The CAT was enacted as part of the 2005 overhaul of the tax code. It is levied on a company’s gross receipts and according to Ohio law is a tax on “the privilege of doing business in this state.” It is separate from the state sales tax.
Zach Schiller, research director for Cleveland-based Policy Matters Ohio, a Cleveland-based think tank, said Monday, Aug. 23, that “tens of millions of dollars” could be at stake for Ohio with a final decision on whether the CAT applies to direct marketing companies based out of state such as L.L. Bean.
Deputy Tax Commissioner Rick Anthony said he doesn’t have an estimate as to how much money is at stake.
Anthony said nearly 100 companies without a physical presence in the state have appealed findings that they owe the CAT. The issue has not been reviewed in any court so far. Altogether, about 200,000 companies are registered for the CAT, Anthony said.
In his Aug. 10 decision, Levin said L.L. Bean must pay the CAT because it has a “substantial nexus” or connection with the state, as defined by Ohio law. A company has a “bright-line” presence if it has annual taxable gross receipts of at least $500,000 a condition L.L. Bean met, Levin wrote.
According to Levin’s decision, the company contended that the U.S. Constitution prohibits Ohio from imposing the tax because the nexus required is a “physical presence,” which L.L. Bean said it did not have. Levin said the prohibition does not apply.
The company has 60 days to appeal Levin’s decision to the state Board of Tax Appeals, a three-member commission. A decision from the board can be appealed to a state appeals court or directly to the Ohio Supreme Court, Anthony said.
L.L. Bean did not respond to an e-mail request for reaction to Levin’s ruling.
Contact this reporter at (614) 224-1608 or whershey@DaytonDailyNews.com.
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