Ohio Supreme Court to hear Commercial Activity Tax case

The Ohio Supreme Court yesterday agreed to hear a petition challenging the constitutionality of the state's Commercial Activities Tax when it's applied to food sold by wholesalers and in groceries. (See Docket )

The Ohio Grocers Association had sued the state back in 2006, contending that the tax was constitutionally prohibited when applied to the wholesale sale of food and the retail sale for consumption off the premises where it was sold. The state’s position was that because neither Sections 3(C) nor 13 of Article 12 of the Ohio Constitution expressly, or by implication, prohibit “the imposition of a tax on the privilege of doing business in Ohio,” CAT was valid.

A Franklin County common pleas court found for the state, which was appealed last year. On Sept. 2, 2008, the Tenth District Court of Appeals reversed, holding that “while it would appear that the constitutional exceptions in Sections 3(C)and 13 of Article XII were not meant to apply to franchise taxes, judicial interpretation has clearly determined that a franchise tax is a form of excise tax (and) excise taxes on certain food sales are precisely what the Constitution prohibits.”

With the Ohio Commercial Activity Tax on grocery foods being projected to generate some $188 million a year once it’s fully phased in next year, the state’s obviously appealing that rendition. ( See Ohio’s Memorandum in Support of Jurisdiction )



Ohio’s Commercial Activity Tax is codified @ ORC § 5751.01 et.seq.