GENERAL MOTORS CORPORATION, APPELLANT, v. TRACY, TAX COMMR., APPELLEE.
Nos. 94-642, 94-643 and 94-644
SUPREME COURT OF OHIO
August 9, 1995
73 Ohio St.3d 29 | 1995-Ohio-294
Tаxation—Sales and use taxes—Use tax on purchases of natural gas from out-of-state vendors—Acquisition of natural gas from natural gas companies that merely market natural gas not exempt from tax under R.C. 5739.02(B)(7). Submitted April 25, 1995. APPEAL from the Board of Tax Appeals, Nos. 91-K-1558, 92-K-146 and 92-H-510.
{¶ 2} GM purchased natural gas from independent natural gas marketers to heat its manufacturing plants. These marketers obtained natural gas from producers outside the state and arranged for transportation to the initial receiving pipeline of the national natural gas pipeline outside the state. These marketers did not own the transportation equipment; they paid a fee to pipeline companies to transport the natural gas to the insertion points. GM took title to the gas at delivery to thе receiving pipeline outside the state. GM then arranged to transport and deliver the natural gas to its locations in Ohio: the Lordstown plant, the Defiance Central Foundry, and the Packard Electric facility in Warren.
{¶ 3} The Tax Commissioner, appellee, assessed a use tax for various audit periods in these three cases because GM purchased the natural gas outside Ohio and consumеd it in Ohio. GM appealed the commissioner‘s order to the Board of Tax Appeals (“BTA“), and the BTA affirmed the order (except for a penalty on
{¶ 4} These causes are now before this court upon appeals as of right.
Jones, Day, Reavis & Pogue, John C. Duffy, Jr., Timothy B. Dyk and Gregory A. Castanias, for appellant.
Betty D. Montgomery, Attorney General, and Barton A. Hubbard, Assistant Attorney General, for appellee.
Emens, Kegler, Brown, Hill & Ritter Co., L.P.A., Paul D. Ritter, Jr., Holley R. Fischer and Thomas W. Hill, urging affirmance for amicus curiae, Enron Access Corp.
Per Curiam.
{¶ 5}
{¶ 6} However, in Chrysler Corp. v. Tracy (1995), 73 Ohio St.3d 26, 652 N.E.2d 185, we upheld the determination of the Public Utilities Commission of Ohio that a vendor in the type of sales now before us is by definition not a natural gas compаny and held that
{¶ 7} GM also contends that the cоmmissioner‘s application of this exemption statute violates the Commerce and Equal Protection Clauses of the Federаl Constitution. According to New Energy Co. of Indiana v. Limbach (1988), 486 U.S. 269, 273-274, 108 S. Ct. 1803, 1807-1808, 100 L.Ed.2d 302, 308:
“It has long been accepted that the Commerce Clause not only grants Congress the authority to regulate commerce among the States, but also directly limits the power of the States to discriminate against interstate commerce. See, e.g., Hughes v. Oklahoma, 441 U.S. 322, 326 [99 S.Ct. 1727, 1731, 60 L.Ed.2d 250, 255-256] (1979); H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 543-535 [69 S.Ct. 657, 663-664, 93 L.Ed. 865, 872-873] (1949); Welton v. Missouri 91 U.S. 275 [23 L.Ed. 347] (1876). This ‘negative’ aspect of the Commerce Clause prohibits economic protectionism—that is, regulatory meаsures designed to benefit in-state economic interests by burdening out-of-state competitors. See, e.g., Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 270-273 [104 S.Ct. 3049, 3054-3056, 82 L.Ed.2d 200, 208-210] (1984); H.P. Hood & Sons, supra, at 532-533 [69 S.Ct. at 662-663, 93 L.Ed. at 871-872]; Guy v. Baltimore, 100 U.S. 434, 443 [25 L.Ed. 743] (1880). Thus, state statutes that cleаrly discriminate against interstate commerce are routinely struck down, see, e.g., Sporhase v. Nebraska ex rel. Douglas, 458 U.S. 941 [102 S.Ct. 3456, 73 L.Ed.2d 1254] (1982); Lewis v. BT Investment Managers, Inc., 447 U.S. 27 [100 S.Ct. 2009, 64 L.Ed.2d 702] (1980); Dean Milk Co. v. Madison 340 U.S. 349 [71 S.Ct. 295, 95 L.Ed. 329] (1951), unless the discrimination is demonstrably justified by a valid factоr unrelated to economic protectionism, see, e.g., Maine v. Taylor, 477 U.S. 131 [106 S.Ct. 2440, 91 L.Ed.2d 110] (1986).”
