Nos. 94-642, 94-643 and 94-644 | Ohio | Aug 9, 1995
R.C. 5741.02 imposes a use tax on the storage, use, or consumption of tangible personal property in Ohio. R.C. 5741.02(C)(2) exempts from this tax acquisitions “which, if made in Ohio, would be a sale not subject to the tax imposed by sections 5739.01 to 5739.31 of the Revised Code.” GM claims that the instant acquisitions would be exempt under R.C. 5739.02(B)(7) as sales of natural gas by a natural gas company.
However, in Chrysler Corp. v. Tracy (1995), 73 Ohio St. 3d 26" court="Ohio" date_filed="1995-08-09" href="https://app.midpage.ai/document/chrysler-corp-v-tracy-6772164?utm_source=webapp" opinion_id="6772164">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 company and held that R.C. 5739.02(B)(7) does not exempt this type of sale. Consequently, we affirm the BTA’s decision as to this claim.
GM also contends that the commissioner’s application of this exemption statute violates the Commerce and Equal Protection Clauses of the federal Constitution. According to New Energy Co. of Indiana v. Limbach (1988), 486 U.S. 269" court="SCOTUS" date_filed="1988-05-31" href="https://app.midpage.ai/document/new-energy-co-of-indiana-v-limbach-112081?utm_source=webapp" opinion_id="112081">486 U.S. 269, 273-274, 108 S. Ct. 1803" court="SCOTUS" date_filed="1988-05-31" href="https://app.midpage.ai/document/new-energy-co-of-indiana-v-limbach-112081?utm_source=webapp" opinion_id="112081">108 S.Ct. 1803, 1807-1808, 100 L. Ed. 2d 302" court="SCOTUS" date_filed="1988-05-31" href="https://app.midpage.ai/document/new-energy-co-of-indiana-v-limbach-112081?utm_source=webapp" opinion_id="112081">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" court="SCOTUS" date_filed="1979-04-24" href="https://app.midpage.ai/document/hughes-v-oklahoma-110063?utm_source=webapp" opinion_id="110063">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" court="SCOTUS" date_filed="1949-04-18" href="https://app.midpage.ai/document/h-p-hood--sons-inc-v-du-mond-104652?utm_source=webapp" opinion_id="104652">336 U.S. 525, 534-535 [69 S. Ct. 657" court="SCOTUS" date_filed="1949-04-18" href="https://app.midpage.ai/document/h-p-hood--sons-inc-v-du-mond-104652?utm_source=webapp" opinion_id="104652">69 S.Ct. 657, 663-664, 93 L.Ed. 865, 872-873] (1949); Welton v. Missouri, 91 U.S. 275" court="SCOTUS" date_filed="1876-01-17" href="https://app.midpage.ai/document/welton-v-missouri-89173?utm_source=webapp" opinion_id="89173">91 U.S. 275 [23 L.Ed. 347] (1876). This ‘negative’ aspect of the Commerce Clause prohibits economic protectionism — that is, regulatory measures designed to bene*31 fit in-state economic interests by burdening out-of-state competitors. See, e.g., Bacchus Imports, Ltd. v. Dias, 468 U.S. 263" court="SCOTUS" date_filed="1984-06-29" href="https://app.midpage.ai/document/bacchus-imports-ltd-v-dias-111244?utm_source=webapp" opinion_id="111244">468 U.S. 263, 270-273 [104 S. Ct. 3049" court="SCOTUS" date_filed="1984-06-29" href="https://app.midpage.ai/document/bacchus-imports-ltd-v-dias-111244?utm_source=webapp" opinion_id="111244">104 S.Ct. 3049, 3054-3056, 82 L. Ed. 2d 200" court="SCOTUS" date_filed="1984-06-29" href="https://app.midpage.ai/document/bacchus-imports-ltd-v-dias-111244?utm_source=webapp" opinion_id="111244">82 L.Ed.2d 200, 208-210] (1984); H.P. Hood & Sons, supra, at 532-533 [69 S. Ct. 657" court="SCOTUS" date_filed="1949-04-18" href="https://app.midpage.ai/document/h-p-hood--sons-inc-v-du-mond-104652?utm_source=webapp" opinion_id="104652">69 S.Ct. at 662-663, 93 L.Ed. at 871-872]; Guy v. Baltimore, 100 U.S. 434" court="SCOTUS" date_filed="1880-03-22" href="https://app.midpage.ai/document/guy-v-baltimore-90046?utm_source=webapp" opinion_id="90046">100 U.S. 434, 443 [25 L.Ed. 743] (1880). Thus, state statutes that clearly discriminate against interstate commerce are routinely struck down, see, e.g., Sporhase v. Nebraska ex rel. Douglas, 458 U.S. 941" court="SCOTUS" date_filed="1982-07-02" href="https://app.midpage.ai/document/sporhase-v-nebraska-ex-rel-douglas-110799?utm_source=webapp" opinion_id="110799">458 U.S. 941 [102 S.Ct. 3456, 73 L.Ed.2d 1254] (1982); Lewis v. BT Investment Managers, Inc., 447 