, Ohio ‘s CAT tax generated more than 1-point3 billion dollars in state revenue. And, remember the CAT tax is levied against Gross revenue - all the money that comes into a business. Not net revene or profit after expenses. And that’s where the casino controversy develops. Should the CAT tax be applied to every dollar bet… or just the money the casinos keep after they pay gamblers winnings.
Let’s ask the expert.
Borg q: So in the casino’s case every nickel that I put in a slot machine is, under this law, taxable, because they are selling me the chance to win that money? Harden: Exactly.
Rock Gaming stopped construction on casinos in Cleveland and Cincinnati until lawmakers decide the CAT tax issue. The developer of the Columbus and Toledo Casinos - Penn National gaming agrees. Penn National spokesman, Bob Tenenbaum, contends voters settled this question when they passed the casino amendment.
“If you follow the constitutional amendment that was passed in 2009 we would pay the CAT tax and we know that on the normal definition of gross casino revenue which is the amount wagered minus the amount paid out to winners.”
Harden says millions of dollars in potential tax revenue are at stake.
“We have a classic example of a monopoly, which by the way was created by constitutional amendment by the voters of the State of Ohio against state government. So I think they are both worthy adversaries and it will all be, If you don’t have to pay the tax it will be entertaining to watch.”
Harden says for businesses its always important to watch because what happens to one business can happen to others.