Case Title: Beaver Excavating Co. v. Testa

Citation: 2012-Ohio-5776

Docket Number: 2011-1536

State: ohio

Court: Ohio Supreme Court

Date: 2012-12-07T00:00:00Z

Document:
[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as 
Beaver Excavating Co. v. Testa, Slip Opinion No. 2012-Ohio-5776.] 
 
 
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. 2012-OHIO-5776 
BEAVER EXCAVATING COMPANY ET AL., APPELLANTS, v. TESTA, TAX COMMR. 
APPELLEE. 
[Until this opinion appears in the Ohio Official Reports advance sheets,  
it may be cited as Beaver Excavating Co. v. Testa,  
Slip Opinion No. 2012-Ohio-5776.] 
(No. 2011-1536—Submitted July 11, 2012—Decided December 7, 2012.) 
APPEAL from the Court of Appeals for Franklin County,  
No. 10AP-581, 2011-Ohio-3649. 
____________________ 
SYLLABUS OF THE COURT 
The allocation under R.C. 5751.20 of commercial-activity-tax revenues derived 
from the gross receipts of the sale of motor-vehicle fuel to nonhighway 
purposes violates the Ohio Constitution, Article XII, Section 5a. 
____________________ 
 
CUPP, J. 
{¶ 1} This case challenges the constitutionality of the Ohio commercial 
activity tax (“CAT”), R.C. Chapter 5751, as applied to gross receipts from motor-
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vehicle-fuel sales.  In particular, we are asked to determine whether the 
imposition of the CAT on revenues derived from the sales of motor-vehicle fuel is 
unconstitutional because it contravenes Ohio Constitution, Article XII, Section 5a.  
For the reasons that follow, we hold that the expenditure of the CAT revenue that 
is derived from motor-vehicle-fuel sales contravenes the Ohio Constitution.  
Therefore, we reverse the judgment of the court of appeals and remand the cause 
to that court for further proceedings. 
I. Factual and Procedural Background 
{¶ 2} Appellants consist of two groups: contractors and county 
engineers.  The parties who are contractors are Beaver Excavating Company; 
Broshear Contractors, Inc.; Gerken Paving, Inc.; Independence  Excavating, Inc.; 
Kokosing Construction Company, Inc.; Lykins Companies, Inc.; Ohio Machinery 
Co., Inc.; Prus Construction Company; The Ruhlin Company; and J.D. 
Williamson Construction Company, Inc. (collectively, the "taxpayers"). The 
remaining plaintiffs are the county engineers of Ashland and Highland Counties 
(collectively, the "county engineers"). 
{¶ 3} In 2008, appellants filed a declaratory-judgment action in the Court 
of Common Pleas of Franklin County against appellee, the Tax Commissioner of 
Ohio.  The taxpayers claimed that in the course of their business they generated 
gross receipts derived from motor-vehicle-fuel sales and that they have been 
improperly subject to, and have paid, the CAT as measured by those gross 
receipts since July 2007.  The county engineers claimed that their budgets for 
county-infrastructure projects (e.g., highway and bridge construction and repair) 
depend, in part, on moneys derived from taxes relating to motor-vehicle-fuel sales 
and that they are being deprived of that money because the CAT is not collected 
and distributed in a manner consistent with Ohio Constitution, Article XII, 
Section 5a.  Appellants sought a judgment declaring that the CAT, as it relates to 
motor-vehicle-fuel sales, violates Section 5a.  Additionally, they requested an 
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injunction to prevent the tax commissioner from levying, enforcing, or collecting 
the CAT as it relates to gross receipts derived from the sales of motor vehicle fuel. 
{¶ 4} The parties filed motions for summary judgment.  The trial court 
granted the tax commissioner’s motion and denied the taxpayers and county 
engineers’ motion.  The trial court relied heavily on Ohio Grocers Assn. v. Levin, 
123 Ohio St.3d 303, 2009-Ohio-4872, 619 N.E.2d 446, reasoning that if the 
imposition of the CAT on gross receipts derived from food sales is constitutional, 
then by analogy, the imposition of the CAT on gross receipts derived from motor-
vehicle-fuel sales is similarly constitutional.  In Ohio Grocers, this court held that 
the CAT was not an excise tax on the sale of food for off-premise consumption 
and did not violate the prohibition of sales or excise taxes on food found in the 
Ohio Constitution, Article XII, Sections 3(C) and 13.  Ohio Grocers at ¶ 1. 
{¶ 5} The appellate court also applied the rationale and conclusions of 
Ohio Grocers to the issue presented by appellants, and it affirmed the trial court’s 
judgment.  The appellate court concluded that the background and history of 
Section 5a did not support the contention that the CAT was a tax “relating to” 
motor vehicle fuel sales.  Beaver Excavating Co. v. Levin, 10th Dist. No. 10AP-
581, 2011-Ohio-3649, ¶ 34.  The court acknowledged that a relationship exists 
between the CAT and motor-vehicle-fuel sales, but it held that the “relationship is 
too attenuated to find that the statutory allocation of the CAT moneys violates 
Section 5a.”  Id.  Based on this rationale, the court overruled appellants’ first 
assigned error and overruled without discussion the two remaining assigned 
errors. 
{¶ 6} We accepted 
appellants’ appeal under our discretionary 
jurisdiction.  Beaver Excavating Co. v. Testa, 130 Ohio St.3d 1493, 2011-Ohio-
6556, 958 N.E.2d 956. 
 
