Title: PPG Industries, Inc. v. Tracy

State: ohio

Issuer: Ohio Supreme Court

Document:

PPG Industries, Inc., Appellant, v. Tracy, Tax Commr., Appellee. 
[Cite as PPG Industries, Inc. v. Tracy (1996), _____ Ohio St.3d _____.] 
Taxation -- Use tax on automobiles purchased and modified into 
high-performance vehicles by manufacturer of automotive 
paint and coatings -- Cars transported to races throughout 
nation for use as pace cars and display -- Sufficient nexus to 
Ohio, when -- R.C. 5741.02(A), applied. 
 
(No. 94-2656--Submitted October 12, 1995--Decided February 7, 
1996.) 
 
Appeal from the Board of Tax Appeals, No. 93-M-415. 
 
PPG Industries, Inc. (“PPG”), appellant, a manufacturer of 
automotive paint and coatings, purchased several automobiles during the 
audit period, July 1, 1987 through December 31, 1991, modified them into 
high-performance vehicles, and operated them as pace cars for the IndyCar 
and IndyLight race car series.  PPG purchased and modified a Buick 
Riviera, a Chevrolet Corvette, a Toyota All-Trac, an Oldsmobile Calais, a 
Ferrari, a Buick Regal, a Ford Mustang SVO, a Dodge Stealth, a Pontiac 
Grand Prix, a Chrysler minivan, a Chrysler Le Baron, an Oldsmobile 
Cutlass, a Chevrolet Camaro, a Chevrolet El Camino, a GMC Sierra, and a 
 
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Cadillac Allante.  PPG participated in this pace car program to gain access, 
and thus sell its paint products, to automobile executives, who were 
extremely interested in auto racing. 
 
PPG transported these pace cars to races throughout the nation, 
including races in Ohio.  It typically transported fourteen vehicles to each 
race.  PPG displayed ten cars to showcase its paint products and provide 
race track rides for PPG’s customers and guests.  It furnished one car as the 
pace car to start the race and control the field if necessary.  PPG provided 
one car to the chief steward of the race and, finally, kept two cars in its van 
as replacements. 
 
PPG transported these vehicles throughout the country in trucks.  It 
kept the vehicles, when not at races or at off-season repairs, at its 
Strongsville, Ohio facility.  PPG owned a high bay building there and could 
economically store them pending transportation to race sites.  In preparation 
for transport, PPG “staged” the vehicles at Strongsville.  According to the 
testimony, in staging, PPG completed a three-page checklist that included 
measuring torque values, fluid levels, and cylinder compression.  PPG then 
loaded the trucks in correct order for transport to the race site.  In addition 
 
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to staging, PPG occasionally exhibited the cars for its customers in 
Strongsville.  Ten percent of the pace car use occurred at Ohio races. 
 
The Tax Commissioner, appellee, concluded that PPG stored the 
vehicles in Ohio and assessed use tax of $444,390.16 against these pace 
cars.  PPG appealed to the Board of Tax Appeals (“BTA”), claiming a 
Commerce Clause violation.  The BTA disagreed with PPG and, with 
certain exceptions, affirmed the commissioner’s order as to the disputed 
purchases.  The BTA ruled that PPG retained complete dominion and 
control over the cars while in Ohio and had the privilege of using the cars in 
every sense of the use tax statute.  The BTA further ruled that this use 
constituted substantial nexus with the state.  The BTA rejected PPG’s 
further argument that it must apportion the use tax to render it externally 
consistent under Complete Auto Transit, Inc. v. Brady (1977), 430 U.S. 274, 
97 S.Ct. 1076, 51 L.Ed.2d 326. 
 
The cause is now before this court upon PPG’s appeal as of right. 
 
Jones, Day, Reavis & Pogue, Todd S. Swatsler, Maryann B. Gall and 
Jeffrey S. Sutton, for appellant. 
 
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Betty D. Montgomery, Attorney General, and Janyce C. Katz, 
Assistant Attorney General, for appellee. 
 
