Mason Cos., Inc. v. Testa (Slip Opinion)

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
Mason Cos., Inc. v. Testa, Slip Opinion No. 2016-Ohio-7768.]
NOTICE
This slip opinion is subject to formal revision before it is published in an
advance sheet of the Ohio Official Reports. Readers are requested to
promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
South Front Street, Columbus, Ohio 43215, of any typographical or other
formal errors in the opinion, in order that corrections may be made before
the opinion is published.
SLIP OPINION NO. 2016-OHIO-7768MASON COMPANIES, INC., APPELLANT AND CROSS-APPELLEE, v. TESTA, TAX
COMMR., APPELLEE AND CROSS-APPELLANT.
[Until this opinion appears in the Ohio Official Reports advance sheets, it
may be cited as Mason Cos., Inc. v. Testa, Slip Opinion No. 2016-Ohio-7768.]
Commercial-activity tax—Commerce Clause—Physical presence of an interstate
business within Ohio is not a necessary condition for imposing the
obligations of the commercial-activity tax.
(No. 2015-0794—Submitted May 3, 2016—Decided November 17, 2016.)
APPEAL and CROSS-APPEAL from the Board of Tax Appeals, Nos. 2012-1169 and
2012-2806.
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O’NEILL, J.
{¶ 1} We decide this case as a companion case to Crutchfield Corp. v. Testa,
__ Ohio St.3d __, 2016-Ohio-7760, __ N.E.3d __, with which this case was
consolidated for purposes of oral argument. Appellant and cross-appellee, Mason
Companies, Inc., is based in Wisconsin, and it appeals from the imposition of
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Ohio’s commercial-activity tax (“CAT”) on revenue it has earned from its sales of
goods through orders received via telephone, mail, and the Internet. Like
Crutchfield, Mason Companies contests its CAT assessments because it operates
outside Ohio, employs no personnel in Ohio, and maintains no facilities in Ohio.
{¶ 2} The 24 assessments at issue here cover the period from July 1, 2005,
through September 30, 2011. In determining that our holding in Crutchfield
requires us to affirm these assessments, we rely on Mason Companies’ decision to
restrict its protest to the imposition of the tax, while not contesting the amounts of
tax assessed, to conclude that Mason Companies satisfied the $500,000 sales-
receipts threshold, triggering its CAT liability during that period. See R.C.
5751.01(H)(3) and (I)(3). Mason Companies, however, asserts that Ohio’s CAT
violates the Commerce Clause of the United States Constitution and that therefore
Ohio had no authority to tax any of those receipts.
{¶ 3} Just as in Crutchfield, we first confront a cross-appeal by the tax
commissioner concerning whether Mason Companies properly raised and
preserved its constitutional challenge. The circumstances of the present case being
no different from those in Crutchfield, we resolve the cross-appeal against the tax
commissioner’s position on the authority of Crutchfield. Similarly, we rely on
Crutchfield to reject Mason Companies’ contentions that the CAT statutes should
be construed to preclude the assessments at issue in this appeal.
{¶ 4} In Crutchfield, we held that under the Commerce Clause, the physical
presence of an interstate business within Ohio was not a necessary condition for
imposing the obligations of the CAT law, given that the $500,000 sales-receipts
threshold adequately assured that the taxpayer’s nexus with Ohio was substantial
pursuant to R.C. 5751.01(H)(3) and (I)(3). Crutchfield Corp., __ Ohio St.3d __,
2016-Ohio-7760, __ N.E.3d __, ¶ 3, 5. Applying that holding here resolves Mason
Companies’ constitutional challenge under the Commerce Clause. It also makes
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January Term, 2016
unnecessary consideration of whether Mason Companies’ Internet contacts with its
Ohio customers constituted a physical presence for Commerce Clause purposes.
{¶ 5} For the foregoing reasons, we affirm the decision of the BTA and
uphold the CAT assessments against Mason Companies.
Decision affirmed.
O’CONNOR, C.J., and PFEIFER, O’DONNELL, and FRENCH, JJ., concur.
LANZINGER and KENNEDY, JJ., dissent and would reverse the decision of
the Board of Tax Appeals for the reasons stated in the dissenting opinion in 2015-
0386, Crutchfield v. Testa.
_________________
Brann & Isaacson, Martin I. Eisenstein, and David W. Berton; and Baker
Hostetler and Edward J. Bernert, for appellant and cross-appellee.
Michael DeWine, Attorney General, and Daniel W. Fausey and Christine
Mesirow, Assistant Attorneys General, for appellee and cross-appellant.
Macey, Wilenski & Hennings, L.L.C., and Peter G. Stathopoulos; and
Robert Alt, urging reversal for amici curiae Buckeye Institute for Public Policy
Solutions, Mackinac Center for Public Policy, NetChoice, and American Catalog
Mailers Association, Inc.
Fredrick Nicely and Nikki Dobay, urging reversal for amicus curiae Council
on State Taxation.
Goldstein & Russell, P.C., Eric F. Citron, and Thomas C. Goldstein, urging
affirmance for amici curiae National Governors Association, National Conference
of State Legislatures, Council of State Governments, National Association of
Counties, National League of Cities, U.S. Conference of Mayors, International
City/County Management Association, International Municipal Lawyers
Association, and Government Finance Officers Association.
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Bricker & Eckler, L.L.P., Mark A. Engel, and Anne Marie Sferra, urging
affirmance for amici curiae Ohio Manufacturers’ Association, Ohio State Medical
Association, Ohio Dental Association, and Ohio Chemistry Technology Council.
Bruce Fort, urging affirmance for amicus curiae Multistate Tax
Commission.
_________________
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