The court’s 4-3 ruling went against Rich’s, a former Atlanta-based department store group that is now part of Macy’s Inc., the Cincinnati-based operator of Macy’s and Bloomingdale’s stores. At issue was the state’s tax valuation of inventory in Rich’s stores in Ohio during the 2000, 2001 and 2002 tax years.
The court reversed a prior ruling by the Ohio Board of Tax Appeals, which concluded that the value of Rich’s inventory should be reduced to reflect vendor markdowns granted to the stores during those years.
“Rich’s argument effectively claims that it should pay less tax, through a reduction in the value of its inventory, because it has received a benefit from its vendors in the form of a credit against monies owed,” Ohio Chief Justice Thomas Moyer wrote for the court’s majority. “The inventory itself and the expected retail price thereof do not change merely because Rich’s has been granted a markdown allowance.”
In a dissent, Justice Terrence O’Donnell said he would have upheld the prior decision of the tax appeals board that markdown allowances equate to a reduction of inventory cost.
Mark Engel, lawyer for the retailer, said he had not seen the court’s ruling and could not comment. Similar inventory tax issues between the company and Ohio for later years remain unresolved in separate cases, Engel said.
At issue was a total of about $1 million in tax payments for the three years. The ruling could affect claims by other business taxpayers in similar circumstances, said Mike McKinney, a spokesman for the Ohio Department of Taxation.
Contact this reporter at (937) 225-2242 or jnolan@DaytonDailyNews.com.
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