The NCSL Blog


By Lisa Soronen

In Crutchfield v. Testa, the Ohio Supreme Court held that Ohio’s commercial activity tax (CAT) applies to online vendors even if they lack a physical presence in the state.

floating money More technically, the court refused to extend the U.S. Supreme Court’s holding in Quill Corp. v. North Dakota (1992), that states cannot require retailers with no in-state physical presence to collect sales tax, to Ohio’s privilege-of-doing-business tax.

The State and Local Legal Center (SLLC) filed an amicus brief arguing in favor of this result.

Ohio’s CAT imposes a tax on any business having at least $500,000 of taxable gross receipts annually. The CAT is a privilege-of-doing-business tax charged directly to the retailer not a sales tax.

Crutchfield has more than $500,000 of gross receipts annually from sales in Ohio exclusively online. Crutchfield argued Quill’s physical presence requirement should apply to the CAT.

The Ohio Supreme Court disagreed, reasoning that two passages in Quill “indicate that the physical-presence standard has not been articulated as a nexus requirement in the business-privilege-tax situation.” And later U.S. Supreme Court precedent indicates that business-privilege taxes occupy a different “constitutional category” than sales tax.

The SLLC amicus brief argued that Quill is a bright-line rule that does not apply outside the sales tax context. The brief encouraged the Ohio Supreme Court not to expand the reasoning of Quill to a privilege-of-doing-business tax because Quill has had “clear and deleterious effects on state treasuries and local economies.”

While the SLLC usually only files amicus briefs in Supreme Court cases, it filed a brief in this case because limiting the reach of Quill is particularly important to SLLC members.

Eric Citron and Tom Goldstein wrote the SLLC brief which all of the Big Seven joined along with SLLC associate members the International Municipal Lawyers Association and Government Finance Officers Association

Lisa Soronen is executive director of the State and Local Legal Center and writes frequently on judicial issues for the NCSL Blog.

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This blog offers updates on the National Conference of State Legislatures' research and training, the latest on federalism and the state legislative institution, and posts about state legislators and legislative staff. The blog is edited by NCSL staff and written primarily by NCSL's experts on public policy and the state legislative institution.