The opinion
[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as VVF
Intervest, L.L.C. v. Harris, Slip Opinion No. 2025-Ohio-5680.]
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. 2025-OHIO-5680
VVF INTERVEST, L.L.C., APPELLEE AND CROSS-APPELLANT, v. HARRIS, TAX
COMMR., APPELLANT AND CROSS-APPELLEE.
[Until this opinion appears in the Ohio Official Reports advance sheets, it
may be cited as VVF Intervest, L.L.C. v. Harris, Slip Opinion No.
2025-Ohio-5680.]
Taxation—Commercial-activity tax (“CAT”)—R.C. 5751.033(E) is
constitutional—Situs of gross receipts—Corporation not entitled to refund
of CAT it paid on gross receipts it earned when it sold property to a
purchaser who had the corporation transport the property to a distribution
center in Ohio and then later resold the property and shipped it out of state
to fulfill the resale—Board of Tax Appeals’ decision reversed.
(No. 2023-1296—Submitted April 1, 2025—Decided December 24, 2025.)
APPEAL and CROSS-APPEAL from the Board of Tax Appeals, No. 2019-1233.
_________________
SUPREME COURT OF OHIO
SHANAHAN, J., authored the opinion of the court, which FISCHER, DEWINE,
BRUNNER, DETERS, and HAWKINS, JJ., joined. KENNEDY, C.J., dissented, with an
opinion.
SHANAHAN, J.
{¶ 1} Appellee and cross-appellant, VVF Intervest, L.L.C., filed a refund
claim with appellant and cross-appellee, Patricia Harris, the tax commissioner of
Ohio, requesting a refund of taxes it had paid under Ohio’s commercial-activity tax
(“CAT”). VVF argued that it was entitled to the refund because a portion of the
property that it had sold to its purchaser, High Ridge Brands (“HRB”), was shipped
to Ohio but was later shipped to HRB’s own purchasers outside Ohio, thereby
removing the tax commissioner’s authority to tax the gross receipts VVF earned
from selling the property. In the parlance of the CAT, VVF posited that its gross
receipts lacked an Ohio situs. The tax commissioner denied VVF’s claim, and the
Board of Tax Appeals reversed the tax commissioner’s decision. The tax
commissioner then brought this appeal, arguing that the CAT’s situsing statute
required that VVF’s gross receipts be sitused to Ohio. VVF cross-appealed, raising
two arguments. First, VVF argues that the board incorrectly concluded that it had
failed to preserve an alternative statutory argument in support of its refund claim.
Second, VVF argues that if this court concludes that the refund claim fails on
statutory grounds, then we must conclude that imposing the CAT against VVF on
the facts of this case violates the United States Constitution.
{¶ 2} Because VVF’s sales in question are properly situsable to Ohio, we
reverse the board’s decision. We also dismiss VVF’s alternative statutory argument
and reject its constitutional arguments on the merits.
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January Term, 2025
I. BACKGROUND
A. Legal background
{¶ 3} The CAT is levied “on each person with taxable gross receipts for the
privilege of doing business in this state.” R.C. 5751.02(A). Subject to exceptions
not applicable here, “gross receipts” are defined as “the total amount realized by a
person, without deduction for the cost of goods sold or other expenses incurred,
that contributes to the production of gross income of the person.” R.C. 5751.01(F).
{¶ 4} For CAT purposes, “taxable gross receipts” are “gross receipts sitused
to this state under [R.C. 5751.033].” R.C. 5751.01(G). But “[b]ecause business is
conducted across state and international boundaries, imposing the tax often raises
the thorny issue of how to properly allocate receipts to Ohio for taxation.” Defender
Sec. Co. v. McClain, 2020-Ohio-4594, ¶ 18. To help navigate this issue, the
General Assembly enacted R.C. 5751.033(E),1 which instructs:
[1] Gross receipts from the sale of tangible personal property
shall be sitused to this state if the property is received in this state
by the purchaser. [2] In the case of delivery of tangible personal
property by motor carrier or by other means of transportation, the
place at which such property is ultimately received after all
transportation has been completed shall be considered the place
where the purchaser receives the property. [3] For purposes of this
section, the phrase “delivery of tangible personal property by motor
1. R.C. 5751.033(E) has been amended and now includes an exception, which is set forth in R.C.
5751.033(M) as follows: “Gross receipts from the sale or lease of a motor vehicle . . . by a motor
vehicle dealer licensed under Chapter 4517. of the Revised Code or the law of another state, shall
only be sitused to this state if the motor vehicle is issued a certificate of title evidencing the owner's
or lessee's address in this state.” 2024 Am.Sub.H.B. No. 315.
Although the amendment applies retroactively, see 2024 Am.Sub.H.B. No. 315, Section
22, no party in this case has asked us to apply R.C. 5751.033(M) and it does not affect the outcome
of this case.
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SUPREME COURT OF OHIO
carrier or by other means of transportation” includes the situation in
which a purchaser accepts the property in this state and then
transports the property directly or by other means to a location
outside this state. [4] Direct delivery in this state, other than for
purposes of transportation, to a person or firm designated by a
purchaser constitutes delivery to the purchaser in this state, and
direct delivery outside this state to a person or firm designated by a
purchaser does not constitute delivery to the purchaser in this state,
regardless of where title passes or other conditions of sale.
B. Factual background
{¶ 5} VVF describes itself as a contract manufacturer of various brands of
personal-care products. As a contract manufacturer, VVF receives a fee from the
brands’ owners for making products for them. This case pertains to VVF’s
relationship with HRB, which is the brand owner of products such as Zest bar soap.
HRB is an “asset light” entity, typified by ownership of intellectual property and
inventory rather than manufacturing facilities. HRB contracted with VVF to
manufacture bar soap on its behalf, which VVF did at its manufacturing facility in
Kansas City, Kansas.
{¶ 6} From January 1, 2010, through December 31, 2014, VVF paid the
CAT on the gross receipts it earned from selling the manufactured bar soap to HRB.
But it later filed a refund claim with the tax commissioner, asserting that it should
not have paid the tax, because the receipts lacked an Ohio situs. VVF’s requested
refund totaled $349,532, roughly $327,000 of which traced to its sales to HRB.2
2. The tax commissioner’s final determination erroneously described the total amount sought by
VVF as $249,532.
4
January Term, 2025
{¶ 7} VVF posited that although the bar soap that it manufactured and sold
to HRB was initially transported to a third-party Columbus distribution center, the
bar soap eventually left Columbus for placement with out-of-state retailers; thus, it
said, the situs of its gross receipts fell outside Ohio. The tax commissioner rejected
this argument in her final determination, reasoning that when the bar soap left the
Columbus distribution center, it did so as a result of a “second sale” by HRB to one
of the out-of-state retailers. As the tax commissioner explained, “the sale at issue
. . . is the first sale, the sale from [VVF] to [HRB]. [VVF], in attempting to situs
its product sales based upon a subsequent sale of the products where [HRB] sells
the product is looking at the wrong sale.” VVF appealed to the board, which held
an evidentiary hearing.
{¶ 8} VVF provided hearing testimony from three witnesses, who provided
further details on how VVF shipped HRB’s product out of Kansas City, what HRB
did with the product after it arrived at the Columbus distribution center, and how
VVF calculated its requested refund. The testimony established that after VVF
manufactured the product, it would let HRB know that the product was ready for
transport. HRB would then direct a third-party carrier to pick the product up at
VVF’s facility, and VVF would load the product onto the truck. VVF prepared the
bill of lading and thus knew that the truck was headed to the Columbus distribution
center. After the product arrived at the Columbus distribution center, HRB would
wait to receive purchase orders from large national retailers (e.g., Target, Walmart).
After receiving an order, HRB would engage a third-party carrier to transport the
product to the retailer’s distribution center.