 
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II. Standing 
{¶ 7} Appellants assert that the CAT is unconstitutional because the 
revenue derived from the CAT relates to the sale of motor-vehicle fuel and the 
revenue is not being expended in accordance with the restricted purposes of Ohio 
Constitution, Article XII, Section 5a. 
{¶ 8} As an initial matter, the tax commissioner asserts that appellants 
lack standing.  Standing is a threshold requirement that must be met before a court 
may consider the merits of a legal claim.  Ohio Pyro, Inc. v. Ohio Dept. of 
Commerce, 115 Ohio St.3d 375, 2007-Ohio-5024, 875 N.E.2d 550, ¶ 27; 
Cuyahoga Cty. Bd. of Commrs. v. State, 112 Ohio St.3d 59, 2006-Ohio-6499, 858 
N.E.2d 330, ¶ 22. Standing exists only when (1) the complaining party has 
suffered or has been threatened with direct and concrete injury in a manner or 
degree different from that suffered by the public in general, (2) the law in 
question caused the injury, and (3) the relief requested will redress the injury.  
Cuyahoga Cty. Bd. of Commrs. at ¶ 22. 
{¶ 9} The tax commissioner contends that appellants do not have 
standing because the relief appellants requested cannot redress their injury.  In 
support of this argument, the tax commissioner states that the taxpayers question 
the validity of collecting the CAT and advocate for the cancellation of that tax 
with respect to its application to motor-vehicle-fuel sales. 
{¶ 10} The tax commissioner distinguishes the taxpayers’ claim from one 
that would assert that tax revenues were being expended outside the permissible 
scope of Section 5a, in which case the proper remedy would be enforcement of 
the spending restriction.  Thus, according to the tax commissioner, because the 
only remedy a court can impose for violating Section 5a is the enforcement of the 
spending restraint, not the cancellation of the collection of the CAT as applied to 
motor-vehicle-fuel sales, the taxpayers’ requested relief differs from the relief that 
is available under Section 5a.  The tax commissioner contends that because the 
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relief requested by the taxpayers cannot be obtained, the injury is not redressable 
in this case, and, thus, the taxpayers lack standing.  See, e.g., Clifton v. 
Blanchester, 131 Ohio St.3d 287, 2012-Ohio-780, 964 N.E.2d 414, ¶ 25-29. 
{¶ 11} The tax commissioner acknowledges that the county engineers 
could have standing but contends that they do not have standing in this case 
because they have not requested enforcement of the spending restraint of Section 
5a.  Finally, the tax commissioner argues that “standing is jurisdictional, the issue 
is non-waivable, and the Court must satisfy itself that standing exists.” 
{¶ 12} We conclude that the appellants do have standing.1  Appellants 
originated this matter as a declaratory-judgment action.  The Declaratory 
Judgment Act authorizes a party to seek a determination of legal rights, even in 
the context of a broad constitutional challenge to the imposition of a tax.  See R.C. 
2721.03; Ohio Grocers, 123 Ohio St.3d 303, 2009-Ohio-4872, 619 N.E.2d 446, at 
¶ 8; Herrick v. Kosydar, 44 Ohio St.2d 128, 339 N.E.2d 626 (1975).  In fact, the 
General Assembly explicitly anticipated the constitutional challenge raised by the 
appellants.  A provision in the CAT legislation, R.C. 5751.31, expressly creates a 
special procedure for a direct appeal from a tax commissioner’s determination to 
this court, in cases involving the commissioner’s authority to assess taxes, if the 
primary issue is “an issue arising under Section * * * 5a * * * of Article XII, Ohio 
Constitution.” 
{¶ 13} Moreover, in addressing an analogous matter, the United States 
Supreme Court has found that the argument that appellants lack standing because 
they sought to cancel the tax rather than to redirect the proceeds is without merit.  
In United States v. Butler, 297 U.S. 1, 56 S.Ct. 312, 80 L.Ed. 477 (1936), the 
                                                 
