Ohio State Tax Blog

Current developments, commentary and helpful resources regarding Ohio state and multistate taxes from attorneys Steven A. Dimengo and Richard Fry. We concentrate on all aspects of Ohio state taxation, including sales/use tax, income tax and commercial activity tax, from audits to appeals before the Ohio Board of Tax Appeals and Ohio Supreme Court, and have significant experience in multistate tax planning. Contact us.

Home Archives Ohio CAT Ohio Supreme Court Upholds CAT as Applied to Food Sellers
Ohio Supreme Court Upholds CAT as Applied to Food Sellers PDF Print E-mail
Friday, 04 December 2009 00:00

The Ohio Grocers Association sought a declaratory judgment that the Commercial Activity Tax (CAT) violated Ohio's constitutional prohibition against excise taxes levied or collected upon the sale or purchase of food for off-site consumption.  Commencing in 2005, Ohio's tax landscape changed substantially by phasing out the personal property and corporate franchise taxes, while phasing in the CAT.  Essentially, the CAT replaced these taxes by imposing a low rate/large base tax upon all businesses with Ohio gross receipts (with no tax being imposed upon businesses with less than $150,000 of gross receipts, and a flat $150 tax imposed on businesses with between $150,000 and $1 million of gross receipts).

The "measuring stick" for the CAT, as the Court phrased, includes as a factor, food sales, even though the Ohio Constitution prohibits an excise tax on the sale of food for off-premises consumption.  However, the Court dismissed the contention that because certain factors are used to measure one's tax base, that the tax is imposed upon sales of the subjects of those factors.  Furthermore, as a tax on the privilege of doing business, the Court respected the legislature’s choice to value the privilege, in part, by sales of food.  Giving it substantial deference, the Court concluded that the CAT was a permissible tax on the privilege of doing business, and that using food sales as one factor in valuing this privilege did not render the tax unconstitutional.

As evidenced by numerous associations urging the Court to uphold the CAT as applied to food sellers, this decision is good news for Ohio residents and businesses (other than food sellers).  If held unconstitutional, millions of dollars of tax revenue collected since the CAT’s inception would be refunded.  Additionally, the State, in a time where its budget is already tight, would need to find ways to fill the large gap of expected revenue from food sellers.  This would likely have resulted in additional burdens upon Ohio residents and other business through tax rate increases and/or re-instituting the personal property or corporate franchise taxes.  Instead, the burden imposed by the CAT, as intended, will continue to be borne by all businesses having Ohio gross receipts.

Last Updated on Tuesday, 08 December 2009 19:32
 
clock

 

 

Ohio State Tax Attorney, Steven A. Dimengo

Steve Dimengo is recognized as one of the leading tax attorneys in Ohio, where he has been serving clients for over twenty-five years. Full Profile. Cases. Email.

 

Ohio State Tax Attorney, Richard B. Fry III

Richard Fry is an Associate focusing on business law, specifically taxation. He holds a J.D. and Masters of Taxation from the University of Akron. Full Profile. Email.

Subscribe

News

Steve will be speaking at the Lorman Sales and Use Tax in Ohio Seminar to be held in Akron on January 21, 2014.  He will be discussing Manufacturing Exemptions, Transfer of Business and Personal Liability for Sales tax.  Click here to see more (and register).

 

BEST LAWYERS' 2012 LAWYERS OF THE YEAR:

Steven Dimengo has been named the Best Lawyers' 2012 Akron Tax Law Lawyer of the Year