{¶ 9} VVF did not initially know where the product was headed after it left
Columbus in fulfilment of HRB’s own sale—that is, HRB’s resale (or the second
sale). Rather, VVF gained this knowledge in preparing its refund claim, with
assistance from HRB. The information provided by HRB to VVF showed that 96.9
percent of the product that entered the Columbus distribution center was eventually
5
SUPREME COURT OF OHIO
transported outside Ohio. Typically, the product would remain in the distribution
center for about two months before being transported outside Ohio in fulfillment of
HRB’s resale. If, say, Target or Walmart had an issue with the shipment it received
from HRB, it would contact HRB, not VVF.
{¶ 10} The Board of Tax Appeals, in a divided decision, determined that
the tax commissioner wrongly denied VVF’s refund claim for gross receipts it made
from selling the bar soap to HRB.3 In rejecting the tax commissioner’s second-sale
argument, the board concluded that the Columbus delivery point was not the final
destination for the goods but was “just one leg of HRB’s transportation and
continuous delivery process” that terminated outside Ohio. The board also rejected
the tax commissioner’s argument that situsing determinations should be made
based on VVF’s knowledge at the time of the sale to HRB, reasoning that it would
not be proper to situs the gross receipts to Ohio (even if that was not the ultimate
destination of the property) simply because that is where VVF knew the property
was headed at the time of shipment. The board further determined that VVF had
not adequately preserved an argument relying on R.C. 5751.033(I) (pertaining to
the situsing of services), because VVF had not raised that argument in its notice of
appeal to the board.4 Last, the board declined to reach VVF’s constitutional
arguments, observing that it lacked jurisdiction to do so.
{¶ 11} One board member dissented from the majority’s rejection of the tax
commissioner’s second-sale argument, reasoning that the majority had erroneously
expanded the scope of R.C. 5751.033(E) to account for purchasers further down the
3. The board also determined that VVF had failed to meet its burden to show entitlement to a refund
with respect to transactions it conducted with Dollar General. VVF has not challenged this aspect
of the board’s decision.
4. Oddly, however, despite determining that VVF had failed to preserve an argument relying on
R.C. 5751.033(I), the board went on to determine that VVF’s argument relying on Adm.Code 5703-
29-17(C)(15), which implements R.C. 5751.033(I) with respect to contract-manufacturing services,
failed on the merits.
6
January Term, 2025
supply chain (i.e., the out-of-state retailers to whom HRB sold the product that it
purchased from VVF). She would have confined the analysis under the statute to
where HRB took delivery as the purchaser, not to where HRB’s customers took
delivery.
{¶ 12} The tax commissioner then brought this appeal, and VVF cross-
appealed.
II. ANALYSIS
{¶ 13} Our task is to determine whether the board’s decision was reasonable
and lawful. See R.C. 5717.04; Adams v. Harris, 2024-Ohio-4640, ¶ 23.
A. R.C. 5751.033(E) requires that VVF’s gross receipts from selling property to
HRB be sitused to Ohio
{¶ 14} The tax commissioner’s lone proposition of law, which she has
divided into two subarguments, centers on the meaning of R.C. 5751.033(E). A
dispute over the meaning of a statute presents a question of law, and this court
reviews such questions de novo. See Progressive Plastics, Inc. v. Testa, 2012-
Ohio-4759, ¶ 15. And
[t]he determination of situs under the statutory standard involves an
“‘inference of an ultimate fact’ ” from the basic facts shown by the
evidence. Marc Glassman, Inc. v. Levin, 119 Ohio St.3d 254, 2008-
Ohio-3819, 893 N.E.2d 476, ¶ 7, quoting Ace Steel Baling, Inc. v.
Porterfield, 19 Ohio St.2d 137, 142, 249 N.E.2d 892 (1969). And
the reasonableness of the inference from basic facts to an ultimate
fact is a question of law on review. SFZ Transp., Inc. v. Limbach,
66 Ohio St.3d 602, 604-605, 613 N.E.2d 1037 (1993).
Defender Sec., 2020-Ohio-4594, at ¶ 20 (addressing a CAT-refund claim).
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SUPREME COURT OF OHIO
1. Second-sale theory
{¶ 15} For her first subargument, the tax commissioner argues that the
board erroneously sitused VVF’s gross receipts outside Ohio by combining the
transportation route associated with VVF’s sales of bar soap to HRB (i.e., the first
sale) with the transportation route associated with HRB’s sales of that bar soap to
out-of-state retailers (i.e., the second sale), thereby treating the soap’s delivery
location as the place where the out-of-state retailers received it, not the Columbus
distribution center. As the board viewed it, ultimate delivery to HRB did not end
at the Columbus distribution center, because that location was merely one leg of a
continuous delivery process that terminated outside Ohio when the goods were
received by the retailers. Rejecting this logic, the tax commissioner reasons that
when HRB transported the property out of the Columbus distribution center in
fulfillment of its sale to an out-of-state retailer, it broke the chain of transportation
associated with the sale by VVF to HRB. By considering the transportation
involved in HRB’s sales to out-of-state retailers, the tax commissioner suggests, the
board overlooked VVF’s commercial activity and wrongly shifted the focus to
HRB’s commercial activity. We agree with the tax commissioner.
{¶ 16} Our analysis must begin with the relevant statutory language. State
v. Bertram, 2023-Ohio-1456, ¶ 11. We do not ask what the General Assembly
intended to enact but what the meaning is of that which it did enact. Total Renal
Care, Inc. v. Harris, 2024-Ohio-5685, ¶ 13. What the statute’s words convey
within their proper context is what they mean. Great Lakes Bar Control, Inc. v.
Testa, 2018-Ohio-5207, ¶ 9. We eschew questions of tax policy in ascertaining the
meaning of a tax law. Stingray Pressure Pumping, L.L.C. v. Harris, 2023-Ohio-
2598, ¶ 22.
{¶ 17} R.C. 5751.033(E) prescribes when a taxpayer must situs to Ohio the
gross receipts that it earns from selling tangible personal property. As the first
sentence of division (E) makes clear, if the property sold by the taxpayer is received
8
January Term, 2025
in Ohio “by the purchaser,” then the taxpayer shall situs the gross receipts earned
from that sale to Ohio. Due to the vagaries of where property might travel before
being received by the purchaser, the General Assembly instructed in division (E)’s
second sentence that “the place at which such property is ultimately received after
all transportation has been completed shall be considered the place where the
purchaser receives the property.” Id. Division (E)’s third sentence clarifies that if
a “purchaser accepts the property in this state” but then transports it out of state, the
property shall be sitused outside Ohio. Id. Throughout, R.C. 5751.033(E) requires
that the situsing inquiry focus on the reception or acceptance of property by “the
purchaser,” not “a purchaser.” The statute does not define “purchaser,” but the
word is ordinarily understood to mean “one that acquires property for a
consideration (as of money),” Webster’s Third New International Dictionary
(2002).
{¶ 18} R.C. 5751.033(E) states that gross receipts shall be sitused to this
State “if the property is received in this state by the purchaser.” “Received” refers
to the purchaser’s act of taking possession after transportation has been completed,
as the following sentence from the statute confirms: “In the case of delivery of
tangible personal property by . . . means of transportation, the place at which such
property is ultimately received after all transportation has been completed shall be
considered the place where the purchaser receives the property.” Id. The statute
goes on to say that “‘delivery of tangible personal property by . . . means of
transportation’ includes the situation in which a purchaser accepts the property in
this state and then transports the property directly or by other means to a location
outside this state.” Id. Situs is tied to receipt.
{¶ 19} In this case, the board’s analysis did not account for the statute’s
focus on where the purchaser received the property from the seller. Because HRB
received the property it purchased from VVF at the distribution center in Ohio, the
property was “received in this state by the purchaser,” R.C. 5751.033(E). The gross
9
SUPREME COURT OF OHIO
receipts from that sale are properly sitused to Ohio. To hold otherwise would
collapse two separate sales—VVF’s sale to HRB and HRB’s resale—into one
continuous transaction, a conflation the statute does not permit.5
{¶ 20} Instead of properly focusing on the purchaser’s receipt of the
products, the board looked to HRB’s later action of shipping the goods to its
purchasers. However, R.C. 5751.033(E) directs attention to where the purchaser
receives the property from the seller—not where the purchaser may subsequently
send it as a result of a subsequent sale.
