Ohio justices hear grocery tax case

Chris Rizo Sep. 1, 2009, 12:00pm

Ohio Supreme Court justices

COLUMBUS, Ohio (Legal Newsline)-The Ohio Supreme Court on Tuesday heard arguments over whether grocery stores should have to pay the state's Commercial Activities Tax.

The tax, enacted in 2005, has raised about $730 million from grocers. If the high court rules that the tax does not extend to grocery stores it would mean that the state would lose about $375 million over the next two years, and about $355 million in taxes already levied against grocery stores would have to be repaid.

Arguing the case for the state was Attorney General Richard Cordray. He says the Commercial Activities Tax was intended by state legislators to replace Ohio's corporate franchise tax.

The Ohio Grocers Association argued that the tax is an illegal levy on food.

The case came to the state Supreme Court after the 10th District Court of Appeals ruled that the Commercial Activities Tax cannot be applied to food sold at wholesalers and grocery stores.

"This erroneous ruling not only endangers the state's efforts in tax reform but will also cost the state hundreds of millions in annual revenue and still more in tax refunds at a time of fiscal crisis," the state argued in court papers.

Grocers in the Buckeye State sued, arguing the Ohio Constitution bars taxes on food consumed off-site. In September, the appeals court agreed.

The Commercial Activities Tax amounts to 26 cents per $100 in sales over $1 million.

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