1  The tax commissioner concedes that he did not pursue the issue of lack of standing, but he 
argues that the issue is not waivable because it is jurisdictional.  We will address the standing 
argument in its jurisdictional aspect only.  To the extent that the tax commissioner’s argument 
relates to nonjurisdictional questions of the capacity to sue or whether these appellants properly 
stated a claim for declaratory relief, we regard such issues as either waived or merged into the 
merits issue.   
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government argued that the taxpayers did not have standing to challenge the 
constitutionality of a federal tax imposed by the Agricultural Adjustment Act.  
The government argued that the taxpayers were challenging how the tax revenues 
were spent and not the legality of the tax.  The Supreme Court, however, 
determined the taxpayers had standing to “challenge the legality of the exaction.”  
Id. at 61.  The court noted that the taxpayers were not contesting expenditures 
without challenging the legality of the tax, but were “resist[ing] the exaction as a 
step in an unauthorized plan.”  Id. at 58. 
{¶ 14} We also reject the tax commissioner’s distinction between 
cancellation of a tax and redirection of the proceeds as a basis upon which to deny 
standing.  In this respect, the state challenges whether the appellants chose the 
correct remedy.  That is a matter to be decided upon the merits and not as a 
threshold issue of jurisdiction. 
{¶ 15} Accordingly, we conclude that appellants meet the traditional 
requirements for standing.  The taxpayers (1) allege that they have paid the CAT 
with respect to gross receipts arising from motor fuel sales, (2) claim an injury 
because the CAT has been levied on them and is not being expended for the 
purposes stated in Section 5a, and (3) have requested a remedy, including a 
declaratory judgment.  Thus, the taxpayers have asserted a concrete injury, the 
cause of that injury, and redressability.  Cuyahoga Cty. Bd. of Commrs., 112 Ohio 
St.3d 59, 2006-Ohio-6499, 858 N.E.2d 330, at ¶ 22.  See also Ohio Trucking 
Assn. v. Charles, ___ Ohio St.3d ___, 2012-Ohio-5679, ___ N.E.2d ___, ¶ 7. 
{¶ 16} Finally, the inclusion of the county engineers in the litigation does 
not alter our analysis.  Without deciding whether the county engineers also have 
standing, it is sufficient for purposes of jurisdiction that at least one plaintiff has 
standing for the claims of the remaining plaintiffs to be heard and the court to 
proceed to decide the case on the merits.  See, e.g., Cincinnati Golf Mgt. Inc., v. 
Testa, 132 Ohio St.3d 299, 2012-Ohio-2846, 971 N.E.2d 929, ¶ 13. 
January Term, 2012 
7 
 
III. Analysis 
{¶ 17} We now turn to the merits of this matter.  Our analysis begins with 
a review of the relevant constitutional and statutory provisions, which are the 
Ohio Constitution, Article XII, Sections 5 and 5a, and the CAT statute. 
A.  The Constitutional Provisions 
{¶ 18} Section 5a restricts the expenditure or use of revenue from certain 
taxes: 
 
No moneys derived from fees, excises, or license taxes 
relating to registration, operation, or use of vehicles on public 
highways, or to fuels used for propelling such vehicles, shall be 
expended for other than costs of administering such laws, statutory 
refunds and adjustments provided therein, payment of highway 
obligations, costs for construction, reconstruction, maintenance 
and repair of public highways and bridges and other statutory 
highway purposes, expense of state enforcement of traffic laws, 
and expenditures authorized for hospitalization of indigent persons 
injured in motor vehicle accidents on the public highways. 
 
{¶ 19} Section 5a was added to the Ohio Constitution in 1947 by initiative 
petition.  It reflects the will of the state’s citizens to have money obtained from 
taxes, fees, and licenses relating to the operation of motor vehicles and motor-
vehicle fuel expended exclusively for road projects, highway improvement and 
other similar costs such as the enforcement of traffic laws.  Ohio Secretary of 
State, Proposal Submitted by Initiative Petition, Certified Ballot Language, 
November 4, 1947; see 1982 Ohio Atty.Gen.Ops. No. 82-084 (Ohio Secretary of 
State’s official pamphlet details the arguments in favor of and against the 
adoption of Section 5a).  Until the amendment was adopted, money generated 
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from motor-vehicle fuel taxes, originally intended for the construction, 
maintenance, and repair of roads, was occasionally diverted for other uses, 
including relief of the poor during the Great Depression, the state’s schools and 
the general-revenue fund.  H.B. No. 44, 111 Ohio Laws 294 (the state’s first 
motor-fuel tax, imposed in 1925, was statutorily earmarked for highway-related 
purposes); H.B. No. 206, 112 Ohio Laws 508 (an additional motor-fuel tax, 
imposed in 1927, was also statutorily earmarked for highway purposes); Am.S.B. 
No. 3, 114 Ohio Laws Part II, 14 (in 1932, motor-fuel tax revenues were diverted 
to provide relief for the poor); H.B. No. 337, 115 Ohio Laws, Part I, 61 (in 1933, 
motor-fuel tax revenues diverted to provide further relief for the poor); 
Am.Sub.S.B. No. 354, 115 Ohio Laws 631 (in 1934, a tax on liquid fuel, 
including gasoline, was imposed and appropriated for school funding); Sub.H.B. 
No. 1, 118 Ohio Laws 7 (liquid-fuel tax provisions amended to allocate revenue 
to the state’s general-revenue fund). 
{¶ 20} Section 5a was designed to stop the diversion of tax revenues 
intended for highway purposes to nonhighway related purposes.  As stated in the 
official publicity pamphlet for the amendment, the argument for the amendment 
included the following statement: 
 