{¶ 21} R.C. 5751.033(E) does not speak in terms of an ultimate-delivery
location in relation to end users. Rather, it concentrates the analysis on where the
purchaser ultimately received the property from the taxpayer. And here, that
location is Ohio. After HRB received the goods in Columbus, it assumed full
control over the property, including the responsibility for directing subsequent
deliveries to third parties. At that point, HRB ceased to act in the capacity of
purchaser in relation to VVF and began acting as a seller in a second transaction.
Therefore, for the purposes of situsing VVF’s gross receipts, HRB’s role as a
purchaser concluded at the point of its receipt of the property in Ohio.
{¶ 22} Our decision more than 50 years ago in House of Seagram, Inc. v.
Porterfield, 27 Ohio St.2d 97 (1971), which addressed nearly identical statutory
language in the corporate-franchise-tax context, confirms this understanding and is
instructive here. The statute at issue in that case provided:
“(I) To the extent that the value of business done in this state
is measured by sales of tangible personal property, it shall, for the
purpose of this section and of Section 5733.03 of the Revised Code,
5. The situation here is clearly different from that in another case currently pending before this court,
Jones Apparel Group/Nine West Holdings v. Harris, case No. 2023-1288. In that case, the purchaser
(DSW, Inc.) shipped goods it received in Ohio to its own retail stores nationwide; it did not resell
the goods to independent retailers, as HRB did here.
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January Term, 2025
mean sales where such property is received in this state by the
purchaser. (II) In the case of delivery of tangible personal property
by common carrier or by other means of transportation, the place at
which such property is ultimately received after all transportation
has been completed shall be considered as the place at which such
property is received by the purchaser. (III A) Direct delivery in this
state, other than for purposes of transportation, to a person or firm
designated by a purchaser constitutes delivery to the purchaser in
this state and (III B) direct delivery outside this state to a person or
firm designated by a purchaser does not constitute delivery to the
purchaser in this state, regardless of where title passes or other
conditions of sale.”
(Parenthetical sentence numbering added in House of Seagram.) Id. at 99, quoting
now former R.C. 5733.05, Am.Sub.S.B. No. 55, 133 Ohio Laws, Part I, 126, 127
(effective Oct. 2, 1969).
{¶ 23} There, an out-of-state distributor sold liquor to Ohio’s liquor agency
and delivered it through a common carrier selected by the agency. The delivery
ended at an Ohio warehouse. The tax commissioner issued a corporate-franchise-
tax assessment against the distributor on the ground that the distributor’s sales to
the agency constituted business done in Ohio. The distributor objected, invoking
language from the corporate-franchise-tax statute at issue in that case—language
that is also found in the fourth sentence of R.C. 5751.033(E). According to the
distributor, because it had made direct delivery outside this State to the agency’s
designee (i.e., the common carrier), it had not effected a delivery to the agency in
Ohio, regardless of where title to the liquor passed.
{¶ 24} This court rejected that argument, concluding that the distributor had
done business in Ohio by way of the sale to the agency. The court acknowledged
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SUPREME COURT OF OHIO
that when goods are delivered outside Ohio, without more, no delivery in Ohio has
occurred. But that acknowledgement did not result in a decision in the distributor’s
favor, because in that case, the liquor did not remain outside Ohio—it was delivered
by the common carrier to the agency’s warehouse in Ohio. As the court held, when
a taxpayer sells “tangible personal property to an Ohio buyer, delivered by the
[taxpayer] to a common carrier outside Ohio and ultimately received in Ohio after
all transportation has been completed,” the taxpayer has conducted business in Ohio
“regardless of whether the buyer or the [taxpayer] has designated the common
carrier.” Id. at syllabus.
{¶ 25} The reasoning in House of Seagram accords with the former
corporate-franchise-tax statute’s plain language. The court gave effect to each
sentence of the provision: it recognized that the first sentence (“Part (I)”)
establishes the general rule that situs lies where the property is received by the
purchaser; that the second sentence (“Part (II)”) defines that place as where the
property is ultimately received after transportation is complete; that the first part of
the third sentence (“Part (III A)”) clarifies that when a purchaser accepts the
property in Ohio and then immediately transports it outside the State, the situs lies
outside Ohio; and that the second part of the third sentence (“Part (III B)”) makes
“clear that where direct delivery out of Ohio is made to a person or firm designated
by the purchaser, including an Ohio purchaser, that particular act of delivery,
without more, ‘does not constitute delivery to the purchaser in this state.”
(Emphasis added.) Id., 27 Ohio St.2d at 100. The court concluded that when
property is ultimately received in Ohio by the purchaser, even if it was first placed
with a common carrier outside Ohio, the receipt occurs in Ohio and the sale is
sitused in Ohio. Id. at 101. The dissent in this case concludes that House of
Seagram was “wrongly decided” and that the court’s interpretation of the statute at
issue in that case was “untethered from the text of the statute,” dissenting opinion,
¶ 79, but that conclusion rests on an isolated reading of Part (III B), which is just
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January Term, 2025
one portion of the statute at issue in that case. The court in House of Seagram
interpreted the statutory sentences in sequence, giving each operative force.
{¶ 26} Like House of Seagram, this case involves a sale by an out-of-state
taxpayer to a purchaser, with the taxpayer transferring the property to the
purchaser’s designee in a location outside Ohio (Kansas City) for delivery in Ohio
(Columbus). House of Seagram directs that VVF’s sale to HRB be sitused to Ohio
because that is where the property was ultimately received after all transportation
was completed.
{¶ 27} While the facts here introduce the additional circumstance that the
purchaser later moved the goods out of state, that postdelivery movement does not
alter where the purchaser received the goods from the seller. The statutory analysis
does not follow the goods indefinitely; it stops when the seller’s delivery obligation
is fulfilled and the purchaser receives the property.
{¶ 28} The dissent questions whether House of Seagram was correctly
decided, suggesting that this court departed from the statutory text in that case.
Dissenting opinion at ¶ 79. But the court in House of Seagram interpreted the
statute as a whole, explaining that Part (III B) “does not negate” Parts (I) and (II)
but, rather, complements them by clarifying circumstances in which goods merely
pass through Ohio. 27 Ohio St.2d at 100-101. This demonstrates that the sentences
of a statute must be read together, not in isolation. In contrast, the dissent
emphasizes later sentences of R.C. 5751.033(E) without addressing the opening
directive, which establishes the starting point for analysis: where the purchaser
receives the goods. The subsequent sentences elaborate on that principle rather
than override it.
{¶ 29} Although the dissent acknowledges the first sentence of R.C.
5751.033(E), it builds its analysis around the final sentence, which it treats as
controlling. In doing so, the dissent reads the final sentence as having more
importance than the other sentences, rather than reading all four sentences together.
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SUPREME COURT OF OHIO
In the dissent’s view, delivery—and thus receipt—occurs at the moment the goods
are loaded onto the purchaser-designated motor carrier, because at that point, the
seller’s “hands [are] off the products” and the purchaser “is deemed to have picked
up [the] goods.” Dissenting opinion at ¶ 81. The difficulty with this approach is
that it renders the preceding sentences of R.C. 5751.033(E) largely irrelevant. If
the last sentence controls, then there is no point to the following language in R.C.
5751.033(E): “[T]he place at which [tangible personal property delivered to a
purchaser by transportation] is ultimately received after all transportation has been
completed shall be considered the place where the purchaser receives the property.”
{¶ 30} The dissent mentions the second sentence but does not give it
operative effect, instead treating the fourth sentence as overriding the second
sentence’s explicit directive to determine situs where the purchaser ultimately
receives the property. See dissenting opinion at ¶ 80. Read in sequence, the
sentences of R.C. 5751.033(E) require situsing based first on where the purchaser
receives the goods. Here, HRB received the goods in Columbus, and the goods
were not transported “directly” to an out-of-state location. Instead, the goods
remained in a warehouse until HRB, now acting as a seller, arranged delivery to its
own purchasers.
