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Court Rules Ohio’s ‘Privilege Tax’ is OK

Posted on: Thursday, November 17, 2016

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COLUMBUS, Ohio (AP) – The Ohio Supreme Court has ruled that the state can impose its primary business tax on out-of-state companies that sell to Ohioans but have no physical presence in the state.

Three out-of-state businesses had challenged Ohio’s application of its commercial activity tax. They claimed that imposing it across state lines violates the U.S. Constitution’s commerce clause, which gives Congress authority over interstate commerce.

But in a 5-2 decision Thursday, the state court found that Ohio can impose the tax on companies that do millions of dollars in online sales to its residents.

The court decided the commerce clause doesn’t prevent the state from collecting the tax, which is levied as a “privilege of doing business” in Ohio.

The state’s commercial activity tax, or CAT, was established in 2005.

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