U.S. 27" court="SCOTUS" date_filed="1980-06-09" href="https://app.midpage.ai/document/lewis-v-bt-investment-managers-inc-110290?utm_source=webapp" opinion_id="110290">447 U.S. 27 [100 S.Ct. 2009, 64 L.Ed.2d 702] (1980); Dean Milk Co. v. Madison, 340 U.S. 349" court="SCOTUS" date_filed="1951-01-15" href="https://app.midpage.ai/document/dean-milk-co-v-city-of-madison-104847?utm_source=webapp" opinion_id="104847">340 U.S. 349 [71 S.Ct. 295, 95 L.Ed. 329] (1951), unless the discrimination is demonstrably justified by a valid factor unrelated to economic protectionism, see, e.g., Maine v. Taylor, 477 U.S. 131" court="SCOTUS" date_filed="1986-06-23" href="https://app.midpage.ai/document/maine-v-taylor-111715?utm_source=webapp" opinion_id="111715">477 U.S. 131 [106 S.Ct. 2440, 91 L.Ed.2d 110] (1986).”
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 to consumers in Ohio. GM reasons that only Ohio companies owning transportation and distribution equipment can qualify because only these domestic companies can physically deliver natural gas to Ohio consumers. Thus, so it argues, the commissioner’s application is an undue burden on interstate commerce and invalid. The commissioner responds that he treats in-state and out-of-state purchases from independent marketers of natural gas the same; he does not exempt either one’s sales if it does not own the transportation and distribution equipment.
We have before us purchases by GM of natural gas from a company that does not own any production, transportation, or distribution equipment. The commissioner claims that he would tax purchases from these persons whether 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 does not violate GM’s Commerce Clause protection.
On close inspection, GM actually argues that the commissioner’s application 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" court="Ohio" date_filed="1994-03-30" href="https://app.midpage.ai/document/industrial-energy-consumers-of-ohio-power-co-v-public-utilities-commission-6768836?utm_source=webapp" opinion_id="6768836">68 Ohio St.3d 547, 557-558, 629 N.E.2d 414" court="Ohio" date_filed="1994-03-30" href="https://app.midpage.ai/document/industrial-energy-consumers-of-ohio-power-co-v-public-utilities-commission-6768836?utm_source=webapp" opinion_id="6768836">629 N.E.2d 414, 422.
Also, GM’s equal protection argument is submerged in its Commerce Clause argument. It claims that the Equal Protection Clause prohibits Ohio from imposing a more onerous use tax on out-of-state companies engaging in interstate commerce than on domestic companies. However, as concluded in the Commerce Clause discussion, the commissioner does not favor in-state purchases over out-of-
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" court="Ohio" date_filed="1984-04-11" href="https://app.midpage.ai/document/jennings--churella-construction-co-v-lindley-6758334?utm_source=webapp" opinion_id="6758334">10 Ohio St.3d 67, 70, 10 OBR 357, 359-360, 461 N.E.2d 897" court="Ohio" date_filed="1984-04-11" href="https://app.midpage.ai/document/jennings--churella-construction-co-v-lindley-6758334?utm_source=webapp" opinion_id="6758334">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" court="Ohio" date_filed="1976-04-28" href="https://app.midpage.ai/document/servomation-corp-v-kosydar-6755739?utm_source=webapp" opinion_id="6755739">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 exercise of the state’s police power.
“Appellate review of this discretionary power is limited to a determination of whether 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" court="Ohio" date_filed="1980-05-07" href="https://app.midpage.ai/document/state-v-adams-6756850?utm_source=webapp" opinion_id="6756850">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" court="Ohio" date_filed="1976-12-27" href="https://app.midpage.ai/document/chester-township-v-geauga-county-budget-commission-6755946?utm_source=webapp" opinion_id="6755946">48 Ohio St.2d 372, 373 [2 O.O.3d 484, 358 N.E.2d 610, 611].” (Emphasis sic; footnote omitted.)
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.
Accordingly, we affirm the BTA’s decision, since it is reasonable and lawful.
Decision affirmed.