This Amendment simply says you want your automobile 
license and gas tax money to go for better roads and streets. 
* * * 
Ohio originally promised that automobile license and gas 
tax funds would go for roads, streets, and related purposes.  But 
temptation was too great and millions of these special tax dollars 
have been and are being spent for other purposes. 
 
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9 
 
Ohio Secretary of State, Certified Ballot Language.  The argument against the 
amendment included the following: 
 
This amendment places the Legislature in a strait-jacket and 
severely handicaps it in applying the revenue of the state to the 
needs of the state.  The Legislature could not use highway 
revenues for emergency purposes and the revenues from such taxes 
will have to be spent for roads and streets and for no other purpose. 
 
Id. 
{¶ 21} In 1972, the Ohio Constitutional Revision Committee concluded 
that Section 5a requires that “all of the revenues derived from the registration of 
motor vehicles and from the taxes imposed on the purchase of fuels for motor 
vehicles be expended on the requirements of the state’s highway system.”  
Legislative Service Commission, Memorandum of the Ohio Constitutional 
Revision Commission Finance and Taxation Committee (September 22, 1972), 
http://www.lsc.state.oh.us/ocrc/v4%20pgs%201647-1803%20finance-taxation% 
201804-2194%20 elections-suffrage.pdf (accessed Dec. 5, 2012). 
{¶ 22} Following the adoption of Section 5a, the provisions pertaining to 
the motor-vehicle-fuel tax and the liquid-fuel tax were revisited by the legislature 
in a special session of the General Assembly.  The rate of the motor-vehicle-fuel 
tax was increased.  Am.S.B.No. 356, 122 Ohio Laws 783.  Then, the General 
Assembly repealed the liquid-fuel tax provisions to bring the statutes into 
compliance with the newly adopted Section 5a.  Am.S.B. No. 358, 122 Ohio 
Laws 807.  These legislative changes ensured that the level of taxation for road 
projects and highway improvement was not reduced, but the revenue resulting 
from these taxes was redirected in a manner compliant with Section 5a. 
 
 
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B.  The Adoption of the CAT 
{¶ 23} In 2005, the General Assembly enacted the CAT.  Am.Sub.H.B. 
No. 66, 151 Ohio Laws, Part II, 2868.  The CAT was enacted to replace the 
existing corporate-franchise and personal-property taxes.  See R.C. 5733.01(G)(1) 
and (2) (phasing out the corporate-franchise tax); R.C. 5711.22(E), (F), (G) 
(phasing out the personal-property tax); R.C. 5751.031 (phasing in the CAT). 
{¶ 24} The CAT is levied “on each person with taxable gross receipts for 
the privilege of doing business in this state.”  R.C. 5751.02(A).  Persons with less 
than $150,000 of gross receipts in a calendar year are exempted from paying the 
tax.  R.C. 5751.01(E)(1).  Persons making between $150,000 and $1 million in 
annual gross receipts pay a flat fee.  R.C. 5751.03(B).  Persons with annual gross 
receipts over $1 million owe “the product of two and six-tenths mills per dollar 
times the remainder of the taxpayer’s taxable gross receipts.”  R.C. 5751.03(A). 
{¶ 25} The term “gross receipts” includes amounts realized from sales.  
R.C. 5751.01(F). 
{¶ 26} Excluded from the definition of “gross receipts” and, therefore, not 
subject to the CAT, are amounts paid by licensed motor-fuel dealers, licensed 
retail dealers, or licensed permissive motor-fuel dealers in state and federal motor-
fuel excise taxes with respect to motor-fuel receipts.  R.C. 5751.20(F)(2)(r).  
Further, the CAT statute excludes from gross receipts “[a]ny receipts for which 
the tax imposed by this chapter is prohibited by the constitution or laws of the 
United States or the constitution of this state.”  Former R.C. 5751.01(F)(2)(ff).2  
Revenues placed in the CAT receipts fund are credited to the general-revenue 
                                                 