{¶ 8} According to the testimony, the commissioner exempts sales of natural gas only if the selling companies own or operate the transportation and distribution equipment and deliver the natural gas tо consumers in Ohio. GM reasons that only Ohio companies owning transportation and distribution equipment can qualify because only thesе domestic companies can physically deliver natural gas to Ohio consumers. Thus, so it argues, the commissioner‘s applicаtion is an undue burden on interstate commerce and invalid. The commissioner responds that he treats in-state and out-of-state purchases from
{¶ 9} We have before us purchases by GM of natural gas from a company that does not own any рroduction, transportation, or distribution equipment. The commissioner claims that he would tax purchases from these persons whethеr they sold natural gas in-state or out-of-state. Thus, the commissioner‘s application of the statute does not benefit in-state purchasers by favoring in-state vendors over out-of-state vendors; he treats purchases from both the same. His application doеs not violate GM‘s Commerce Clause protection.
{¶ 10} On close inspection, GM actually argues that the commissioner‘s apрlication burdens out-of-state vendors of natural gas. However, GM is not a member of that class and lacks standing to challenge the constitutionality of this application on that basis; our further comment on this question is inappropriate. Indus. Energy Consumers of Ohio Power Co. v. Pub. Util. Comm. (1994), 68 Ohio St. 3d 547, 557-558, 629 N.E. 2d 414, 422.
{¶ 11} Also, GM‘s equal protection argument is submerged in its Commerce Clause argument. It claims that the Equal Protection Clause prohibits Ohio frоm imposing a more onerous use tax on out-of-state companies engaging in interstate commerce than on domestic сompanies. However, as concluded in the Commerce Clause discussion, the commissioner does not favor in-state purchases over out-of-state purchases. If the vendor does not own transportation or distribution equipment, the commissioner does not exempt its sales of natural gas to Ohio consumers.
{¶ 12} Finally, GM contends that the BTA incorrectly determined that the commissioner did not abuse his discretion in remitting only a portion of the statutory penalty. According to Jennings & Churella Constr. Co. v. Lindley (1984), 10 Ohio St.3d 67, 70, 10 OBR 357, 359-360, 461 N.E. 2d 897, 900:
” R.C. 5739.13 mandates the imposition of a penalty in the event of an assessment. Remission of the penalty is discretionary. In Servomation Corp. v. Kosydar (1976), 46 Ohio St.2d 67 [75 O.O.2d 147, 346 N.E.2d 290], we held this discretionary power valid and constitutional as an exerсise of the state‘s police power.“Appellate review of this discretionary power is limited to a determination of whеther an abuse has occurred. Interstate Motor Freight System v. Bowers (1960), 170 Ohio St. 483 [11 O.O.2d 240, 166 N.E.2d 229]. An abuse of discretion connotes a decision that is unreasonable, arbitrary or unconscionable. State v. Adams (1980), 62 Ohio St.2d 151, 157 [16 O.O.3d 169, 173, 404 N.E.2d 144, 149]; Chester Twp. v. Geauga Cty. Budget Comm. (1976), 48 Ohio St.2d 372, 373 [2 O.O. 3d 484, 358 N.E.2d 610, 611].” (Emphasis sic; footnote omitted.)
{¶ 13} We have consistently refused to find an abuse of discretion on the commissioner‘s remitting a portion of the statutory penalty, even in the face of good-faith efforts at compliance. Kings Entertainment Co. v. Limbach (1992), 63 Ohio St.3d 369, 371, 588 N.E. 2d 777, 779. Consequently, we affirm the BTA‘s decision on the penalty.
{¶ 14} Accordingly, we affirm the BTA‘s decision, since it is reasonable and lawful.
Decision affirmed.
MOYER, C.J., DOUGLAS, WRIGHT, RESNICK, F.E. SWEENEY, PFEIFER and COOK, JJ., concur.