Crutchfield, Inc. v. Testa, Case No. 2015-0386
Mason Cos. Inc. v. Testa, Case No. 2015-0794
Newegg, Inc. v. Testa, Case No. 2015-0483
Ohio Board of Tax Appeals
ISSUES:
- Does Ohio's commercial activity tax violate the U.S. Constitution's commerce clause when imposing the tax on businesses that have no physical presence in Ohio?
- Is the "bright-line presence" rule in the state's Commercial Activity Tax sufficient to determine if a business has the required substantial nexus with the state to be subjected to a "privilege of doing business"-type tax?
BACKGROUND:
As part of a sweeping overhaul of Ohio's state tax system in 2005, the General Assembly adopted a commercial activity tax (CAT). To address the issue raised by "brick and mortar" Ohio companies about the surge of e-commerce, Ohio turned to model legislation developed in 2002 by the Multistate Tax Commission. The commission proposed that companies without a physical presence in the state could be required to pay the CAT if the company had at least $500,000 in gross receipts from sales in Ohio. This was labeled the "bright-line presence" rule.