If you have not heard the state of Ohio has adopted a commercial activity tax (CAT) which became effective July 1, 2005. The CAT tax is an annual privilege tax to do business in Ohio and is measured by gross receipts on business activity. The tax applies to all types of businesses regardless of legal form. Individuals also may be subject to the tax. This is how the CAT tax works: most everyone, except wage earners, with gross receipts beyond $150,000 must register with the state and pay a fee of $20.00 ($15.00 if you register electronically) on or before November 15, 2005. For gross receipts up to $1 million, you pay $150.00 annually. For gross receipts above $1 million, you will pay an additional .0026. Here are a few examples:

� Sam owns a welding shop and has $475,000 in gross receipts. His business expenses total $410,000 leaving him with net income of $65,000. Sam pays income tax on $65,000 plus an extra $150.00 for the CAT tax.

� Wendy is a partner in a small medical practice. The practice generates $2 million in gross receipts. The practice will pay $2,750 in CAT tax.

� Karl has investment properties that generate $5 million in gross rents. In addition to paying income tax on the net income (gross receipts less allowable deductions) his CAT tax will be $10,550.

As the examples show, each person is paying more tax to the state of Ohio than before.

The CAT tax will be phased in over the next five years and payment is due in February of each year. Some taxpayers will be required to make quarterly payments.

Here is one more tidbit: If state of Ohio revenue projections from the CAT tax are lower than projected, the Ohio Tax Commissioner (and not your elected representatives) is permitted to increase the Cat tax.

For more information on the CAT tax and how it may apply to your situation, please consult your tax advisor.