State can’t spend Commercial Activity Tax money on non-highway projects

The Columbus Dispatch
December 7, 2012

The state is unconstitutionally spending $140 million a year gleaned from the Commercial Activity Tax for non-highway purposes, the Ohio Supreme Court ruled today. The money has been allocated to local government, schools and other expenses. In a 6-1 ruling written by outgoing Justice Robert R. Cupp, the court found that how the state is spending the money violates the Ohio Constitution. The court did not invalidate the CAT tax, which replaced the state corporate franchise tax, nor did it apply the decision retroactively. Cupp said the constitution “explicitly prohibits the expenditure of revenue derived from excises on motor-vehicle fuel for any purpose other than highway purposes.” He said because a section of state law “credits revenue collected from excise taxes on motor-vehicle fuel to purposes other than highway purposes, that provision of the CAT is unconstitutional.” The decision involves a lawsuit filed against Ohio Tax Commissioner Joseph Testa by Beaver Excavating Co., other companies, and the county engineers from Ashland and Highland counties. The companies and officials argued that tax revenue from fuel sales can only be used for construction, repair and maintenance roads, not other purposes. That restriction became part of the Ohio Constitution by a voter-approved amendment in 1947. In 2005, the General Assembly passed a law replacing the franchise tax with the CAT. That tax is imposed on all businesses based on a portion of their gross receipts. Of the $2.3 billion a year in CAT revenues, about $140 million is derived from fuel sales.

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