Case Title: Newegg, Inc. v. Testa

Citation: 2016-Ohio-7762

Docket Number: 2015-0483

State: ohio

Court: Ohio Supreme Court

Date: 2016-11-17T00:00:00Z

Document:
[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as 
Newegg, Inc. v. Testa, Slip Opinion No. 2016-Ohio-7762.] 
 
 
 
NOTICE 
This slip opinion is subject to formal revision before it is published in an 
advance sheet of the Ohio Official Reports.  Readers are requested to 
promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65 
South Front Street, Columbus, Ohio 43215, of any typographical or other 
formal errors in the opinion, in order that corrections may be made before 
the opinion is published. 
 
 
SLIP OPINION NO. 2016-OHIO-7762 
NEWEGG, INC., APPELLANT AND CROSS-APPELLEE, v. TESTA, TAX COMMR., 
APPELLEE AND CROSS-APPELLANT. 
[Until this opinion appears in the Ohio Official Reports advance sheets, it 
may be cited as Newegg, Inc. v. Testa, Slip Opinion No. 2016-Ohio-7762.] 
Commercial-activity tax—Commerce Clause—Physical presence of an interstate 
business within Ohio is not a necessary condition for imposing the 
obligations of the commercial-activity tax. 
(No. 2015-0483—Submitted May 3, 2016—Decided November 17, 2016.) 
APPEAL and CROSS-APPEAL from the Board of Tax Appeals, No. 2012-0234. 
____________________ 
O’NEILL, J. 
{¶ 1} We decide this case as a companion case to Crutchfield Corp. v. Testa, 
__ Ohio St.3d __, 2016-Ohio-7760, __ N.E.3d __, with which this case was 
consolidated for purposes of oral argument.  According to the tax commissioner’s 
final determination, appellant and cross-appellee, Newegg, Inc., is “the second 
largest on-line only retailer in the United States selling information technology and 
SUPREME COURT OF OHIO 
 
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computer electronics products.”  Orders are filled from processing centers in 
California and New Jersey.  Newegg appeals from the imposition of Ohio’s 
commercial-activity tax (“CAT”) on revenue it has earned from sales of computer-
related products that it ships into the state of Ohio.  Like Crutchfield, Newegg 
contests its CAT assessments based on Newegg’s being operated outside Ohio, 
employing no personnel in Ohio, and maintaining no facilities in Ohio. 
{¶ 2} The six assessments at issue here cover the period from July 1, 2005, 
through a first-quarter 2011 estimate.  In determining that our holding in 
Crutchfield requires us to affirm the assessments at issue here, we rely on the 
stipulation that “Newegg does not contest the amounts of actual and estimated Ohio 
gross receipts” on which the assessments are based.  For tax years 2005 through 
2009, Newegg stipulated to receipts of $272,289,269, which formed the basis for 
CAT assessments totaling $447,580 for that period.  The receipts for 2010 through 
March 2011 were estimated at nearly $20 million per quarter, and Newegg 
stipulated to those amounts also.  Consequently, Newegg satisfied the $500,000 
sales-receipts threshold, triggering its CAT liability during that period.  See R.C. 
5751.01(H)(3) and (I)(3).  Newegg, however, asserts that Ohio’s CAT violates the 
Commerce Clause of the United States Constitution and that therefore Ohio had no 
authority to tax any of those receipts. 
{¶ 3} Just as in Crutchfield, we first confront a cross-appeal by the tax 
commissioner concerning whether Newegg properly raised and preserved its 
constitutional challenge.  The circumstances of the present case being no different 
from those in Crutchfield, we resolve the cross-appeal against the tax 
commissioner’s position on the authority of Crutchfield.  Similarly, we rely on 
Crutchfield to reject Newegg’s contentions that the CAT statutes should be 
construed to preclude the assessments at issue in this appeal. 
{¶ 4} In Crutchfield, we held that under the Commerce Clause, the physical 
presence of an interstate business within Ohio is not a necessary condition for 
January Term, 2016 
 
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imposing the obligations of the CAT law, given that the $500,000 sales-receipts 
threshold adequately assures that the taxpayer’s nexus with Ohio is substantial 
pursuant to R.C. 5751.01(H)(3) and (I)(3).  Crutchfield Corp., __ Ohio St.3d __, 
2016-Ohio-7760, __ N.E.3d __, ¶ 3, 5.  Applying that holding here resolves 
Newegg’s constitutional challenge under the Commerce Clause.  It also makes 
unnecessary consideration of whether Newegg’s Internet contacts with its Ohio 
customers constituted a physical presence for Commerce Clause purposes. 
{¶ 5} For the foregoing reasons, we affirm the decision of the BTA and 
uphold the CAT assessments against Newegg. 
Decision affirmed. 
O’CONNOR, C.J., and PFEIFER, O’DONNELL, and FRENCH, JJ., concur. 
LANZINGER and KENNEDY, JJ., dissent and would reverse the decision of 
the Board of Tax Appeals for the reasons stated in the dissenting opinion in 2015-
0386, Crutchfield v. Testa. 
_________________ 
 
Brann & Isaacson, Martin I. Eisenstein, David W. Bertoni, and Matthew P. 
Schaefer; and Baker Hostetler and Edward J. Bernert, for appellant and cross-
appellee. 
 
Michael DeWine, Attorney General, and Daniel W. Fausey and Christine 
Mesirow, Assistant Attorneys General, for appellee and cross-appellant. 
 
Macey, Wilenski & Hennings, L.L.C., and Peter G. Stathopoulos; and 
Robert Alt, urging reversal for amici curiae Buckeye Institute for Public Policy 
Solutions, Mackinac Center for Public Policy, NetChoice, and American Catalog 
Mailers Association, Inc. 
Fredrick Nicely and Nikki Dobay, urging reversal for amicus curiae Council 
on State Taxation. 
 
Goldstein & Russell, P.C., Eric F. Citron, and Thomas C. Goldstein, urging 
affirmance for amici curiae National Governors Association, National Conference 
SUPREME COURT OF OHIO 
 
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of State Legislatures, Council of State Governments, National Association of 
Counties, National League of Cities, U.S. Conference of Mayors, International 
City/County Management Association, International Municipal Lawyers 
Association, and Government Finance Officers Association. 
 
Bricker & Eckler, L.L.P., Mark A. Engel, and Anne Marie Sferra, urging 
affirmance for amici curiae Ohio Manufacturers’ Association, Ohio State Medical 
Association, Ohio Dental Association, and Ohio Chemistry Technology Council. 
 
Bruce Fort, urging affirmance for amicus curiae Multistate Tax 
Commission. 
_________________