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Grocers must pay commercial activity tax
The Ohio Supreme Court on Thursday, Sept. 17, ruled that it’s constitutional for the state to collect the commercial activity tax from grocers.
The ruling said that collecting the tax on the grocers’ gross receipts is not an unconstitutional “excise tax upon the sale or purchase of food.” Rather the tax is a tax on the privilege of doing business and the fact that this privilege is measured by gross receipts that include proceeds from the sale of food doesn’t affect its constitutionality, the decision said.
The 6-1 decision was a big win for Gov. Ted Strickland and the legislature. They need the money from the tax to keep the state budget balanced. A win for the grocers would have meant an annual loss of $188 million in taxes and could have led to $355 million in refunds.
In a prepared statement, Strickland praised the decision:
“I am thankful for the Supreme Court’s decision, which protects the integrity of Ohio’s reformed tax code and upholds the broad-based, low-rate structure that gives Ohio the lowest business taxes in the Midwest.”
Tom Jackson, president of the Ohio Grocers Association, which filed the lawsuit, had a different reaction.
“This is a sad day for consumers in the state of Ohio. Obviously the Supreme Court of Ohio did not recognize the constitutional argument that the grocers were making on behalf of Ohioans purchasing food for off premise consumption,” Jackson said in a prepared statement.
“We are extremely disappointed with the Court’s decision.
“In our opinion, the Ohio Constitution and the intention of the legislature were not upheld by this court today—it is very disappointing.
“Our goal was to make sure that any tax dollars would not affect the price of food. It is a sad to think that the consuming public will continue to be taxed one way or another on food for off premise consumption. Today, the Ohio consumer lost.”
Jackson said it appeared there would be no further appeal.
It is one of two cases the court heard oral arguments on this month that could affect the budget. In the second, LetOhioVote.org wants permission to hold a referendum in 2011 on the slots-at-the-tracks gambling plan. This could delay start of the slots program which is supposed to generate $933 million for the state over two years. The court hasn’t rule on that case.
The court’s majority opinion in the CAT case was authored by Justice Maureen O’Connor. Justice Paul Pfeifer dissented.
To read the opinion, click here.
“We’re very pleased,” said John Kohlstrand, spokesman for Tax Commissioner Richard Levin.
The legislature enacted the commercial activity tax in 2005 as part of the state’s tax overhaul. It is a tax on businesses’ gross receipts, levied for the privilege of doing business.
The tax doesn’t apply to businesses grossing less than $150,000 a year. Businesses grossing between $150,000 and $1 million must pay a flat tax of $150.
For businesses grossing more than $1 million, the tax is measured by .26 percent of their gross annual receipts.
The Ohio Grocers Association and others filed suit, claiming that levying the tax on grocers violated provisions in the Ohio Constitution that prohibit the state from levying or collecting any “excise tax upon the sale or purchase of food.”
A trial court ruled in favor of the state but a state appeals court reversed the ruling.
In her opinion, O’Connor wrote that the constitution “does not prohibit the state from using gross receipts to compute the amount of a privilege-of-doing-business tax, even if those gross receipts include proceeds from the sale of food.”
She also wrote that the CAT is a “permissible tax on the privilege of doing business, not a proscribed tax upon the sale or purchase of food.”
In his dissent, Pfeifer wrote:
“It is an incontrovertible fact that if a retailer has sales over $1 million and he sells an additional 40 gallons of milk at $2.50 per gallon, for a total of $100, a tax of 26 cents is levied upon him and the state collects 26 cents.
“Is this not a tax ‘levied or collected upon the sale or purchase of food?’”
Joining O’Connor in the majority were: Chief Justice Thomas J. Moyer and Justices Evelyn Lundberg Stratton, Terrence O’Donnell, Judith Ann Lanzinger and Robert R. Cupp.