{¶ 31} By focusing on its individual sentences rather than R.C. 5751.033(E)
as a whole, the dissent illustrates what has been described as a “common”
“interpretive fault”—“the failure to follow the whole-text canon, which calls on the
judicial interpreter to consider the entire text, in view of its structure and of the
physical and logical relation of its many parts,” Scalia and Garner, Reading Law:
The Interpretation of Legal Texts, 167 (2012).
{¶ 32} In this case, HRB received the goods and warehoused them in Ohio.
When HRB later resold them, that resale was a separate transaction and not part of
the situs inquiry for VVF’s sale. The third sentence of R.C. 5751.033(E) clarifies—
rather than overrides—the statutory focus on the purchaser’s initial receipt of the
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January Term, 2025
goods. The scenario in this case is distinct from cases in which goods are accepted
in Ohio solely for purposes of immediate transportation outside the State. Here,
the goods were stored in Ohio and were later moved only to fulfill HRB’s resales,
which does not alter where HRB received them from VVF.
{¶ 33} VVF argues that adopting the tax commissioner’s reading of R.C.
5751.033(E) risks converting the CAT from a privilege-of-doing-business tax into
a transactional tax. In the words of VVF, “the Tax Commissioner’s focus on HRB’s
subsequent transactions merely distracts from what should be the focus—
determining the value of VVF’s Ohio business over a period of time measured by
market access.” This argument fails. It is true that the CAT is a privilege-of-doing-
business tax and “is computed using a broad measure of market access that is
rationally related to the enjoyment of the privilege of doing business.” Ohio
Grocers Assn. v. Levin, 2009-Ohio-4872, ¶ 14, 49. But it is also true that we have
described the CAT as using gross receipts as the measuring stick to value that
privilege. Id. at ¶ 1, 17-18. And the CAT explicitly provides that gross receipts
include amounts realized from sales of the taxpayer’s property to another. R.C.
5751.01(F)(1)(a). Thus, to measure the value of VVF’s privilege of doing business,
the CAT directs that VVF’s sales must be accounted for. Necessarily then, an
analysis that accounts for HRB’s sales to out-of-state retailers—which is where
VVF’s argument ultimately leads—would not accurately reflect the scope of VVF’s
commercial activity; rather, it would blur the distinction between VVF’s and
HRB’s commercial activity. It follows that by distinguishing between VVF’s sales
activity to HRB and HRB’s sales activity to out-of-state retailers, an accurate
measure of VVF’s commercial activity may be arrived at.
{¶ 34} VVF argues that the tax commissioner’s argument cannot be squared
with R.C. 5751.40, which is a provision of the CAT pertaining to qualified
distribution centers (“QDCs”). To receive a certificate as a QDC, the operator of a
distribution center must pay an annual fee of $100,000, R.C. 5751.40(F), and show
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SUPREME COURT OF OHIO
for the relevant time period that more than 50 percent of the cost of the property
shipped by suppliers to the center is situsable outside Ohio under R.C. 5751.033(E)
and the costs of the suppliers’ property shipped to the center are at least $500
million, R.C. 5751.40(B)(1). A supplier that ships property to the QDC is not
subject to a tax on “qualifying distribution center receipts,” R.C. 5751.40(D), which
are defined as the supplier’s receipts from property shipped to the QDC “multiplied
by a quantity that equals one minus the Ohio delivery percentage,” R.C.
5751.40(A)(1). The “Ohio delivery percentage” reflects the proportion of property
delivered inside Ohio from the QDC to that delivered everywhere from the QDC.
R.C. 5751.40(A)(7).
{¶ 35} There is no question here that VVF’s products were not delivered to
a QDC. Even so, VVF reads the QDC provision as signaling the General
Assembly’s intent to treat products passing through an Ohio distribution center
solely for further shipment as not situsable to the distribution center’s location. In
other words, because of the QDC provision, VVF reasons that its gross receipts
should not be sitused to Ohio, because the property it sold to HRB to earn those
gross receipts eventually left the distribution center for placement outside Ohio.
But if the General Assembly wanted to achieve the result that VVF urges, the
General Assembly would not have imposed conditions on who can qualify as a
QDC and who can claim the tax benefits of transporting goods to a QDC. If, as a
matter of policy, the QDC provision’s scope is to be enlarged, then the General
Assembly must be the one to do so. See Kaminski v. Metal & Wire Prods. Co.,
2010-Ohio-1027, ¶ 59 (the legislative branch of government is the ultimate arbiter
of public policy).
2. Contemporaneous knowledge
{¶ 36} The tax commissioner’s second subargument in support of her
proposition of law contends that the board erred in determining that R.C.
5751.033(E) does not require contemporaneous knowledge by the taxpayer of the
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property’s ultimate destination at the time of transportation. Because we have
determined that VVF’s gross receipts are properly situsable to Ohio, we do not need
to address this argument.
B. VVF did not preserve its argument under R.C. 5751.033(I)
{¶ 37} VVF’s first proposition of law in its cross-appeal asserts that it
properly preserved its argument in support of its refund claim predicated on R.C.
5751.033(I), which prescribes the CAT’s standard for situsing gross receipts from
sales of services. VVF’s notice of appeal to the board, however, did not refer to
this division of the statute. Rather, it referred to R.C. 5751.033(E) and various
constitutional provisions. The board thus concluded that because VVF failed to
raise R.C. 5751.033(I) in its notice of appeal, that division of the statute was not
properly before it. VVF challenges the board’s determination, arguing that its
notice of appeal provided fair notice of its argument under R.C. 5751.033(I). In
response, the tax commissioner insists that the board correctly declined to address
VVF’s R.C. 5751.033(I) argument.
{¶ 38} R.C. 5717.02 establishes the requirements for filing a notice of
appeal with the board. The requirements are jurisdictional. See, e.g., Ellwood
Engineered Castings Co. v. Zaino, 2003-Ohio-1812, ¶ 20. Before 2013, the statute
provided that the notice of appeal had to “specify the errors . . . complained of,”
2011 Sub.H.B. No. 225, which this court had construed as “requiring a notice of
appeal to set out the errors in definite and specific terms,” Obetz v. McClain, 2021-
Ohio-1706, ¶ 21. But in 2013, the General Assembly amended the statute to
provide that “[a] notice of appeal [to the board] shall contain a short and plain
statement of the claimed errors in the determination . . . of the tax commissioner
. . . showing that the appellant is entitled to relief and a demand for the relief to
which the appellant claims to be entitled.” R.C. 5717.02(C). By removing the
specification-of-error requirement from the statute, the court in Obetz concluded,
the General Assembly had “eliminated a procedural pitfall requiring unwary
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taxpayers to provide a laundry list of errors and thereby helped to ensure that tax
appeals are decided on their merits—not denied because of a technical defect.”
Obetz at ¶ 21.
{¶ 39} As Obetz explains, a taxpayer’s notice of appeal under R.C.
5717.02(C) need not contain a “full legal argument or specific reasoning” to
preserve a claim of error for review. Id. at ¶ 22. Rather, “fair notice” of the
argument will suffice. Id. But even in view of the relaxed assignment-of-error
standard that the statute now embodies, we do not see how VVF’s notice of appeal
contained a short and plain statement showing that it was entitled to relief under
R.C. 5751.033(I). That division of the statute applies to situsing gross receipts from
sales of services, whereas R.C. 5751.033(E), which is the division that VVF did
raise in its notice of appeal, applies to situsing gross receipts from sales of property.
While VVF was not required to detail in its notice of appeal the legal argument it
intended to assert under R.C. 5751.033(I), it was required to provide fair notice that
it was placing the portion of the statute pertaining to situsing sales of services at
issue. Rather than provide fair notice relating to the situsing of services, VVF
provided no notice relating to that issue.
{¶ 40} We dismiss VVF’s first proposition of law in its cross-appeal for
lack of jurisdiction.