2  This provision is presently codified as R.C. 5751.01(F)(2)(jj). 
 
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fund, the school-district tangible-property-tax fund, and the local-government 
tangible-personal-property-tax repayment fund.  R.C. 5751.20(B).3   
C. Presumption of Constitutionality 
{¶ 27} As we have stated, “ ‘Laws are entitled to a “strong presumption of 
constitutionality,” and the party challenging the constitutionality of a law “bears 
the burden of proving that the law is unconstitutional beyond a reasonable 
doubt.” ’ ”  Ohio Grocers, 123 Ohio St.3d 303, 2009-Ohio-4872, 916 N.E.2d 446, 
at ¶ 11, quoting Columbia Gas Transm. Corp. v. Levin, 117 Ohio St.3d 122, 2008-
Ohio-511, 882 N.E.2d 400, ¶ 41, quoting Yajnik v. Akron Dept. of Health, Hous. 
Div., 101 Ohio St.3d 106, 2004-Ohio-357, 802 N.E.2d 632, ¶ 16. 
D.  Interpretation of the Phrase “Relating To” in Section 5a 
{¶ 28} The question to be decided in the instant case is whether the CAT 
is a tax “relating to” motor-vehicle-fuel sales such that it implicates the 
prohibition in Section 5a on spending revenue for nonhighway purposes. 
{¶ 29} The Constitution does not define the phrase “relating to,” and the 
appellants and the tax commissioner offer differing perspectives on the 
interpretation this court should give to that phrase.  The appellants assert that the 
phrase “relating to” is broad and comprehensive.  In contrast, the tax 
commissioner offers a narrower construction of the phrase “relating to” and 
contends that as used in Section 5a, the taxing statute (1) must explicitly refer to 
motor-vehicle fuel or (2) must specifically target highway users. 
{¶ 30} We have previously held that the phrase “relating to” should be 
construed according to the plain and ordinary meaning given in the context of 
“political discussions and arguments,” in order to carry out the intention and 
                                                 
3  A portion of the CAT is also allocated to the revenue-enhancement fund to be “used to defray 
the costs incurred by the department of taxation in administering the tax imposed by this chapter 
and in implementing tax reform measures.”  R.C. 5751.20(B).  R.C. 5751.20 was most recently 
modified by Am.S.B. 316, effective September 24, 2012.  The most recent modification is not 
relevant to this appeal.   
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objectives of the people in making the Constitution, both as it was adopted and 
has been amended.  State ex rel. Keller v. Forney, 108 Ohio St. 463, 466, 141 
N.E. 16 (1923); Hockett v. State Liquor Licensing Bd., 91 Ohio St. 176, 179-180, 
110 N.E. 485 (1915).  The text and history of Section 5a makes clear that the 
purpose of the amendment is to ensure that any revenue raised from taxes relating 
to motor vehicle fuels is expended only for the purposes specified in Section 5a 
and is not diverted to other governmental purposes.  See, e.g., Stockberger v. 
Henry, __ Ohio St.3d __, 2012-Ohio-5392, ___ N.E.2d ___.  See also 1982 Ohio 
Atty.Gen.Ops. No. 82-084; Constitutional Revision Committee, Finance and 
Taxation Committee, supra. 
{¶ 31} In view of the foregoing, the phrase “relating to” is plainly 
intended to be interpreted broadly.  First, the drafters of the amendment employed 
a broad term, “derived from,” to connect “moneys” with “fees, excises, or license 
taxes relating to registration, operation, or use of vehicles on public highways, or 
to fuels used for propelling such vehicles.”4  The evident purpose for using this 
particular terminology is to ensure that any revenue from these taxes is clearly 
within the scope of Section 5a’s restriction on its use. 
{¶ 32} Likewise, the term “relating to” broadly connects “fees, excises, or 
license taxes” to the sources from which the revenue is to be “derived,” which are 
the “registration, operation, or use of vehicles on public highways, or to fuels used 
for propelling such vehicles.”  The evident purpose here was to ensure that these 
objects of fees and taxation would not be narrowed or diminished through any 
                                                 
4 But see Ohio Trucking Assn. v. Charles, ___ Ohio St.3d ___, 2012-Ohio-5679, ___ N.E.2d ___, 
¶ 1, concluding that the fees charged by the registrar of motor vehicles for the production of 
certified abstracts of driving records are not “related to” the registration, operation, or use of 
vehicles on public highways within the meaning of Ohio Constitution, Article XII, Section 5a. 
 
