Ohio Tax - Manufacturers' Education Council

32. Oil Exchanges
2011 Ohio Tax Conference
Ohio Commercial Activity Tax (CAT) Audit Experiences
Appendix A
The taxpayer (an oil company) exchanges oil/gas it owns in Columbus, Ohio for oil/gas another
oil company owns in Van Wert, Ohio. The taxpayer then sells the oil/gas it now owns in Van
Wert, Ohio to a customer located in Van Wert. The taxpayer included the gross receipts from its
sale of the oil/gas to its customer in Van Wert.. The Department determined that the taxpayer also
should have included as taxable gross receipts the amount it exchanged with the other oil
company. Further, the other oil company would also need to include as taxable gross receipts the
amount it exchanged with the taxpayer.
33. Agency
The taxpayer argued that the relationship it had with independent contractors the taxpayer
contracted with to distribute tangible personal property was an agency relationship. The taxpayer
marked up the tangible personal property it purchased by 8% when selling the product to the
independent contractors. As a result, the taxpayer argued that only the 8% mark up was subject to
CAT. The Department determined that an agency relationship was not created by the taxpayer
and the independent contractors and the entire amount the taxpayer received from the independent
contractors was subject to CAT.
34. R.C. 5751.013 gross receipts
The taxpayer admitted to having the vendor ship widgets to an unoccupied address in Indiana so
the vendor could avoid CAT on the gross receipts. The widgets actually never came to rest in
Indiana, but instead were transported to Ohio. R.C. 5751.013 provides that the Department may
assess CAT against any taxpayer who transfers tangible personal property into this state for the
person's own use within one year after the person receives the property outside this state. The
Department must prove that the person received the property outside the state to avoid in whole
or in part the CAT.
SITUSING
35. Management fees for managing leases
Taxpayer provides lease management services for banks who lease property to bank customers.
The taxpayer manages the billing, mailing, cash receipt, etc for the bank. The Department
determined that the services could be sitused based on where the leased property is located/used,
the banks’ headquarters or some other reasonable, consistent and uniform method.
36. Airplane lease
The taxpayer owns two single member LLCs that own one airplane each. The two planes are
leased/rented to a third party (who has the pilots), who in turn, provides flights for the taxpayer.
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