C. R.C. 5751.033 is constitutional
{¶ 41} The second, third, and fourth propositions of law advanced in VVF’s
cross-appeal assert that three distinct constitutional violations will arise if this court
holds that it is not entitled to a CAT refund for the transactions at issue. VVF
anchors these allegations in the Due Process Clause of the Fourteenth Amendment
to the United States Constitution; the Commerce Clause of the United States
Constitution, U.S. Const., art. I, § 8, cl. 3; and the Equal Protection Clause of the
Fourteenth Amendment to the United States Constitution. A party that attacks the
constitutionality of a statute must overcome the presumption that the statute is
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constitutional. Ohio Renal Assn. v. Kidney Dialysis Patient Protection Amendment
Commt., 2018-Ohio-3220, ¶ 26. Although VVF does not expressly couch its claim
in terms of an as-applied constitutional challenge, that is the crux of its argument.
An as-applied challenge requires the challenger to present clear and convincing
evidence of the statute’s constitutional defect. Id. As explained below, VVF’s
constitutional arguments fail.
1. Due Process Clause
{¶ 42} VVF argues that imposing the CAT on it for the transactions at issue
violates the Due Process Clause because the connection between it and Ohio is too
attenuated to permit the exercise of the State’s taxing power. In support of this
argument, VVF observes that it had no physical presence in and directed no
marketing activities toward Ohio; title and risk of loss to the property passed to
HRB in Kansas upon delivery to HRB’s designated carrier; HRB selected the third-
party distribution center in Columbus; and VVF’s communications with HRB took
place in Kansas or Connecticut. According to VVF, the only connection it had to
Ohio was the knowledge that its products would end up in Ohio.
{¶ 43} The Fourteenth Amendment to the United States Constitution
forbids a state from depriving “any person of life, liberty, or property, without due
process of law.” A two-step analysis applies in determining whether a state tax
passes muster under the Due Process Clause. First, there must be some definite
link or minimum connection between the state and the person, property, or
transaction that the state seeks to tax. T. Ryan Legg Irrevocable Trust v. Testa,
2016-Ohio-8418, ¶ 64. And second, the income attributed to the state for tax
purposes must be rationally related to values connected with the taxing state. Id.
VVF claims here that the first part of the test is unmet.
{¶ 44} “A State has the power to impose a tax only when the taxed entity
has certain minimum contacts with the State such that the tax does not offend
traditional notions of fair play and substantial justice.” (Cleaned up.) North
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Carolina Dept. of Revenue v. Kimberley Rice Kaestner 1992 Family Trust, 588 U.S.
262, 269 (2019). Although a corporation’s physical presence in the taxing state
enhances its contacts with the state, the corporation need not have a physical
presence in the state to meet the due-process standard. See South Dakota v.
Wayfair, 585 U.S. 162, 177 (2018) (“It is settled law that a business need not have
a physical presence in a State to satisfy the demands of due process.”). The relevant
question is whether the out-of-state corporation has purposefully availed itself of
the benefits of an economic market in the taxing state. See Quill Corp. v. North
Dakota, 504 U.S. 298, 307 (1992), overruled on other grounds by Wayfair at 188;
see also Corrigan v. Testa, 2016-Ohio-2805, ¶ 32 (“due process requires that a
person whom a state proposes to tax have ‘purposefully availed’ himself of benefits
within the taxing state”).
{¶ 45} In attempting to meet its burden to show that the application of the
CAT to the transactions at issue in this case is unconstitutional, VVF cites Asahi
Metal Indus. Co., Ltd. v. Superior Court of California, 480 U.S. 102 (1987), a
products-liability case that addressed the interplay between stream-of-commerce
theory and due process. The contours of the stream-of-commerce theory are “far
from exact,” but it is generally understood to describe “the movement of goods
from manufacturers through distributors to consumers.” J. McIntrye Machinery,
Ltd. v. Nicastro, 564 U.S. 873, 882 (2011) (lead opinion).
{¶ 46} To begin with, we doubt that Asahi provides the proper frame of
reference for resolving this tax dispute. “Courts typically do not extend the stream
of commerce theory beyond the products liability context or beyond a dispute
pertaining to the actual product.” 4 Wright and Miller, Federal Practice and
Procedure: Civil, § 1067.4, fn. 2 (4th Ed. 2025). So too, a leading treatise in the
field—Hellerstein and Hellerstein, State Taxation (3d Ed. 2019)—omits mention
of Asahi in its lengthy index of cases cited. Unsurprisingly, then, VVF fails to cite
one decision in which a court has struck down on due-process grounds the
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application of a state’s tax statute based on Asahi’s reasoning. But even if Asahi
can be applied to resolve some tax disputes in a taxpayer’s favor, it cannot be
applied to resolve this one in VVF’s favor.
{¶ 47} In Asahi, Cheng Shin, a Taiwanese tire manufacturer, sought
indemnification from Asahi Metal Industry Company, Ltd., a Japanese valve-
assembly manufacturer, in a California court. Asahi manufactured the valves in
Japan and sold and shipped them to Cheng Shin in Taiwan. Asahi was aware that
Cheng Shin sold the valves worldwide and that they would end up in California
through the stream of commerce. Writing on behalf of herself and three other
justices, Justice O’Connor observed that “[t]he placement of a product into the
stream of commerce, without more, is not an act of the defendant purposefully
directed toward the forum State.” Asahi at 112. On the facts presented, she
reasoned that California’s exercise of jurisdiction over Asahi exceeded the limits
of due process. Here, in contrast, VVF did more than place its bar soap in the
stream of commerce, leaving it to be swept into Ohio through happenstance.
Rather, it prepared the bill of lading specifying that the place of shipment was Ohio
and loaded its products onto trucks for transport to Ohio. This case is factually
distinct from Asahi.
{¶ 48} We reject VVF’s due-process argument.
2. Commerce Clause
{¶ 49} VVF next claims that the application of the CAT to the transactions
in question violates the Commerce Clause. We disagree.
{¶ 50} The United States Constitution empowers Congress “[t]o regulate
Commerce . . . among the several States.” Art. I, § 8, cl. 3. “Although written as
an affirmative grant of power to Congress, the Commerce Clause has long been
understood to ‘prohibit[] state laws that unduly restrict interstate commerce.’ . . .
This ‘dormant’ feature of the Commerce Clause serves as a bulwark against
‘protectionist measures’ enacted by the States ‘and thus preserves a national market
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for goods and services.’” (Brackets added in Rockies Express Pipeline.) Rockies
Express Pipeline, L.L.C. v. McClain, 2020-Ohio-410, ¶ 23, quoting Tennessee Wine
& Spirits Retailers Assn. v. Thomas, 588 U.S. 504, 514 (2019).
{¶ 51} For a state tax to pass muster under the Commerce Clause, it must
satisfy the four-part test announced in Complete Auto Transit, Inc. v. Brady, 430
U.S. 274 (1977). Under Complete Auto, a state tax is valid if it is “applied to an
activity with a substantial nexus with the taxing State, is fairly apportioned, does
not discriminate against interstate commerce, and is fairly related to the services
provided by the State.” Id. at 279. VVF asserts that as applied to the transactions
at issue here, the CAT tax fails the substantial-nexus and fairly related prongs.
a. Substantial-nexus prong
{¶ 52} VVF argues that its sales activity does not have a substantial nexus
with Ohio because it lacks a physical presence in Ohio (no employees, property, or
facilities in Ohio), did not control the transportation of products to Ohio, and did
not interact with Ohio customers whether through marketing or solicitation. In
support of this argument, VVF invokes this court’s decision in Crutchfield Corp. v.
Testa, 2016-Ohio-7760, and the United States Supreme Court’s decision in
Wayfair, 585 U.S. 162.