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legislative efforts to statutorily redefine the terms as an attempted end-run to the 
amendment.5   
{¶ 33} In this context, the CAT proceeds bear a logical and close 
connection to motor-vehicle fuels.  The CAT proceeds are (1) money (2) derived 
(3) from an excise (4) on motor-vehicle-fuel sales.  Although not a transactional 
tax, the amount of tax one must pay to the state because of the CAT is directly 
based on motor-vehicle-fuel sales revenue.  Objectively, one is hard pressed to 
deny the close connection between the tax paid (moneys derived) and the source 
(excise on “fuels used”) of that tax revenue.  The close relationship is not severed 
because the excise is on the revenue derived from the sales of motor-vehicle fuel 
rather than the quantity of such fuel.  There is still a close connection to the “fuels 
used for propelling vehicles” on public highways and the revenue generated to fall 
within the amendment’s intended ambit.  Consequently, we conclude that the 
CAT revenues derived from sales of motor-vehicle fuel relate to motor-vehicle 
fuel used for propelling vehicles on public highways as contemplated within 
Section 5a. 
{¶ 34} Ohio Grocers is not dispositive of this appeal, contrary to the 
contention of the tax commissioner.  In Ohio Grocers, we held that the CAT was 
not a transactional tax, that is, a tax on the sale or purchase of food, as 
contemplated by the Ohio Constitution, and, therefore, it did not violate the 
constitutional prohibitions against sales or excise taxes on food.  Id., 123 Ohio 
St.3d 303, 2009-Ohio-4872, 916 N.E.2d 466, at ¶ 48.  Instead, we held that the 
CAT was an excise tax that operated as a privilege-of-doing-business tax.  Id. at 
¶ 43.  In this sense, the gross receipts that form the CAT base measure the value 
of the privilege that is being taxed.  Consequently, the CAT was not a prohibited 
                                                 
5 The amicus brief of the County Engineers Association of Ohio suggests that it would be possible 
for the General Assembly to divert virtually all the tax revenue raised from motor-vehicle fuels to 
general-fund purposes if Section 5a does not encompass tax revenue derived from an excise tax on 
motor-vehicle fuel such as the CAT. 
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excise tax imposed on transactions of sales and purchases of food.  Id. at ¶ 22-23, 
43-49. 
{¶ 35} The distinction between transactional and privilege-of-doing-
business taxes that was central to the Ohio Grocers decision does not apply here, 
however.  The text and meaning of the constitutional provisions controlling in 
Ohio Grocers is different from the text and meaning of the constitutional 
provisions now at issue.  Ohio Constitution, Article XII, Section 3(C) authorizes 
the enactment of excise and franchise (i.e., privilege) taxes, but then expressly 
limits those taxes: “no excise tax shall be levied or collected upon the sale or 
purchase of food for human consumption off the premises where sold.”  
(Emphasis added.)  Ohio Constitution, Article XII, Section 13 similarly limits any 
authority for imposing certain taxes, specifying that “[n]o sales and other excise 
taxes shall be levied or collected” upon certain dealings that are transactional in 
nature.  (Emphasis added.) 
{¶ 36} Section 5a, however, uses the phrase “relating to,” and taxes 
imposed with respect to receipts from transactions in both motor-fuel and other 
fuel have been characterized as a privilege tax.  Hickok Oil Corp. v. Evatt, 141 
Ohio St. 644, 653, 49 N.E.2d 937 (1943) (characterizing the motor-vehicle-fuel 
excise taxes and the now-repealed liquid-fuel tax as privilege taxes).  The 
structure of Section 5a also contrasts with the constitutional provisions at issue in 
Ohio Grocers, which limit their applicability only to excise and transactional 
taxes—but not to privilege taxes.  Section 5a does not provide any express 
limitations of its own applicability. 
{¶ 37} These differences between Section 3(C) and Section 13 in Ohio 
Grocers and Section 5a in the present case mean that the holding in Ohio Grocers 
does not control here, and we hold that the instant case requires a different 
outcome. 
 
