Ohio CAT unconstitutional when applied to grocers

The 10th. District Ohio Court of Appeals last Tuesday ruled that the state’s commercial activities tax (CAT ), “when applied to gross receipts from the wholesale sale of food and the retail sale of food for consumption off of the premises where sold, operates as, and is, an excise tax levied or collected on the sale or purchase of food, which is prohibited by Sections 3 and 13 of Article XII of the Ohio Constitution.” ( Ruling )

Ohio’s CAT, enacted in 2005 and codified in ORC Chapter 5751, is levied “on each person with gross receipts for the privilege of doing business in this state.” Appellants had contended that since the Ohio Supreme Court has “repeatedly held that a tax levied on a business’ gross receipts was an ‘excise tax’ [i.e. East Ohio Gas Co. v. Limbach (1986)], and both Sections 3(C) and 13 of Art. XII prohibit ‘excise taxes’ from being imposed on certain food sales...it was clearly unconstitutional.” The state’s view had been that CAT was “a franchise tax as it is imposed for the privilege of doing business in Ohio, and what the Ohio Constitution prohibits are excise taxes levied on the sale of food in certain situations..” (highlights mine) The Tenth District agreed with the earlier contention, noting several cases [i.e. Wesnovtek Corp. v. Wilkins (2005) and Keycorp v. Tracy (1999)] in holding that “a franchise tax was an excise tax.”

The decision is apparently going to be appealed to the Ohio Supreme Court, according to an article in the Dayton Daily News on that day.