State tax news

September 17, 2009  The Supreme Court of Ohio held today that
Ohio's Commercial Activity Tax is constitutional:  Ohio Grocers
Assn. v. Levin

Today the Supreme Court of Ohio overturned the court of appeals, deciding that
the Commercial Activity Tax ("CAT") is constitutional under Ohio law because the
CAT is a tax on the privilege of doing business measured by gross receipts from
the sale of food, not a tax on the sale or purchase of food.

The Grocers Association had argued, and the Court of Appeals, Franklin County,
agreed that the CAT was an excise tax on the sale and purchase of food that is
prohibited by the Ohio Constitution.

The Supreme Court of Ohio's analysis was based upon three points of law.  First,
Ohio may tax the privilege of doing business in Ohio and must value that privilege
in order to effectuate the tax.  Second, there is a difference in Ohio law between a
tax on a factor (gross receipts) and a tax on a privilege as measured by a factor.  
The Court cited a case where it held that the Ohio Franchise Tax on net worth  
was constitutional, finding that the tax was not a tax on net worth itself but on the
privilege of doing business as measured by net worth.  Third, under Ohio law, the
factor used to measure the value of the privilege could itself be an item exempt
from taxation; here, the sale and purchase of food.

For a preliminary version of the Supreme Court of Ohio's Opinion, click here  
THE LAW OFFICE OF
KEITH GREGORSKI, LLC
Taxation and Estate Planning
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