 
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15 
 
E.  Summary 
{¶ 38} The appellate court erred in holding that “the relationship [between 
the CAT and the taxes paid on the sales of motor-vehicle fuel] is too attenuated to 
find that the statutory allocation of the CAT moneys violates Section 5a.”  Beaver 
Excavating, 2011-Ohio-3649, at ¶ 34.  Section 5a explicitly prohibits the 
expenditure of revenue derived from excises on motor-vehicle fuel for any 
purpose other than highway purposes.  Because R.C. 5751.20 credits revenue 
collected from excise taxes on motor-vehicle fuel to purposes other than highway 
purposes, that provision of the CAT is unconstitutional. 
F.  Remedy—Prospective Application 
{¶ 39} Having concluded that the allocation of revenues from the CAT 
contained in R.C. 5751.20 violates the Ohio Constitution, we must determine the 
appropriate remedy to apply. 
{¶ 40} We begin with the principle that the power to tax lies exclusively 
with the General Assembly pursuant to the general legislative grant conferred by 
Ohio Constitution, Article II, Section 1.  Volbers-Klarich v. Middletown Mgt., 
Inc., 125 Ohio St.3d 494, 2010-Ohio-2057, 929 N.E.2d 434, ¶ 22; Cincinnati v. 
Roettinger, 105 Ohio St. 145, 154, 137 N.E. 6 (1922).  The expenditure of the 
revenue derived from the CAT relating to motor-vehicle-fuel sales for purposes 
other than those enumerated in Section 5a violates that section.  However, the 
Constitution does not forbid the imposition of the CAT itself on the gross 
revenues derived from motor-vehicle-fuel sales.  Consequently, the state may still 
collect the revenue derived from the CAT relating to motor-vehicle fuel, but the 
revenue may not be expended until the General Assembly properly allocates the 
revenue according to Section 5a. 
{¶ 41} Appellants and many of their supporting amici urge that should we 
find a Section 5a violation in the allocation of the revenue derived by the CAT, as 
we do today, we should apply our decision prospectively only.  The taxpayers 
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affirm that they do not seek, and do not claim as part of the relief sought from this 
court, any refund of taxes they have paid pursuant to the CAT relating to motor-
vehicle fuel.  Nor do they seek an order requiring the state to replenish moneys 
derived from the CAT relating to motor-vehicle fuel that have already been 
expended for nonhighway purposes.  The tax commissioner specifically contends 
that should this court hold that the revenue derived from the CAT may not 
constitutionally be expended except as allowed by Sec. 5a, the appropriate 
remedy is to prospectively enjoin the expenditure of the revenue until the General 
Assembly acts to remedy the statutory defect. 
{¶ 42} The general rule with respect to the application of court decisions 
is that a “decision applies retrospectively unless a party has contract rights or 
vested rights under the prior decision.”  DiCenzo v. A-Best Prods. Co., Inc., 120 
Ohio St.3d 149, 2008-Ohio-5327, 897 N.E.2d 132 (2008), paragraph one of the 
syllabus.  However, this court has observed that in certain circumstances, it has 
the authority to apply its decision prospectively only: 
 
An Ohio court has discretion to apply its decision only 
prospectively after weighing the following considerations: (1) 
whether the decision establishes a new principle of law that was 
not foreshadowed in prior decisions, (2) whether retroactive 
application of the decision promotes or retards the purpose behind 
the rule defined in the decision, and (3) whether retroactive 
application of the decision causes an inequitable result. (Chevron 
Oil Co. v. Huson (1971), 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 
296, adopted and applied.) 
 
Id. at paragraph two of the syllabus. 
January Term, 2012 
17 
 
{¶ 43} In this case, at the suggestion of the parties, we conclude that this 
decision is appropriate for prospective-only application. 
{¶ 44} The first consideration in this regard is whether this decision 
establishes a new principle of law that was not foreshadowed in prior decisions.  
The issue presented in this case, whether the allocation of the CAT revenues 
derived from motor-vehicle-fuel sales in a manner contrary to that provided for in 
Section 5a, is a matter of first impression before this court.  The CAT legislation 
was enacted in 2005 and wholly replaced the existing corporate-franchise and 
personal-property taxes.  In this respect, the contours of the recently enacted 
CAT, and the allocation of its revenues from sales of motor-vehicle fuel, are 
being presently determined.  Ohio Grocers may have presented an issue in which 
the CAT was implicated, but as previously stated, the constitutional provisions at 
issue in Ohio Grocers are not pertinent to this appeal, and there are no other cases 
that foreshadowed the issue presented in this appeal. 
{¶ 45} The second consideration is whether applying this decision 
retrospectively promotes or hinders the purposes behind the rule stated in this 
opinion.  We conclude that retroactive application of this decision will neither 
promote nor hinder the purpose behind our determination that allocation and 
crediting of the CAT revenue must be made according the provisions of Section 
5a.  Regardless of whether this decision is given retroactive or prospective effect, 
the constitutional allocation of the CAT revenues remains the purpose of our 
decision today. 
{¶ 46} The third inquiry considers whether retroactive application of this 
decision causes an inequitable result.  In this regard, the taxpayers assert that 
approximately $140 million per year is diverted from public-highway purposes to 
general-revenue funds by the application of the CAT statute.  The fiscal effect of 
reallocating other state revenue to replace money that has been expended for 
nonhighway purposes would have a significant, consequential, and negative 
SUPREME COURT OF OHIO 
18 
 
