Ohio justices: Grocers' tax is legal

By Chris Rizo | Sep 18, 2009

Richard Cordray (D)

COLUMBUS, Ohio (Legal Newsline)-The Ohio Supreme Court has ruled that grocery stores should have to pay the state's Commercial Activities Tax.

The tax, enacted in 2005, has raised about $730 million from grocers. The state high court ruled Thursday that the tax is not unconstitutional.

The 6-1 decision found that requiring grocers to pay a tax on gross receipts was not tantamount to an excise tax on food, which is barred by the Ohio Constitution.

"When the CAT's practical operation is considered, it becomes evident that it is what it purports to be: a permissible tax on the privilege of doing business, not a proscribed tax upon the sale or purchase of food," Justice Maureen O'Connor wrote in the majority opinion.

If the justices had ruled that the tax does not extend to grocery stores, it would have meant that the state would lose about $375 million over the next two years, and about $355 million in taxes already collected would have to be repaid.

Attorney General Richard Cordray, a Democrat, argued the case for the state. He said the Commercial Activities Tax was intended by state legislators to replace Ohio's corporate franchise tax.

The Ohio Grocers Association, meanwhile, 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.

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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