Northwest Ohio, Toledo, OH

I work for a company located in Ohio. This is my first time dealing with Ohio CAT filings. My predecessors have been reducing the company gross sales receipts in Ohio by the amount of vendor subcontracts we have in Ohio.  I cannot find anywhere that states the vendor costs can offset your sales. Does anyone else file the same way? Any guidance would be much appreciated!

Dana, 

We are a general contractor in Toledo, Ohio. We also exclude subcontractor costs from our gross receipts in relation to the Ohio Commercial Activity Tax (CAT) filings. This is allowed due to what the state of Ohio calls the "agency exclusion". You can find more detailed information about this at the following web address: https://tax.ohio.gov/business/ohio-business-taxes/commercial-activities/information-releases/cat200603-archive

The snip from the paragraph below discusses how a general contractor can exclude subcontractor costs/payments from their taxable gross receipts:

(b) Alternatively, for example, a general contractor enters into a costs-plus contract with a property owner for the general contractor to construct an office building. Under the terms of the contract, the owner agrees to pay the general contractor for work completed by the subcontractors at cost plus a five per cent fee. The general contractor, when bidding out the work to subcontractors, has an agreement in writing with the subcontractors that states that the general contractor is acting as the owner's agent and not as an agent of the subcontractor. The general contractor acts as a conduit with regard to any payments made to the subcontractors, in that the general contractor remits monies received from the owner to the subcontractors, provided that certain conditions are met. Accordingly, the general contractor may exclude the money that the general contractor receives from the owner to pay the subcontractors from its gross receipts. However, the five per cent fee retained by the general contractor would be included in its calculation of taxable gross receipts for purposes of the commercial activity tax.

If you have any questions after reading/digesting this, I am happy to discuss. We have even been audited by the State of Ohio for CAT and we had no findings/issues.

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Chris Kaspar CPA
VP Finance
Rudolph/Libbe, Inc.
Walbridge OH
(419) 725-3203
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