Ohio's Commercial Activity Tax (CAT) is unique among state business taxes and can catch freelancers off guard, but most solo practitioners qualify for significant exemptions.

Ohio CAT Tax for Freelancers: $150K Exemption

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James Okafor, Self-Employment Tax Specialist

Best for established Ohio freelancers who may be approaching or exceeding the CAT thresholds

Ohio CAT basics for freelancers

Ohio's Commercial Activity Tax (CAT) is a gross receipts tax that applies to most business activities in Ohio. Unlike income taxes that are based on profit, CAT is calculated on total revenue before expenses, making it important to understand even if your freelance business isn't highly profitable.

CAT exemption thresholds

The good news is that most freelancers qualify for exemptions based on their revenue levels:

Example: $180,000 freelance consultant

Let's say Maria runs a marketing consulting practice in Columbus and earned $180,000 in gross receipts last year:

Gross receipts: $180,000

CAT calculation: $150 minimum (since she's between $150K-$1M)

Annual CAT owed: $150

Quarterly payments: $37.50 each quarter

Even though Maria earns well above the exemption threshold, her CAT burden is minimal compared to her federal tax obligations.

What counts as "gross receipts" for CAT?

Understanding what income counts toward the CAT threshold is crucial:

Included in gross receipts:

All 1099-NEC payments from clients

Cash payments and unreported income

Interest income from business accounts

Receipts from Ohio-based activities

Not included:

Reimbursements for client expenses (if separately itemized)

Sales tax collected on behalf of clients

Receipts from activities outside Ohio

Filing requirements and deadlines

If your gross receipts exceed $150,000, you must:

Register for CAT within 30 days of exceeding the threshold

File quarterly returns by the 10th day of the second month after each quarter

Pay quarterly estimated taxes based on current year projections

File annual reconciliation by May 10th of the following year

Key planning considerations

Multi-state freelancers: Only Ohio-sourced receipts count toward CAT

Business structure: CAT applies regardless of entity type (sole prop, LLC, corp)

Expense timing: Since CAT is on gross receipts, expense timing doesn't reduce the tax

Growth planning: Monitor receipts carefully as you approach $150,000 threshold

What you should do

Track your Ohio gross receipts monthly to know if you're approaching the $150,000 threshold. If you exceed it, register for CAT immediately and begin quarterly filings. Most freelancers find the compliance burden more annoying than the actual tax cost.

For federal taxes, use our quarterly estimator to calculate your self-employment and income tax obligations, which will be much larger than CAT for most freelancers.

Key takeaway: Most Ohio freelancers earning under $150,000 are exempt from CAT, while those above pay a minimum $150 annually plus compliance requirements.

*Sources: [Ohio Department of Commerce CAT Guide](https://com.ohio.gov/taxes/commercial-activity-tax), [IRS Publication 334](https://www.irs.gov/pub/irs-pdf/p334.pdf)*

Key Takeaway: Most Ohio freelancers earning under $150,000 are exempt from CAT, while those above pay a minimum $150 annually plus compliance requirements.

Calculate your quarterly tax payments →

Annual Gross Receipts	CAT Tax Owed	Quarterly Filing Required	Registration Required
Under $150,000	$0 (exempt)	No	No
$150,000 - $999,999	$150 minimum	Yes	Yes
$1,000,000	$150 + $0 (at threshold)	Yes	Yes
$1,500,000	$150 + $1,300	Yes	Yes
$2,000,000	$150 + $2,600	Yes	Yes

Annual Gross Receipts

CAT Tax Owed

Quarterly Filing Required

Registration Required

Under $150,000

$0 (exempt)

$150,000 - $999,999

$150 minimum

Yes

$1,000,000

$150 + $0 (at threshold)

Yes

$1,500,000

$150 + $1,300

Yes

$2,000,000

$150 + $2,600

Yes

More Perspectives

James Okafor, Self-Employment Tax Specialist

Best for new Ohio freelancers who are just learning about state tax obligations

CAT probably doesn't apply to new freelancers

As a new freelancer in Ohio, the Commercial Activity Tax likely isn't on your radar yet — and that's probably fine. The $150,000 exemption threshold means most first-year freelancers won't owe CAT.

Focus on what matters in your first year

Instead of worrying about CAT, new Ohio freelancers should prioritize:

Federal self-employment tax: 15.3% on net earnings over $400

Ohio state income tax: 0% to 3.99% depending on income level

Local municipality taxes: Many Ohio cities have local income taxes (1-3%)

Quarterly estimated payments: Required if you'll owe over $1,000 federally

Example for a new freelancer

Tom starts freelance web development in Cleveland and expects $45,000 in his first year:

Ohio CAT: $0 (under $150,000 threshold)

Federal self-employment tax: ~$6,358

Ohio state income tax: ~$1,350 (3% rate)

Cleveland city tax: ~$1,125 (2.5% rate)

His total state and local burden is about $2,475, with zero CAT liability.

When to start tracking CAT

Start monitoring your gross receipts once you're consistently earning over $10,000 per month. If you're on track to exceed $150,000 annually, you'll need to register for CAT and begin quarterly filings.

Remember that it's gross receipts, not net income, so even if you have high expenses, you could still owe CAT if your total billings are high enough.

Key takeaway: New freelancers should focus on federal and local Ohio taxes first, as CAT typically doesn't apply until annual receipts exceed $150,000.

Key Takeaway: New freelancers should focus on federal and local Ohio taxes first, as CAT typically doesn't apply until annual receipts exceed $150,000.

How does the Ohio Commercial Activity Tax affect freelancers?