Rockies Express Pipeline, L.L.C. v. McClain (Slip Opinion), 2020 Ohio 410

Rockies Express Pipeline, L.L.C. (Rockies) is a federally regulated interstate natural‑gas pipeline crossing Ohio; in 2015 it reported $699,018,936 in transportation receipts and allocated them all as interstate.
Tax commissioner audited and identified 36 transactions (totaling $2,084,426) where Rockies transported gas that both entered and exited the pipeline within Ohio; commissioner assessed tax on those receipts and Rockies paid under protest.
Rockies sought exclusion under R.C. 5727.33(B)(1) ("all receipts derived wholly from interstate business"); commissioner and the BTA concluded those within‑Ohio receipts were taxable; BTA decision affirmed and appealed to Ohio Supreme Court.
The Ohio Supreme Court considered (1) whether R.C. 5727.33(B)(1) excludes receipts for transportation whose contract origin and destination are both in Ohio, and (2) whether taxing those receipts violates the Commerce Clause.
The court held the within‑Ohio transportation receipts were not excluded as "interstate business" and that taxing them does not violate the Commerce Clause.

Issue	Rockies' Argument	Tax Commissioner's Argument	Held
Whether R.C. 5727.33(B)(1) excludes gross receipts from transporting gas wholly within Ohio	All of Rockies’ receipts are "derived wholly from interstate business" because Rockies is an interstate pipeline and gas may originate/destinate out of state	Receipts for shipments that start and end in Ohio are intrastate "business done within this state" and therefore taxable	Exclusion does not apply; within‑Ohio receipts are taxable under R.C. 5727.33(A)
Whether taxing those receipts violates the Commerce Clause (Complete Auto test)	Tax on these receipts impermissibly burdens interstate commerce	Tax satisfies Complete Auto: substantial nexus (physical pipeline presence), fair apportionment, nondiscrimination, and relation to state services	Tax does not violate the Commerce Clause; substantial nexus established by physical presence in Ohio
Whether deliveries to virtual hub pooling points are exempt because not physical	Hubs are virtual and therefore not taxable as in‑state deliveries	Tax applies to receipts from "business done within this state" irrespective of virtual/physical label	Receipts from hub pooling points are taxable as in‑state business receipts

Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (established four‑part Commerce Clause test for state taxes)
South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (substantial nexus inquiry and business‑privilege taxation principles)
Coe v. Errol, 116 U.S. 517 (contract of shipment determines when interstate commerce begins)
Gulf, C. & Santa Fe Ry. Co. v. Texas, 204 U.S. 403 (contract‑of‑shipment principle; intrastate segment taxable when under separate contract)
Ohio Tax Cases, 232 U.S. 576 (historical context for Ohio’s 1910 exclusion and its relation to Commerce Clause jurisprudence)
Columbia Gas Transmission Corp. v. Levin, 117 Ohio St.3d 122 (distinguishing FERC jurisdiction/interstate transportation from state tax authority)
Crutchfield Corp. v. Testa, 151 Ohio St.3d 278 (physical presence as sufficient for substantial nexus under Ohio commercial‑activity tax)
Polar Tankers, Inc. v. City of Valdez, 557 U.S. 1 (taxpayer availing itself of state privilege establishes nexus)