{¶ 53} In Crutchfield, the taxpayer had no personnel or facilities in Ohio. It
sold its goods through the internet and over the phone. And when it shipped its
goods from outside Ohio to consumers located in Ohio, it did so through third-party
carriers. Because it lacked a physical presence in Ohio, the taxpayer argued that its
activity lacked a substantial nexus with Ohio, thereby barring Ohio from levying
the CAT on its gross receipts. Crutchfield at ¶ 1. This court disagreed. The court
held that while physical presence was a sufficient condition for finding a substantial
nexus, it was not a necessary condition. Id. at ¶ 42-43 (distinguishing Quill, 504
U.S. 298, and further distinguishing the CAT from sales and use taxes). But the
court clarified that a quantitative threshold was needed to ensure that the CAT
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would not impose excessive burdens on interstate commerce through its application
to remote sellers with modest sales volumes. Crutchfield at ¶ 52-54. The $500,000-
sales-receipts threshold prescribed by the General Assembly, the court explained,
was adequate protection against this concern. Id. at ¶ 56.
{¶ 54} In Wayfair, the United States Supreme Court definitively resolved
what this court had anticipated in Crutchfield, overruling Quill’s physical-presence
requirement and holding that the Commerce Clause was not a barrier to a state’s
exercise of its taxing authority over an out-of-state seller that lacked a physical
presence in the taxing state. Wayfair at 188-189 (addressing a state’s sales-tax law
that required remote sellers to collect tax on their sales to in-state purchasers).
Much like in Crutchfield, the taxpayers in Wayfair had no physical presence in the
taxing state; rather, they transacted business over the internet.
{¶ 55} Crutchfield and Wayfair foreclose VVF’s attempt to establish a
Commerce Clause violation based on its lack of physical presence in Ohio. And
VVF otherwise fails to cite a doctrine in support of its claim that the Commerce
Clause bars a state from taxing a remote seller that did not control the shipment into
the taxing state. What remains to be decided is VVF’s argument predicated on an
absence of Ohio-customer interaction. VVF does not dispute that its sales activity
clears the $500,000 threshold. But it posits that despite its significant sales of
property that was shipped to Ohio, its sales nevertheless lack a substantial nexus
with Ohio due to its lack of interaction with Ohio customers.
{¶ 56} We do not read Crutchfield or Wayfair as articulating a bright-line
rule requiring that an out-of-state seller have interacted with an in-state customer
before a substantial nexus may be found. To be sure, those decisions illustrate the
paradigmatic method of conducting business in today’s internet age, whereby a
remote internet seller interacts with a purchaser through a website and transmits the
purchased good to the purchaser in the taxing state in fulfillment of the sale. But
as this case well illustrates, sellers of goods have devised other methods of doing
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SUPREME COURT OF OHIO
business in a state without ever stepping foot in the state. See Wayfair, 585 U.S. at
177, quoting Quill, 504 U.S. at 308, quoting Burger King Corp. v. Rudzewicz, 471
U.S. 462, 476 (1985) (“‘“it is an inescapable fact of modern commercial life that a
substantial amount of business is transacted [with no] need for physical presence
within a State in which business is conducted”‘”). And nothing in either decision
expressly forecloses Ohio from taxing, as here, an out-of-state entity that, without
interacting with an Ohio customer, ships property to Ohio through a third-party
carrier at the direction of its out-of-state customer in fulfillment of a sale.
{¶ 57} VVF’s proposed customer-interaction rule is also hard to square with
Wayfair’s observation that Commerce Clause doctrine must be attuned to economic
realities, id. at 180 (“The basic principles of the Court’s Commerce Clause
jurisprudence are grounded in functional, marketplace dynamics; and States can
and should consider those realities in enacting and enforcing their tax laws.”).
Because these types of transactions are so prevalent, this court would expect VVF
to cite caselaw to support its position if such support existed and because VVF’s
position lacks such support, we decline its invitation to announce a rule of law under
the Commerce Clause that ignores the realities of modern commerce.
{¶ 58} We reject VVF’s substantial-nexus argument.
b. “Fairly related” prong
{¶ 59} VVF next argues that the taxation of its gross is not fairly related to
the benefits and protections provided to it by Ohio. The inquiry under the fair-
relation prong is not “the amount of the tax of the value of the benefits allegedly
bestowed as measured by the costs the State incurs on account of the taxpayer’s
activities.” (Emphases in original.) Commonwealth Edison Co. v. Montana, 453
U.S. 609, 625 (1981). Rather, the inquiry is whether the “measure of the tax [is]
reasonably related to the extent of the contact, since it is the activities or presence
of the taxpayer in the State that may properly be made to bear a ‘just share of state
tax burden.’” (Emphasis in original.) Id. at 626, quoting W. Live Stock v. Bur. of
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January Term, 2025
Revenue, 303 U.S. 250, 254 (1938). That is, the tax must be “‘tied to the earnings
which the State . . . has made possible’ ” (ellipsis in original), id., quoting Wisconsin
v. J.C. Penney Co., 311 U.S. 435, 444 (1940), such that the tax is in “‘proper
proportion’ to [the taxpayer’s] activities within the State and, therefore, to [its]
‘consequent enjoyment of the opportunities and protections which the State has
afforded’ in connection with those activities,” id., quoting Gen. Motors Corp. v.
Washington, 377 U.S. 436, 441 (1964). Even though a taxpayer may not directly
benefit from the services a state is able to provide because of its collection of a tax,
the “advantages conferred by the State’s maintenance of a civilized society[] are
justifications enough for the imposition of the tax.” Oklahoma Tax Comm. v.
Jefferson Lines, Inc., 514 U.S. 175, 200 (1995); see also Goldberg v. Sweet, 488
U.S. 252, 267 (1989) (observing that “a taxpayer’s receipt of police and fire
protection, the use of public roads and mass transit, and the other advantages of
civilized society satisf[y] the requirement that the tax be fairly related to benefits
provided by the State to the taxpayer”).
{¶ 60} VVF maintains that it is not challenging the percentage of the CAT
but is instead challenging the fact that it was asked to pay the CAT at all, because,
it says, there was no connection between Ohio and the gross receipts it taxed. In
VVF’s view, it did “not conduct any activities in or directed at Ohio.” Again,
invoking Asahi, 480 U.S. 102, VVF asserts that at most, it had mere knowledge that
its products would end up in Ohio. The true beneficiary of the advantages conferred
by Ohio, the argument runs, was HRB.
{¶ 61} For the reasons explained above, VVF’s reliance on Asahi to support
its position fails. Indeed, Asahi did not consider the fair-relation prong at all. Nor
does VVF cite a case in which a court invalidated a state’s tax under the fair-relation
prong that involved, as here, an out-of-state taxpayer that sold its product to a
company that directed a third-party carrier to pick up the product and transport it to
the taxing state. Given the pervasiveness of interstate commerce in this country,
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we would (again) expect to see support in the caselaw to bolster VVF’s position if
that position were correct.
{¶ 62} What is more, in focusing on the benefits that Ohio has afforded to
HRB, VVF has lost sight of the fact that it was the Ohio marketplace that made
VVF’s sale to HRB possible, for Ohio is where the distribution center is located.
So too, Ohio’s roads facilitated the delivery of the bar soap into and across Ohio
for placement in that distribution center. By furnishing these advantages, Ohio may
justly ask for something in return. See Commonwealth Edison, 453 U.S. at 625.
And the return sought here is in proper proportion to VVF’s activities related to
Ohio, for Ohio has sought to tax only those gross receipts that VVF earned from
selling to HRB that are situsable to Ohio.
{¶ 63} We reject VVF’s Commerce Clause challenge predicated on the fair-
relation prong of the Complete Auto test.
3. Equal Protection Clause
{¶ 64} For its last constitutional challenge, VVF argues that imposing the
CAT on the gross receipts it earned from transacting sales with HRB violates the
Equal Protection Clause. As noted earlier, the General Assembly enacted a
provision that enables a seller to reduce its gross receipts by a specified percentage
for property it sells that is transported to a QDC. VVF, however, did not transact
with a QDC, so it could not invoke this reduction. As VVF says, if its hypothetical
rival conducted identical operations but transacted with a QDC, then its rival would
enjoy a tax advantage that VVF does not. In VVF’s view, its inability to invoke
the QDC reduction creates an equal-protection problem “because identical
operations by similarly situated taxpayers would be taxed differently.” We
disagree.
