B&I Files Second Set of Merits Briefs with the Ohio Supreme Court in Cases Challenging the Constitutionality of the Ohio Commercial Activity Tax on Behalf of Remote Sellers

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B&I Files Second Set of Merits Briefs with the Ohio Supreme Court in Cases Challenging the Constitutionality of the Ohio Commercial Activity Tax on Behalf of Remote Sellers


Brann & Isaacson partners Martin Eisenstein, David Bertoni, and Matthew Schaefer filed a second set of merits briefs with the Ohio Supreme Court on November 19, 2015, in three separate cases challenging the constitutionality of the statutory, gross receipts nexus standard applicable to the Ohio Commercial Activity Tax (“CAT”). B&I represents Internet retailers Newegg Inc., Crutchfield Corp., and Mason Companies, Inc. in three concurrently pending appeals before the Court. The second set of merits briefs respond to the arguments made by the Tax Commissioner of Ohio in defense of the CAT.

Each of the companies contends that the gross receipts, “bright-line presence” (or “factor presence”) provision of the CAT statute violates, on its face, and as-applied to the company, the “substantial nexus” requirement of the Commerce Clause. The second set of merits briefs demonstrate that the defense proffered by the Commissioner is at odds with a series of decisions by the U.S. Supreme Court dating back more than 50 years concerning taxes measured by gross receipts, including Tyler Pipe Industries, Inc. v. Washington Department of Revenue, 483 U.S. 232 (1987). The briefs further show that the Commissioner’s arguments, if adopted, would result in nationwide, and even worldwide nexus for Internet and catalog sellers, contrary to principles of the dormant Commerce Clause which limit state authority for regulating interstate commerce. Under the Commerce Clause, Congress, and not an individual state such as Ohio, has responsibility for determining the proper balance with respect to imposing state tax obligations on remote sellers.

The companies were supported through the concurrent filing of an amicus curiae reply brief by the Council On State Taxation (“COST”) in each case.

Briefing in the cases continues. The final merits briefs for the Tax Commissioner of Ohio are due under the current schedule on December 9, 2015.

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