DaytonDailyNews.com

COLUMBUS — Grocers, wholesale food distributors and businesses selling takeout food could get a tax break at the expense of Ohio schools and local governments.

A state appeals court on Tuesday, Sept. 2, ruled unanimously that the state's commercial activity tax – the CAT tax – violates the Ohio Constitution when applied to "gross receipts from the wholesale sale of food and from the retail sale of food for human consumption off premises where sold."

The decision will be appealed to the Ohio Supreme Court and the appeals court will be asked to stay its decision pending appeal, Keith Dailey, spokesman for Gov. Ted Strickland, said.

Waynesville grocer Ron Kronenberger was delighted with the decision from the Columbus-based 10th District Court of Appeals. A lower court had ruled in the state's favor.

"That's fantastic," Kronenberger said. "Any tax that taxes activity versus profits is not fair. The grocery industry ... we handle huge sums of money and we keep, if anything, 1 or 2 percent (as profit)."

When fully phased in on April 1, 2009, the portion of the CAT tax applicable to those affected by the lawsuit would bring in about $188 million annually, said John Kohlstrand, spokesman for the Ohio Department of Taxation.

Overall, 70 percent of CAT tax revenue goes to school districts and 30 percent to other local governments. The money is to replace revenue from the tangible personal property tax that is being phased out, with final payments due by this September, according to the Department of Taxation.

The CAT tax was enacted in 2005 as part of an overhaul of the tax system and is levied on a business' gross receipts from activities such as sales, performance of services, rentals or leases.

Contact this reporter at (614) 224-1608 or whershey@DaytonDailyNews.com.