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Comments
By daveb
September 18, 2009 2:41 PM | Link to this
grocery tax seems as fair as any tax. most all of us could stand to eat a bit less.By Jack
September 18, 2009 11:07 AM | Link to this
Way to go Mitch! That is axactly right. It lowered the tax rate and spread the burden to entities that paid no tax before. It show shows you how ignorant the averaage person is!By kurt
September 18, 2009 10:51 AM | Link to this
Look for a 300 % tax on toilet paper—-considering that government doesn’t know how to wipe its a—s—s,they’ll be immune to this one tooBy Mitch
September 18, 2009 10:12 AM | Link to this
First, people always pay the taxes as businesses pass them to the consumer. Second, the franchise and personal property taxes were removed. This has reduced taxes for most Ohio bases businesses and aids in future growth for Ohio. Finally, companies with headquarters outside the state who paid little to Ohio now pay more which reduces (in theory) what Ohioans must pay. This tax was fully phased in this spring so it will likely have no additional impact in he marketplace.By National Anthem-War of 1812
September 18, 2009 9:40 AM | Link to this
War is good. This country was born of war. Our National Anthem is a war song. This country loves war. We are our best when we at war. We have elected many wartime generals to the Presidency. War is in our blood. Speak softly and carry a big stick and don’t be afraid to swing it. Thank You Mr. President Bush.By Pay the State all you got
September 18, 2009 9:33 AM | Link to this
Just shut up and pay your taxes. Don’t you know the bureaucrats know we are sheep and will be happy to pay the way of our State Employees. Pay them for they shall live better than you. Suckers you taxpayers are.By Jack
September 18, 2009 9:02 AM | Link to this
Bunch of ignorant dolts! The CAT tax REPLACED both the franchise tax and the personal property taxes. It LOWERED the tax rate on business. The grocer’s were paying more in CFT and PPT tax than they are paying now. Why don’t you guys do some research and quite being so dumb. And Jacob, you are an idiot!By GUSS
September 18, 2009 7:49 AM | Link to this
Looks like the state of ohio is feeding the people another “ACORN”spit it out and call your rep and tell them to try to curtail there crazy tax and spend,,,,,,,By john
September 18, 2009 7:47 AM | Link to this
This will be passed onto the consumer. Your taxes just went upBy barking bulldog
September 18, 2009 6:01 AM | Link to this
Government doesn’t do things for you… it does things to youBy Barry
September 17, 2009 11:45 PM | Link to this
Let me tell you how it will be, There’s one for you, nineteen for me, ‘Cos I’m the Taxman, Yeah, I’m the Taxman. Should five per cent appear too small, Be thankful I don’t take it all. ‘Cos I’m the Taxman, Yeah yeah, I’m the Taxman.By The Jackal
September 17, 2009 8:39 PM | Link to this
DUR HURR HURR!~ AHAHAHAHA!By The Jackal
September 17, 2009 8:38 PM | Link to this
DUR HURR HURR!~ AHAHAHAHA!By Steve
September 17, 2009 8:12 PM | Link to this
What they don’t seem to realize is that companies and corporations don’t pay taxes. All they do is pass the cost of doing business onto the comsumer by adding to the price we pay for the products we buy. I’m not a businessman but at tleast I understand that much.By InconvenientFacts
September 17, 2009 7:56 PM | Link to this
“Uh, InconvenientFacts? After the appeals court struck it down the Strickland administration “asked” that it be restored. Or is that fact too inconvenient for you?” So, where is your outrage at the Taft administration for passing this tax in the first place? [crickets] You guys are always the first to jump on the Democrats, but stand silent for whatever the Republicans do. And when it’s pointed out that the Republican’s hands are just as dirty? Blame the Democrats. Right-wing hypocrisy — it’s not just for breakfast anymore.By Wayne
September 17, 2009 7:21 PM | Link to this
