The Supreme Court of Ohio reversed a Board of Tax Appeals decision, holding that a contract manufacturer’s sales must be sitused to Ohio. As a result, the company is not entitled to a Commercial Activity Tax (CAT) refund. Additionally, the Court dismissed the company’s alternative argument for lack of preservation and rejected all constitutional challenges under the Due Process Clause, the Commerce Clause, and the Equal Protection Clause.
VVF Intervest, L.L.C, is a contract manufacturer that produced bar soap and other personal care products in Kansas for High Ridge Brands (HRB). Between January 1, 2010, and December 31, 2014, VVF manufactured soap products in Kansas City and, following High Ridge Brands’ instructions, loaded them onto third party trucks bound for a distribution center in Columbus, Ohio. The products typically stayed in Columbus for about two months before being shipped to national retailers, most of which were located out of state.
VVF initially paid Commercial Activity Tax on these sales but later sought a refund because the goods ultimately left the state. The Tax Commissioner denied the refund, explaining that situsing must be determined based on where the purchaser receives the property from the seller, which was in Ohio. The Board of Tax Appeals disagreed and held that the goods’ time in Ohio was only one stage of a continuous delivery process ending out of state. The Commissioner appealed to the Supreme Court of Ohio, and VVF cross appealed, adding an alternative services situsing theory under R.C. 5751.033(I) and several constitutional challenges.
The Supreme Court resolved the case by interpreting R.C. 5751.033(E) to require situsing based on the location where the purchaser receives the property after transportation for that particular sale is complete. Because HRB received VVF’s products in Columbus, the Court held that the statutory analysis ends there, and HRB’s later out‑of‑state shipments to its own customers do not affect the situsing of VVF’s receipts. The Court also concluded that VVF failed to preserve its alternative argument since the theory was not included in its notice of appeal to the Board. The argument was dismissed.
The Court further rejected all of VVF’s constitutional challenges. It held that due process was satisfied because VVF specifically delivered its products to Ohio, which the Court viewed as the company intentionally sending its goods into the state’s market. The Commerce Clause claim failed because VVF had substantial nexus with Ohio through its deliberate shipments, and the CAT was fairly related to benefits the state provided. The equal protection challenge also failed because taxpayers who transact with Qualified Distribution Centers are not similarly situated to those who do not, and the Legislature had a rational basis for offering favorable treatment to QDC‑related transactions. (VVF Intervest, L.L.C. v. Harris, Slip Opinion No. 2025‑Ohio‑5680; Case No. 2023‑1296)