impact on the state’s fiscal footing, which has been under sustained stress for 
several years during the course of the economic recession.  See Ohio Office of 
Budget and Management, Executive Budget FY2012 and 2013, Section B, 
Economic Forecast Economic Overview and Forecast, http://obm.ohio.gov/ 
SectionPages/Budget/OperatingBudget.aspx(accessed December 5, 2012) (stating 
that “the recovery from the 2007-2009 recession has been among the weakest on 
record”). 
{¶ 47} Clearly, the considerable sum of money implicated in this litigation 
and its significant effect on state finances satisfy the foregoing standard with 
respect to causing an inequitable result.  Moreover, prospective application 
promotes equity to the extent that the CAT revenue previously collected and 
expended by the state is not subject to any refund requests by aggrieved 
taxpayers, including appellants or any others with claims pending.  In this 
manner, all taxpayers are treated the same, and there is no unequal treatment 
between similarly situated taxpayers.  In fact, appellants specifically state that 
they have not sought any refund of the CAT amounts paid on sales of motor-
vehicle fuel, which provides further indication that appellants have no contract or 
vested rights that would require this decision to have retrospective application. 
IV. Conclusion 
{¶ 48} We hold that the CAT revenues derived from an excise tax 
measured by the gross receipts from the sale of motor-vehicle fuel must be 
considered to be “related to” fuels used for propelling motor vehicles on a 
highway, within the meaning of Section 5a and, consequently, the excise tax at 
issue violates the Ohio Constitution to the extent that the revenue raised is used 
for purposes other than those specified in Section 5a.  Accordingly, the allocation 
under R.C. 5751.20 of the commercial-activity-tax revenues derived from the 
gross receipts of the sale of motor-vehicle fuel to nonhighway purposes violates 
the Ohio Constitution, Article XII, Section 5a. 
January Term, 2012 
19 
 
{¶ 49} We reverse the judgment of the court of appeals and remand for 
consideration of the appellants’ two remaining assigned errors, which the 
appellate court initially overruled based on its finding that the statutory allocation 
of the CAT money did not violate Ohio Constitution, Article XII, Section 5a. 
Judgment reversed 
and cause remanded. 
O’CONNOR, C.J., and LUNDBERG STRATTON, LANZINGER, and MCGEE 
BROWN, JJ., concur. 
PFEIFER, J., concurs in judgment only. 
O’DONNELL, J., dissents. 
__________________ 
 
Vorys, Sater, Seymour and Pease, L.L.P., and Thomas Ridgley, Anthony 
Ehler, Jeffrey Miller, and Robert Krummen, for appellants. 
 
Michael DeWine, Attorney General, Stephen Carney and Matthew 
Hampton, Deputy Solicitors, and Julie Bringer and Barton Hubbard, Assistant 
Attorneys General, for appellee. 
 
Peck, Shaffer & Williams, L.L.P., Thomas A. Luebbers, and Victor A. 
Linnebom, urging affirmance on behalf of amici curiae County Commissioners 
Association of Ohio, Ohio Municipal League, and Ohio School Boards 
Association. 
 
Bricker & Eckler, L.L.P., and Mark Engel, urging affirmance on behalf of 
amici curiae Ohio Manufacturers’ Association and Ohio Society of Certified 
Public Accountants. 
 
Frederick A. Vierow, urging reversal for amicus curiae County Engineers 
Association of Ohio. 
 
Brady, Coyle & Schmidt, Ltd., and Brian P. Barger, urging reversal on 
behalf of amici curiae Flexible Pavements, Inc., Ohio Aggregates and Industrial 
Minerals Association, and Ohio Ready Mix Concrete Association. 
SUPREME COURT OF OHIO 
20 
 
 
Timothy R. Fadel, urging reversal for amicus curiae International Union of 
Operating Engineers, Local 18. 
 
Ice Miller, L.L.P., and Patrick A. Devine, urging reversal on behalf of 
amicus curiae Ohio Contractors Association. 
 
Kegler, Brown, Hill & Ritter and Ralph Breitfeller, urging reversal on 
behalf of amicus curiae Ohio Equipment Dealers Association. 
 
Jennifer Rhoads, urging reversal on behalf of amici curiae Ohio Petroleum 
Marketers and Convenience Store Association. 
 
Roetzel & Andress, L.P.A., Thomas Rosenberg, and Michael Traven, 
urging reversal on behalf of amicus curiae American Council of Engineering 
Companies of Ohio. 
_______________________