Does anybody remember how outraged the people of the USA were after 911. Well I was peed off. Collectively we were ready to kill some Radical Muslims. Congress gave US the go ahead. So we did. The all voluntary army swelled with new recruits. The men and boys marched off to end this menace. This war as all wars is bad. Sometimes, when you have been bloodied, you react in a most brutal way. This reaction has served us well. Muammar Gaddafi came to us on his knees and made peace. Others see this brutality we bring on those who attack US and it may make them think twice. So Bush ran up the bill killing al-Qaida and that seemed like the right thing to do.By Call 'Em As I See 'Em
September 17, 2009 7:13 PM | Link to this
Uh, InconvenientFacts? After the appeals court struck it down the Strickland administration “asked” that it be restored. Or is that fact too inconvenient for you?By jacob
September 17, 2009 6:14 PM | Link to this
I agree with part of the idea behind the Tea Parties, but I see them as a bunch of followers. These same “small government” types didn’t lift a finger when the Patriot ACT was passed, when we invaded a country that never attacked us and didn’t have WMD’s, and when the size and spending of our gov’t grew out of control. Where were the tea parties then? Even funnier, I’d bet half these guys had never heard of Ayn Rand prior to November 2008. Suddenly, FOX news gets the idea of organizing a ‘grass roots’ protest and now it’s vogue to criticize government spending.By joey
September 17, 2009 6:11 PM | Link to this
Let’s face it…our government would tax the air we breath if they could just figure out how to measure it.IF the government would quit spending OUR money, then there would be no reason to raise taxes.Just another example of government overstepping and in the tax payers pockets.Vote all these fools out of office.By InconvenientFacts
September 17, 2009 6:05 PM | Link to this
Uh, Bill? This tax was implemented under Gov. Taft, a Republican. It was passed by the Ohio Legislature in 2005, when both houses were Republican majorities. The Ohio Supreme Court which just issued this ruling is Republican. Now, please tell us again exactly how this is the Democrat’s fault?By Buffalo Bill
September 17, 2009 5:55 PM | Link to this
Well folks this is just the beginning of taxing everything under the sun. You wanted democrats to run government so quit whining and pay up.By Dazed & Confused
September 17, 2009 5:54 PM | Link to this
Scratch my last comment. I didn’t see that it was .26 percent, not 26 percent. I was going to say….By Dazed & Confused
September 17, 2009 5:50 PM | Link to this
Anyone else think that it is a huge leap from $150 flat fee to .26 of gross receipts? WOW…..By blow ups
September 17, 2009 5:07 PM | Link to this
I would like to know where the Tea Partiers were when we were spending Trillions of $ on blowing people up in other countries. The Repubs left us in trillions of dollars in debt. But they do this all the time and the sheep just sit back and watch!By Common Sense
September 17, 2009 5:03 PM | Link to this
Let’s see… consumer gets food, consumer has to pay more to cover a government commanded cost for the food, sounds like a tax on food to me. Call it whatever you want. Call it a tax on talking to the cashier that day, but it comes down to the government gets money because you buy food. Essentially, the Ohio Supreme Court gave into a semantics argument and ignored the Ohio Constitution. Shame on you Ohio Supreme Court. Shame on you Governor Strickland. Your dishonesty is amazing.By Clevo
September 17, 2009 4:58 PM | Link to this
Strickland I know you did not do this to us. Someone please tell me this is a dream. Another loophole around the laws of the land. How the heck can this even make since to you. You Punk!By null
September 17, 2009 4:48 PM | Link to this
Organizing for America is a great way to get your voice heard. Fact based arguments are effective. Those who like Glen Beck will run saying the sky is falling. Ignorance keeps them in their blissful world of poverty. Real change requires accurate information, and a real direction. It takes hard work to bring change. I admire my President and my Country.By Susan
September 17, 2009 4:42 PM | Link to this
As if the price of groceries haven’t risen enough! Taxing the grocery stores is a horrible idea because they will turn around and raise the prices of groceries! Nice move (extreme sarcasm) when most of us are already struggling! And Mr. Strickland is praising this? UGH!!!!By NoMoreSmallBiz
