Ohio Economic Nexus Legislation Challenged in Court

The American Catalog Manufacturers Association (ACMA) has filed an action for declaratory judgment against the Ohio Tax Commissioner and Ohio Department of Taxation challenging the constitutionality of the state’s economic nexus legislation, which became effective on January 1, 2018. The action for declaratory judgment claims that the economic nexus legislation violates the commerce clause and due process clause as well as the Internet Tax Freedom Act (ITFA). The ACMA alleges that the economic nexus legislation violates the physical presence requirement as set forth in Quill v. North Dakota. The ACMA also alleges that the software and content delivery network provisions of the legislation violates the ITFA. NEW: The legislation did not include a stay of enforcement and therefore, this provision can still be enforced by Ohio while the litigation is pending. There is a chance that if the state is successful, the law could be enforced effective January 1, 2018. An evaluation of the risk of non collection should be evaluated on a case by case basis. For our previous news item, click here. (Complaint, American Catalog Mailers Association v. Testa, Case No. 17 CV 011440 (Ohio C.P. Dec. 29, 2017))

UPDATE: On December 18, 2018, the American Catalog Mailers Association (ACMA) voluntarily withdrew its lawsuit challenging Ohio’s economic nexus legislation (American Catalog Mailers Association v. Joseph W. Testa, Franklin Cty., Ohio Ct. Com. Pl., No. 17-CV-11440, voluntary dismissal 12/18/18)

UPDATE: Ohio repealed its cookie nexus provisions, the source of the lawsuit described, by signing Am. Sub. House Bill 166, Ohio’s FY’20-‘21 general operating budget, into law, effective August 1, 2019. The budget bill enacted new economic nexus requirements and a tax collection requirement for marketplace facilitators.

Posted on March 14, 2018