Summary

In 2005, Ohio instituted a commercial activity tax (CAT). Companies without a physical presence in the state could be required to pay the CAT if the company had at least $500,000 in gross receipts from sales in Ohio. Mason Companies is an internet-based retailer that has no physical presence in Ohio but was assessed a CAT based on purchases by Ohio residents.

Taxing entities with no physical presence in the state is a violation of the commerce clause of the U.S. Constitution. Congress is given the authority to regulate interstate commerce. Conversely, states are prohibited from regulating interstate commerce. Otherwise, states could impose taxes on out-of-state businesses to give preferential treatment to resident businesses. Allowing such taxes would impede interstate commerce.

Ohio filed an amicus brief in the Ohio Supreme Court on August 31, 2015. 

UPDATE: The Ohio Supreme Court upheld the Commercial Activities Tax (CAT). 

Download the Amicus Brief: Mason Companies, Inc., Appellant, v. Joseph W. Testa, Tax Commissioner of Ohio, Appellee