On August 10, the Ohio Department of Taxation issued a decision upholding the Commercial Activities Tax’s (CAT) statutory “bright-line presence” nexus test and concluded that L.L. Bean had substantial nexus with the state solely based upon the volume of its sales to Ohio customers. This is the first known ruling addressing a taxpayer’s challenge to the constitutionality of Ohio’s statutory bright-line imposition.

The CAT’s bright-line test is similar to the model rule adopted by the Multistate Tax Commission and provides that taxpayers are subject to the CAT if they meet any one of the following thresholds:

1. At least $50,000 of property in the state
2. At least $50,000 of payroll in the state
3. At least $500,000 of sales to customers in the state
4. 25% or more of its total property, payroll and receipts in the state
5. The taxpayer is domiciled in the state