The Ohio Board of Tax Appeals held that automobile dealers were not subject to the Ohio Commercial Activity Tax (CAT) on their sales of motor vehicles because the purchase, receipt, and delivery of the vehicles took place entirely outside of Ohio. The Department of Taxation assessed the dealers, which were located in West Virginia, for the CAT. The Department claimed that gross receipts from its sales of motor vehicles to Ohio purchasers must be sourced to Ohio where the purchaser accepted the vehicle in West Virginia and then drove it to Ohio. The sourcing provision stated that the gross receipts from sales of tangible personal property are sitused to Ohio “if the property is received in this state by the purchaser.” (Emphasis added.)
The Board agreed with the taxpayer and held that the motor vehicle sale gross receipts were properly sitused outside of Ohio. The Ohio Supreme Court interprets the term “receive” to “include the taking of ‘delivery.’” Thus, if a person takes “delivery” of tangible personal property outside of Ohio, that person is “receiv[ing]” it outside of Ohio for CAT situsing purposes. The Board found the statutory language to be “plain and unambiguous.” Because the “entire vehicle sales transaction (i.e., purchase, receipt, and delivery)” occurred in West Virginia, the Board concluded that the Ohio customers “received” their vehicles in West Virginia, not Ohio.
The Board also rejected the Department’s argument that the motor vehicle sales were sourced to Ohio pursuant to an additional sourcing provision: “In the case of delivery of the 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.” Because the taxpayer had already delivered the vehicles to the customers in West Virginia, they “could not have been ‘delivered’ again once Ohio customers returned to Ohio.” In other words, “once [the automobile dealer] relinquished physical possession of the new or used car to the buyer in West Virginia, [the automobile dealer] could not again deliver physical possession of the vehicles for a second time by transportation or otherwise.”
Straub Nissan LLC v. Harris, Case No. 2022-422 (Ohio Bd. Tax App. Oct. 23, 2024).