September 17, 2009 4:30 PM | Link to this
To Ohio Department of Development: Wake up!! That huge sucking sound is the sound of small businesses closing or leaving the State while you grant ‘tax abatements’ and incentives to the WalMart’s of the world.By Ohio_sucks
September 17, 2009 4:15 PM | Link to this
Are you pissed off yet people? Join the Tea Party Movement. This is exactly what we are fighting. Both political parties are OUT OF CONTROL. We have been silent for too long. They tax us, then tax us some more while they live a life of privileged royalty and work our asses off just to get by. Don’t believe what you hear about the Tea Party movement in the mainstream media. Go to a local meeting and see for yourself what it is all about.By Crusty
September 17, 2009 4:15 PM | Link to this
Wheeeeeeee! The price of food is going up! In a struggling economy let’s pass the inability to balance a budget on to the people!!!By wiz71
September 17, 2009 3:54 PM | Link to this
NICE: if GOP’ers enacted this tax, they should be voted out! You’re a deluded socialist. The > 1 mill teabaggers in DC this past week(per UK Times and others), and the folks at town halls are patriots opposing govt takeover - as do I. Mainstream media is only BEGINNING to wake up and realize the people who make this country WORK are not gonna let socialism live here…By brian
September 17, 2009 3:54 PM | Link to this
you know the grocers are going to trickle the cost to the consumer its basic business so who bends over in the end the tax payerBy Leslie
September 17, 2009 3:53 PM | Link to this
A tax for the privilege of doing business? What? No wonder businesses have been leaving Ohio.By Norm
September 17, 2009 3:51 PM | Link to this
The Grocers of Ohio need to Close their Stores and let the Supreme Court of Ohio Freed the People. The Stores can also move out of state. We’re becoming more like Russia the a Free United States.By Jim 5
September 17, 2009 3:50 PM | Link to this
That silence is the sound of underserved urban neighborhoods who were formerly hoping for a grocery store.By move?
September 17, 2009 3:45 PM | Link to this
How can we move if we are underwater thanks to dubya? Median income dropped during both of his terms while he set the economy up for failure. The only way out for most homeowners is wait for foreclosure or declare bankruptcy, and then hope to find a job in another city, since thank to the Republicans in the 80s, credit checks are grounds for employment decisions. Bill, come back, we need you!By Johio
September 17, 2009 3:42 PM | Link to this
InconvenientFacts - while you are technically correct in saying that the OH Supreme Court is majority Republican, it’s not the whole picture. In fact, ALL of the members of the current court are Republicans.By Carol Stull
September 17, 2009 3:32 PM | Link to this
I have lived in this state all my life. I thought this was the most wonderful place to live in the world. It was at one time. But that was before we filled it with corupt politicians. 74 years old and I would leave today. How dumb are we to vote for these croupt people and let them continue to ruin or State!!! TAX TAX TAX. I couldn’t believe what I was reading.By Carol Stull
September 17, 2009 3:32 PM | Link to this
I have lived in this state all my life. I thought this was the most wonderful place to live in the world. It was at one time. But that was before we filled it with corupt politicians. 74 years old and I would leave today. How dumb are we to vote for these croupt people and let them continue to ruin or State!!! TAX TAX TAX. I couldn’t believe what I was reading.By Ogg
September 17, 2009 3:16 PM | Link to this
This tax is a tax on the privilege of doing business in the state of ohio. Move people, its easier then changing stupid laws. Run as fast as you can. Ohio is about to implode. Your properties there will continue to go down in value.By Bill%20S%20from%20OH
September 17, 2009 3:09 PM | Link to this
Take out all incumbents state, local and Federal when it comes time to vote! Start a referendum to repeal this tax as well as Social Security 1983 bill that taxes your social security benefit with income offsets. Those who don’t know about this sneaky tax will soon find out. Those voting for all these taxes have voted themselves unbelieveably good pension retirement programs and health care because they are “so special” vs the people who elected them.By Nice
