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SB 325

Authorize CAT exclusion for contractor payments to subcontractors

136th Legislature (2025-2026) Introduced by Tim Schaffer

SB 325 would allow Ohio contractors to exclude subcontractor payments from Commercial Activity Tax, reducing their tax liability and potentially affecting state revenue.

Referred to committee
#taxation
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Bill Summary · SB 325

Legislative bill overview

SB 325 would authorize contractors to exclude payments made to subcontractors from Ohio's Commercial Activity Tax (CAT) calculation. This would effectively reduce the CAT liability for general contractors by allowing them to deduct subcontractor costs before applying the tax rate to their remaining taxable gross receipts.

Why is this important

The CAT is Ohio's primary business tax, and this change could substantially lower tax burdens for construction and contracting firms that rely heavily on subcontractors. This impacts business competitiveness and state tax revenue, while potentially affecting project costs, labor dynamics, and how contract work is structured in Ohio's construction industry.

Potential points of contention

  • Revenue impact: Excluding subcontractor payments could significantly reduce state tax collections, requiring either offsetting revenue sources or budget cuts elsewhere
  • Fairness concerns: Contractors would receive preferential treatment compared to other businesses without similar cost-deduction allowances, raising equity questions
  • Implementation complexity: Defining what qualifies as a "subcontractor payment" versus other business expenses could create administrative challenges and disputes with the tax department

Compiled from official sources — confirm details with the bill’s official record.

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