Ohio Denies Air Transportation Company the Public Utility Exemption.

In a recent Ohio Board of Tax Appeals decision, it was determined that an air transportation company was not able to benefit from the public utility exemption. The taxpayer claimed that it was a common carrier providing services to the general public without discrimination in its provision. The taxpayer also provided the basis that since large commercial airlines were exempt as public utilities; smaller common carriers should be allowed the same exemption due to the elimination of any distinctions between carriers in regards to prior deregulation. The Board concluded that since the taxpayer negotiated contracts individually and did not provide flights on a regular basis, the taxpayer was not afforded the public utility exemption. The Board further stated that the taxpayer’s services were more of transportation or hauling services than common carrier services; prior case law supported the Board’s decision. The taxpayer also tried to establish that it was allowed an exemption for vessels used in interstate commerce and motor vehicles used in highway transportation for hire. The Board stated that airplanes are not included in the definition of vessels and noted that the Ohio Supreme Court ruled in a previous case that hauling services do not qualify as motor vehicles used in highway transportation for hire. The Board dismissed the taxpayer’s final argument that there was an unconstitutional treatment of its business in comparison with other air transportation businesses considered tax exempt. The Board stated that they did not have the jurisdiction to rule on constitutional matters. (Castle Aviation, Inc. v. Zaino, Tax Commissioner, Ohio Board of Tax Appeals, No. 2003-M-146, January 14, 2005)

Posted on February 15, 2005