September 17, 2009 3:08 PM | Link to this
InconvenientFacts wrote: Rightwing logic: if it’s bad, it’s the Democrat’s fault, even if it was implemented by Republicans. You wingnuts couldn’t be any dumber if you tried. Bravo! The screeching wacko-teabaggers DO NOT represent the majority of Americans. That’s why they got their tails kicked TWO ELECTIONS IN A ROW. Soon it will be three!By Leaving Ohio
September 17, 2009 2:59 PM | Link to this
This past year our board of directors passed a resolution to move our business out of Ohio to more friendlier territory. By the end of this year, our company will be relocating to North Carolina where the environment is much more friendly to business. Fortunately, my job will still be in place however, another 30 people in the Miami Valley will be added to the unemployment roles. Ohio is operated as an ineffective bureaucracy where only the state and state employees benefit. An example of this is in Ohio Law Enforcement. In Montgomery County only there are 37 police agencies. Quite simply, Ohio government is not a government of the people, for the people, and by the people. We are servants of the state.By InconvenientFacts
September 17, 2009 2:53 PM | Link to this
polishsniper aimed carefully and shot himself in the foot, along with Diogenes and his friends. This tax was implemented by REPUBLICANS and this so-called “activist” State Supreme Court that upheld the tax is majority REPUBLICAN. But, we all know that facts like that don’t matter to wingnuts. Rightwing logic: if it’s bad, it’s the Democrat’s fault, even if it was implemented by Republicans. You wingnuts couldn’t be any dumber if you tried.By Dave
September 17, 2009 2:46 PM | Link to this
This is a tax to drive business out of Ohio that was given to us by that wonderful governor Bob TAX (taft)By polishsniper
September 17, 2009 2:45 PM | Link to this
TAX this ,TAX that,TAX this,TAX that,TAX this,TAX that.The DEMOCRATS first, middle, and last name. YOUR THE FOOLS THAT PUT EM IN THERE.By biz owner
September 17, 2009 2:29 PM | Link to this
This is nothing new. It started in 2005 and it applies to ALL businesses in Ohio, not just grocers. My husband owns a semi and we have to pay the CAT tax on his revenues even though he doesn’t sell anything - he only hauls it. This is why businesses are leaving left and right.By biz owner
September 17, 2009 2:28 PM | Link to this
This is nothing new. It started in 2005 and it applies to ALL businesses in Ohio, not just grocers. My husband owns a semi and we have to pay the CAT tax on his revenues even though he doesn’t sell anything - he only hauls it. This is why businesses are leaving left and right.By Eric
September 17, 2009 2:23 PM | Link to this
This was enacted in 2005 long before Gov Strickland and done by the Republican legislature not the Governor.Once again the republicans do the deed and then point fingers at the democrats!By Becky
September 17, 2009 2:18 PM | Link to this
Former Ohio Biz Owner, if you’re glad you left, then keep your nose out of our business. And any increases in anything, you always want to blame the president, blame yo mamma.By Republicans Failed Us
September 17, 2009 2:16 PM | Link to this
Diogenes…it was the REPUBLICAN LEGISLATURE of Ohio and REPUBLICAN GOVERNOR of who ENACTED THIS TAX in 2005…the ALL REPUBLICAN SUPREME COURT of Ohio are the ones who rendered this opinion.By BennyD
September 17, 2009 2:11 PM | Link to this
And we wonder why businesses don’t want to be in Ohio? Even a small grocer is going to gross $150,000.By painfultruth
September 17, 2009 2:10 PM | Link to this
You gullible fools keep electing Democrats, so BLAME YOURSELVES for HIGHER TAXES! Strickland is nothing but “gimme, gimme, gimme”. Chairman MAO-BAMA is even worse. Kiss your income goodbye, SUCKERS!By InconvenientFacts
September 17, 2009 2:08 PM | Link to this
“New improved taxes,” Isn’t this an existing tax? If you don’t like it, get the law changed.By null
September 17, 2009 2:02 PM | Link to this