{¶ 65} The Fourteenth Amendment to the United States Constitution bars a
state from “deny[ing] to any person within its jurisdiction the equal protection of
the laws.” Classifications pervade American laws, but the “Equal Protection Clause
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January Term, 2025
does not forbid [them].” Nordlinger v. Hahn, 505 U.S. 1, 10 (1992). Rather, it
forbids “governmental decisionmakers from treating differently persons who are in
all relevant respects alike.” Id. If, as in this case, the classification does not involve
a suspect class or implicate a fundamental right, then there is no equal-protection
violation provided that the classification “bears a rational relationship to a
legitimate governmental interest.” Columbia Gas Transm. Corp. v. Levin, 2008-
Ohio-511, ¶ 91. In the tax context, rational-basis review under the Equal Protection
Clause is “especially deferential,” Nordlinger at 11, in view of the “great leeway”
that states have in “making classifications and drawing lines that in their judgment
produce reasonable systems of taxation,” Columbia Gas at ¶ 92. VVF “bears the
burden to negate every conceivable basis that might support the legislation,” id. at
¶ 91.
{¶ 66} First, VVF goes astray in asking this court to treat it and its
hypothetical rival as similarly situated when in fact they are not. “[T]he Equal
Protection Clause ‘does not require things which are different in fact . . . to be
treated in law as though they were the same.’” (Ellipsis in original.) GTE N., Inc.
v. Zaino, 2002-Ohio-2984, ¶ 22, quoting Tigner v. Texas, 310 U.S. 141, 147 (1940).
The fact that VVF and its hypothetical rival compete “does not, of itself, mean that
the two companies are similarly situated for purposes of equal protection.” Id. at
¶ 39. Here, at the risk of stating the obvious, VVF and its hypothetical rival are not
similarly situated, because VVF’s rival dealt with a QDC while VVF did not. And
that dissimilarity is the reason for differential tax treatment.
{¶ 67} VVF cites in passing MCI Telecommunications Corp. v. Limbach,
1994-Ohio-489, but that case does not compel a different result. There, this court
found an equal-protection violation when the tax commissioner had applied
different property-valuation methods to different classes of telecommunications
providers despite a ruling by the Public Utilities Commission of Ohio that placed
the providers in the same category for utility-regulation purposes. VVF reasons
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from MCI that “when there is no relevant distinction between how different
taxpayers conduct their businesses, there cannot be different methods of taxation.”
But this case is factually distinguishable from MCI. The reason for the differential
tax treatment here is the distinction in how VVF and its hypothetical rival conduct
their business—the rival transacted with a QDC and VVF did not. See Home Depot
USA, Inc. v. Levin, 2009-Ohio-1431, ¶ 20-21 (rejecting equal-protection challenge
predicated on MCI based on factual distinctions). Nor is there a regulatory ruling
that places VVF and its hypothetical rival in the same category.
{¶ 68} VVF’s claim falters for additional reasons. Notwithstanding the
absence of record evidence that points to the General Assembly’s rationale for
enacting the QDC provision, the General Assembly’s decision to extend special tax
treatment to those who deal with QDCs and withhold it from those who do not can
be rationally justified with a plausible policy reason. See Nordlinger, 505 U.S. at
15 (“the Equal Protection Clause does not demand for purposes of rational-basis
review that a legislature or governing decisionmaker actually articulate at any time
the purpose or rationale supporting its classification”); State v. Noling, 2016-Ohio-
8252, ¶ 20, quoting Nordlinger at 11 (“the Equal Protection Clause is satisfied if
‘there is a plausible policy reason for the classification’”).
{¶ 69} One plausible policy reason for enacting the QDC provision could
have simply been a desire on the part of the General Assembly to make Ohio a more
attractive place to do business for suppliers who transact business with large
distribution centers. That desire falls within the heartland of the General
Assembly’s powers, for “the Constitution grants legislators, not courts, broad
authority (within the bounds of rationality) to decide whom they wish to help with
their tax laws and how much help those laws ought to provide.” Fitzgerald v. Cent.
Iowa Racing Assn., 539 U.S. 103, 108 (2003). The General Assembly drew the line
that separates suppliers who deal with QDCs from those who do not, and equal-
protection doctrine rejects this kind of judicial second-guessing. See id., quoting
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January Term, 2025
United States RR. Retirement Bd. v. Fritz, 449 U.S. 166, 179 (1980) (observing that
under the Equal Protection Clause, “‘the fact that the line [written into a state’s tax
law] might have been drawn differently at some points is a matter for legislative,
rather than judicial, consideration’ ”).
{¶ 70} We reject VVF’s equal-protection challenge.
III. CONCLUSION
{¶ 71} We reverse the decision of the Board of Tax Appeals, dismiss for
lack of jurisdiction VVF’s first proposition of law in its cross-appeal, and reject the
challenges raised under the United States Constitution in the remainder of VVF’s
propositions of law in its cross-appeal.
Decision reversed.
__________________
KENNEDY, C.J., dissenting.
{¶ 72} Ohio’s commercial-activity tax does not apply to the sale of goods
that are manufactured outside of Ohio when those goods are loaded onto a motor
carrier selected by the purchaser before the goods are brought into Ohio. Nor does
it apply when the goods are shipped to a purchaser at a location in Ohio before
being transported out of state. The Board of Tax Appeals correctly ordered a refund
of the commercial-activity tax paid by appellee and cross-appellant, VVF Intervest,
L.L.C., and I would affirm its decision. Because the majority does otherwise, I
dissent.
{¶ 73} In this case, VVF Intervest manufactured soap products in Kansas
and then loaded the products onto a motor carrier chosen by High Ridge Brands
(“High Ridge”) before the goods were transferred into Ohio. The motor carrier
transported the goods from Kansas to a distribution center in Ohio, and High Ridge
then shipped the products to its out-of-state customers. This case presents the
question whether VVF Intervest’s sales to High Ridge are subject to Ohio’s
commercial-activity tax. In my view, they are not.
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Delivery Outside Ohio
{¶ 74} The first sentence of R.C. 5751.033(E) states the general rule that
“gross receipts from the sale of tangible personal property shall be sitused to this
state if the property is received in this state by the purchaser.” R.C. 5751.033(E)’s
fourth sentence then specifies that “direct delivery outside this state to a person or
firm designated by a purchaser does not constitute delivery to the purchaser in this
state, regardless of where title passes or other conditions of sale.”
{¶ 75} The first and fourth sentences use different words—“received”
versus “delivery”—but they are interrelated, because the word “receive” means “to
take possession or delivery of.” Webster’s Third New International Dictionary
(2002). So when the fourth sentence says that the out-of-state delivery of goods to
a third party (such as a trucking company) selected by the purchaser does not
constitute delivery to the purchaser in Ohio, it necessarily also means that the goods
in that situation were not received by the purchaser in Ohio. Delivery and receipt
in that situation occurred out of state. That is how R.C. 5751.033(E)’s first and
fourth sentences fit together.
{¶ 76} Here, VVF Intervest directly delivered its products to a motor carrier
designated by High Ridge at a location outside this State. Therefore, VVF
Intervest’s shipments do not constitute delivery to High Ridge in Ohio. Instead,
delivery was made in Kansas. The goods were therefore deemed to have been
received by High Ridge in Kansas as well, and the sales cannot be sitused in this
State for purposes of liability for the commercial-activity tax.
{¶ 77} The majority relies on this court’s decision in House of Seagram, Inc.
v. Porterfield, 27 Ohio St.2d 97 (1971), to support its conclusion that the situs of
VVF Intervest’s sales to High Ridge is Ohio. In House of Seagram, the court
addressed language in Ohio’s franchise-tax statute that is similar to the language in
R.C. 5751.033(E). The franchise-tax statute provided that “‘direct delivery outside
this state to a person or firm designated by a purchaser does not constitute delivery
30
January Term, 2025
to the purchaser in this state, regardless of where title passes or other conditions of
sale.’” House of Seagram at 99, quoting R.C. 5733.05.
