2020 Ohio 4594
Ohio2020Background
- Defender Security, an Indiana authorized dealer for ADT, sold alarm-service contracts (intangible contract rights) to ADT and received payments (“ADT funding”) when ADT accepted assignment of Ohio customer contracts.
- ADT provides remote monitoring from six monitoring centers, all located outside Ohio; ADT decides whether to accept each contract at its dealer-support unit in Colorado.
- Defender also installs equipment and collects installation fees from Ohio customers (those receipts are undisputedly taxable in Ohio). The refund claim concerns only payments ADT made to Defender for purchased contracts.
- Defender paid CAT on the ADT-funding receipts for 2011–2013, claimed a $73,334.82 refund, and the tax commissioner denied it; the BTA and the Franklin County Court of Appeals affirmed denial.
- The Ohio Supreme Court granted review, held the evidence sufficient, and addressed whether R.C. 5751.033(I) sitused the ADT-funding receipts to Ohio or to ADT’s physical locations outside Ohio.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper standard of review for BTA legal questions | De novo review without deference to commissioner | Court of appeals should defer to commissioner | De novo standard applies; court of appeals did apply it |
| Situs of ADT-funding receipts under R.C. 5751.033(I) | Receipts are proceeds from sale of intangible contract rights; situs is where purchaser (ADT) uses/receives benefit — ADT locations outside Ohio | Benefit accrues in Ohio because contracts relate to Ohio property and ADT realizes benefit in Ohio | Receipts sitused to ADT’s physical locations outside Ohio; refund required |
| Dormant Commerce Clause (risk of double taxation) | Commissioner’s approach creates double taxation violating dormant Commerce Clause | Taxation is permissible | Court did not reach this constitutional claim (unnecessary after statutory ruling) |
Key Cases Cited
- Progressive Plastics, Inc. v. Testa, 979 N.E.2d 280 (Ohio 2012) (legal questions of tax statute construction reviewed de novo)
- Marc Glassman, Inc. v. Levin, 893 N.E.2d 476 (Ohio 2008) (inference of ultimate fact from basic facts in situs determinations)
- Ace Steel Baling, Inc. v. Porterfield, 249 N.E.2d 892 (Ohio 1969) (description of factual inference process)
- SFZ Transp., Inc. v. Limbach, 613 N.E.2d 1037 (Ohio 1993) (reasonableness of inference is a question of law)
- Geoffrey, Inc. v. South Carolina Tax Comm., 437 S.E.2d 13 (S.C. 1993) (trademark-license situs analysis contrasted with contract-rights sale)
- Goldberg v. Sweet, 488 U.S. 252 (U.S. 1989) (discusses governmental “benefit” in commerce/due-process contexts)
- Davis v. Michigan Dept. of Treasury, 489 U.S. 803 (U.S. 1989) (principle on courts’ adoption of judicially defined concepts in statutes)
- Corrigan v. Testa, 73 N.E.3d 381 (Ohio 2016) (remanding to tax commissioner for issuance of refunds)