Gasoline-tax case is heard by court

Associated Press

COLUMBUS

Ohio is unconstitutionally diverting $140 million annually from gasoline sales to non-roadwork accounts for schools and cities through the misapplication of the state’s updated business tax, according to a coalition of builders, contractors, construction companies and engineers.

The groups argue in a lawsuit that reached the Ohio Supreme Court on Wednesday that the state constitution bars money raised from the sale of fuel from being used on anything but highway upkeep.

The groups also argue that voters repeatedly have rejected the notion of diverting taxes raised from fuel sales to nonroad work.

“The diversion of any of these excise taxes undermines the will of the people to preserve the Motor- Vehicle-Fuel-related excise tax base for public road repair and construction,” Anthony Ehler, an attorney representing both construction companies and county engineers whose budgets rely on fuel taxes, said in a March 20 court filing.

The court heard arguments from both sides Wednesday and is expected to rule this fall.

At issue is a 2005 rewrite of Ohio’s tax code that taxes a wide variety of business activity, not just a company’s revenue.

Lawmakers approved the tax as an alternative to the state’s former business tax, which was criticized as having high rates but numerous loopholes — it was sometimes dubbed a “Swiss cheese” approach — that reduced its ability to raise revenue.

The new tax is low — 0.26 percent — but is applied to as many businesses as possible with fewer exemptions.

The debate doesn’t involve the 28-cent state gasoline tax whose revenues are distributed automatically to the state, counties and local governments for road work.

The state argues that the tax — called the Commercial Activities Tax, or CAT — is not on gasoline itself but on companies that make money selling fuel. It also said opponents of the tax are disguising their objections to paying it “as a crusade to save highway spending.”