The U.S. Supreme Court appears to have ended legal challenges to an Ohio business tax that through April had generated $1 billion a year to the state government.
The justices, without any comment, let stand Monday a decision earlier this year by a federal appeals court in Missouri, which upheld Ohio’s claim against Diversified Ingredients, a company that produces pet food ingredients.
Combined with a 5-2 ruling late last year by the Ohio Supreme Court upholding the tax – known as the Commercial Activities Tax – both state and federal courts have sided with Ohio on a tax badly needed as state lawmakers attempt to close a $1 billion budget shortfall.
“We’re happy that the court declined to take the case and left in place the lower court,” Matt Chafin, chief legal counsel for the Ohio Department of Taxation, said of the high court’s action.
Diversified, which had been assessed more than $500,000 in taxes, does not have any workers in Ohio and is not registered to do business in the state. But Diversified sells products to customers who according to the lower court “direct the delivery of Diversified products to manufacturing plants in Ohio.”
The justices did not technically uphold the constitutionality of the commercial tax, but instead made clear any challenges need to be made in Ohio. But last year’s Ohio Supreme Court ruling provides companies with little hope that a legal challenge will be successful.
The Ohio Supreme Court ruled last year that three online retailers had to pay Ohio’s commercial activities tax even though they lacked a bricks-and-motor presence in the state.
(Randy Ludlow of the Columbus Dispatch contributed to this story.)