{¶ 78} In that case, like here, a foreign company loaded goods onto a motor
carrier selected by a customer before those goods were brought into Ohio. The court
noted that the franchise-tax statute provided that delivery of goods occurs where they
are ultimately received by the purchaser after all transportation is completed. That
place was Ohio, the court reasoned, so the foreign company was subject to the
franchise tax. The court said that the part of the statute relating to direct delivery to
a common carrier designated by the purchaser applied in limited situations and was
only “a safeguard applicable to a situation where an Ohio purchaser brings goods
through Ohio on their way to some ultimate destination outside Ohio, or where such
goods, immediately upon receipt, are shipped to some other state by the purchaser
and do not even pass through Ohio.” Id. at 100.
{¶ 79} It is not possible to square House of Seagram’s analysis with the
language of the franchise-tax statute. The statute provided that a foreign company
is not subject to the franchise tax when it delivers goods outside Ohio to a common
carrier chosen by the Ohio purchaser. That is the exact fact pattern in House of
Seagram. The court’s interpretation of the franchise-tax statute was so untethered
from the text of the statute that it is clear that House of Seagram was wrongly
decided.
{¶ 80} It is true that, in the words of R.C. 5751.033(E)’s second sentence,
the situs is “the place at which [the] property is ultimately received after all
transportation has been completed.” But R.C. 5751.033(E) qualifies that language
by saying that “direct delivery outside this state to a person or firm designated by a
purchaser does not constitute delivery to the purchaser in this state.” And that
qualification makes sense, because when the goods are loaded onto the purchaser’s
chosen motor carrier, the seller has fulfilled its part of the transaction. So here, at
the time VVF Intervest transferred the goods to the motor carrier selected by High
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Ridge, its hands were off the products and its role in the transaction was complete.
High Ridge received the goods before they entered Ohio. Therefore, VVF
Intervest’s sales to High Ridge were not subject to the commercial-activity tax
during the relevant tax years.
{¶ 81} The majority focuses on where the purchaser of the out-of-state
goods received them. But that is only the first step. How does one decide where
an in-state purchaser received goods that originated out of state? This is where the
fourth sentence of R.C. 5751.033(E) comes in. Again, it says that “direct delivery
outside this state to a person or firm designated by a purchaser does not constitute
delivery to the purchaser in this state.” Who delivers the goods and where they are
delivered matters. If the out-of-state seller selected the motor carrier that
transported the goods to Ohio, then the seller is deemed to have delivered those
goods to the purchaser in Ohio. The out-of-state seller’s hands stayed on the goods
until they reached Ohio. But if the purchaser in Ohio selected the motor carrier,
then the purchaser is deemed to have picked up those goods outside Ohio.
{¶ 82} So in this case, because High Ridge designated the motor carrier that
picked up the goods in Kansas, delivery occurred there, and that is where High
Ridge “assumed full control over the property,” to use the majority’s words,
majority opinion at ¶ 21. Because High Ridge is deemed by the statute to have
received the goods outside Ohio, the situs of the sales was not Ohio under the first
and fourth sentences of R.C. 5751.033(E).
Goods Passing Through Ohio
{¶ 83} There is an independent reason for holding that the situs of the sales
to High Ridge is not Ohio, and it comes from the second and third sentences of R.C.
5751.033(E), which state:
In the case of delivery of tangible personal property by motor carrier
or by other means of transportation, the place at which such property
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January Term, 2025
is ultimately received after all transportation has been completed
shall be considered the place where the purchaser receives the
property. For purposes of this section, the phrase “delivery of
tangible personal property by motor carrier or by other means of
transportation” includes the situation in which a purchaser accepts
the property in this state and then transports the property directly or
by other means to a location outside this state.
{¶ 84} Like the fourth sentence, the second and third sentences of R.C.
5751.033(E) qualify the first sentence of the statute. The first sentence sets out the
general proposition that the situs of a sale is the place where the goods are received
by the purchaser. The second sentence specifies that when the goods are physically
transported, then what matters for purposes of situs of the sale is where the goods
are received after all transportation is complete. The third sentences then qualifies
the second sentence by providing that final delivery does not occur in Ohio when
“a purchaser accepts the property in this state and then transports the property
directly or by other means to a location outside this state.”
{¶ 85} Here too, the plain language of R.C. 5751.033(E) requires VVF
Intervest’s sales of goods to High Ridge to be sitused outside Ohio. A motor carrier
transported the goods, High Ridge accepted the products in Ohio, and it then
shipped those products “directly or by other means” to a location outside Ohio.
Importantly, the statute does not contain a temporal component establishing how
long goods must remain in Ohio before they are deemed to be at their final
destination. Therefore, the place where VVF Intervest’s products were delivered
after all transportation was completed was outside Ohio.
{¶ 86} The majority resists this analysis by saying that the chain of
transportation was broken when High Ridge resold VVF Intervest’s goods to third
parties outside Ohio. Majority opinion at ¶ 15. But R.C. 5751.033(E) anticipates
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that goods can be “accept[ed]” by the purchaser in Ohio yet still not be sitused in
Ohio. And the majority itself recognizes that the chain of transportation is not
broken when goods received in Ohio are immediately shipped to third parties
outside Ohio; the majority states that “[t]he scenario in this case is distinct from
cases in which goods are accepted in Ohio solely for purposes of immediate
transportation outside the State.” Majority opinion at ¶ 32. The majority’s
distinction might be persuasive if the third sentence of R.C. 5751.033(E) were
modified as follows: “For purposes of this section, the phrase ‘delivery of tangible
personal property by motor carrier or by other means of transportation’ includes the
situation in which a purchaser accepts the property in this state and then transports
the property directly or by other means [and immediately] to a location outside this
state.” But that is not what the statute says.
{¶ 87} The third sentence does not apply only when the goods are shipped
immediately out of state; it also applies when the goods are transported “directly or
by other means.” The “by other means” language is broad enough to encompass
indirect transportation of the goods through the purchaser to the purchaser’s out-
of-state customers.
{¶ 88} Since VVF Intervest’s goods were ultimately received out of state,
the situs of the sales of the goods is not Ohio. This result is counterintuitive—the
goods were shipped to a purchaser at a location in Ohio. But the result is not so
absurd that we can deviate from the literal meaning of the words the General
Assembly wrote. See Scalia & Garner, Reading Law: The Interpretation of Legal
Texts 237 (2012). The General Assembly could have reasonably decided that when
products flow through Ohio from a foreign company to the purchaser’s out-of-state
customers, the foreign company should not be subject to Ohio’s commercial-
activity tax—just as the foreign company is not subject to the tax when its goods
are transported through the State without stopping here.
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January Term, 2025
{¶ 89} The General Assembly is the ultimate arbiter of tax policy in this
State. See Pelletier v. Campbell, 2018-Ohio-2121, ¶ 31. In contrast, “[o]ur role, in
exercise of the judicial power granted to us by the Constitution, is to interpret and
apply the law enacted by the General Assembly.” Houdek v. ThyssenKrupp
Materials N.A., Inc., 2012-Ohio-5685, ¶ 29. And when the text of a statute is
unambiguous, we have no authority to judicially amend it. See Pelletier at ¶ 20.
{¶ 90} For these reasons, the Board of Tax Appeals correctly concluded that
VVF Intervest’s sales to High Ridge were not subject to Ohio’s commercial-activity
tax. Therefore, I would affirm its decision. The majority does not do that, so I
dissent.
__________________
Buckingham, Doolittle & Burroughs, L.L.C., Richard B. Fry III, Steven A.
Dimengo, and Nathan M. Fulmer, for appellee and cross-appellant.
Dave Yost, Attorney General, Mathura J. Sridharan, Solicitor General,
Stephen P. Carney, Deputy Solicitor General, and Daniel G. Kim, Assistant
Attorney General, for appellant and cross-appellee.
Dentons, Bingham, Greenebaum, L.L.P., Mark A. Loyd, and Bailey Roese;
and Tony Long, in support of appellee and cross-appellant, for amicus curiae, Ohio
Chamber of Commerce.
__________________
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