“A government big enough to give you everything you want, is big enough to take away everything you have.” AND “We must not let our rulers load us with perpetual debt. We must make our election between economy and liberty or profusion and servitude. If we run into such debt, as that we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements, for our calling and our creeds… [we will] have no time to think, no means of calling our miss-managers to account but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow-sufferers… And this is the tendency of all human governments. A departure from principle in one instance becomes a precedent for [another ]… till the bulk of society is reduced to be mere automatons of misery… And the fore-horse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression.” Thomas JeffersonBy unbelievable
September 17, 2009 1:49 PM | Link to this
Frankly Scarlett may have something there…….we’re not forced to live in Ohio, and there are states that won’t tax us into oblivion. Higher food costs is the wrong move for this day and time.By Former Ohio Biz Owner
September 17, 2009 1:49 PM | Link to this
A tax on gross revenue?? That is insanity! Don’t grocers have an extremely low profit margin, like 1%? Of course prices will have to go up and Ohioans will be hurt again. Glad we left.By null
September 17, 2009 1:49 PM | Link to this
Frankly Scarlett may have something there…….we’re not forced to live in Ohio, and there are states that won’t tax us into oblivion. Higher food costs is the wrong move for this day and time.By null
September 17, 2009 1:48 PM | Link to this
Typical Ohio tax and fees…I cannot wait to move out of Ohio…If I could sell this condo, I would, but gov’t has taken care of that.By Diogenes
September 17, 2009 1:41 PM | Link to this
No big surprise here. Democrats, and their willing collaborators in the activist judiciary, have never met a tax they didn’t like. As usual, the Constitution be damned. GIVE US YOUR MONEY. We can spend it more wisely than you.By Frankly Scarlett I dont care
September 17, 2009 1:40 PM | Link to this
Strickland and the legislature who need the money from the tax to balance the state budget. New improved taxes, Oh this is so wonderful. Your Ohio State Government is no better than your football teams. I am so happy I sold my house in Quail Hollow and ran to the southland. This is Gator CountryBy Don't Get Me Started
September 17, 2009 1:34 PM | Link to this
ALL of you are correct!!! My 2 cents is that the government is trying to push us all into submission so that Obama’s ideas begin to look good.By Barry
September 17, 2009 1:34 PM | Link to this
“privilege-of-doing-business tax” the state of Ohio is one of the top ten worst tax states. this is one of the reasons why.By Mike
September 17, 2009 1:30 PM | Link to this
Our food? Tell me this isn’t an act of desperation.By Barry
September 17, 2009 1:29 PM | Link to this
and the grocers will pass this tax on to the customers. remember kids, companies don’t pay taxes, they pass the cost of doing business on to the customer, and in the end that is you and me. the government thinks that your paycheck belongs to them and they let you keep part of it.By Jim Smith
September 17, 2009 1:25 PM | Link to this
Unbelievable!!!!! At a time when businesses are closing like water runs from the tap and unemployment is double digits, this brilliant govenor wants to tax our grocers into oblivion!!!! What a moron.By harangutan
September 17, 2009 1:23 PM | Link to this
We need smaller government and less taxes during a time of economic recession. We are turning into the now-defunct USSR, whose communist economy collapsed.By Anne
September 17, 2009 1:22 PM | Link to this
How about we just reduce the government waste. Like computer projects the state procures that never get developed yet run way over budget….there are millions of examples.By Bob
September 17, 2009 1:21 PM | Link to this
All this means is they will pass it on to you and me … WE WILL PAY THE TAXBy Bill W
September 17, 2009 1:20 PM | Link to this
Welcome to Ohio’s double taxation state laws… Ohio collecting tax on gross revenue, instead of net revenue is wrong for businesses. Bascially Ohio double taxes business and lessen job and business growth in the state.