Per Curiam.  PPG claims that this use-tax assessment violates the 
federal Commerce Clause because it does not satisfy two prongs of 
Complete Auto Transit, Inc. v. Brady, supra--the substantial-nexus and fair-
apportionment prongs.  We find no such violations and affirm the BTA’s 
decision. 
 
In dormant Commerce Clause cases, according to Norandex, Inc. v. 
Limbach (1994), 69 Ohio St.3d 26, 630 N.E.2d 329, we first find a taxable 
event in Ohio and then apply the Complete Auto Transit test. 
 
In determining whether a taxable event occurred in Ohio, R.C. 
5741.02(A) levies “an excise tax *** on the storage, use, or other 
consumption in this state of tangible personal property or the benefit 
realized in this state of any service provided.”  R.C. 5741.01(C) defines 
“use” as “the exercise of any right or power incidental to the ownership of 
the thing used.” 
 
We agree with the BTA that PPG exercised rights or powers 
incidental to the ownership of these pace cars in Ohio.  Ten percent of the 
 
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pace cars’ actual track time occurred in Ohio, and PPG stored and staged the 
vehicles in Ohio.  Staging included preparing the vehicles for transport to 
race sites.  PPG also exhibited the cars for customers in Ohio.  All these 
activities are “uses” of the vehicles in Ohio. 
 
In applying the Complete Auto Transit test, we also find that these 
taxed activities had sufficient nexus to Ohio.  These cited activities had a 
significant connection to Ohio.  PPG operated the pace cars ten percent of 
the time in Ohio, inspected and prepared them for transport in Ohio, and 
stored them for significant times in Ohio.  This is “‘nexus’ aplenty.”  See D. 
H. Holmes Co. v. McNamara (1988), 486 U.S. 24, 32-33, 108 S.Ct. 1619, 
1624, 100 L.Ed.2d 21, 28-29. 
 
PPG next argues that, under the Commerce Clause, Ohio must 
apportion its use tax on property principally used in other states to reflect 
only the in-state use of the property.  It claims, under Goldberg v. Sweet 
(1989), 488 U.S. 252, 109 S.Ct. 582, 102 L.Ed.2d 607, that Ohio’s credit for 
sales or use taxes paid to other states does not satisfy the external 
consistency requirement of the Commerce Clause. 
 
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However, in Quotron Systems, Inc. v. Limbach (1992), 62 Ohio St.3d 
447, 584 N.E.2d 658, we held that Ohio’s use tax does satisfy the fair-
apportionment criterion because of this credit.  “Under Goldberg, this credit 
provision avoids actual multiple taxation, and, thus, the tax does not 
threaten interstate commerce.”  Id at 450, 584 N.E.2d at 660. 
 
This conclusion agrees with D. H. Holmes Co. v. McNamara, supra 
(“The Louisiana taxing scheme is fairly apportioned, for it provides a credit 
against its use tax for sales taxes that have been paid in other States.”  Id. at 
31, 108 S.Ct. at 1623, 100 L.Ed.2d at 28), and Oklahoma Tax Comm. v. 
Jefferson Lines, Inc. (1995), 514 U.S. _____, ____ 115 S.Ct. 1331, 1342, 
131 L.Ed.2d 261, 277, fn. 6.  In Jefferson Lines, the court noted that 
discrete-event taxes containing credits for a similar tax paid to another state 
satisfy the fair-apportionment criterion.  Id. at _____, 115 S.Ct. at 1342-
1343, 131 L.Ed.2d at 277-278.  Indeed, the commissioner here credited the 
use tax on several assessed purchases because PPG paid a sales tax to 
Michigan.  See, also, Whitcomb Constr. Corp. v. Commr. (1984), 144 Vt. 
466, 479 A.2d 164, and Ex parte Fleming Foods of Alabama, Inc. v. Dept. 
of Revenue (Ala. 1994), 648 So.2d 577. 
 
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Finally, PPG contends that Sections 1983 and 1988, Title 42, U.S. 
Code, entitle it to attorney fees because the commissioner deprived it of its 
constitutional rights.  Since PPG did not prove a violation of the Commerce 
Clause, this argument fails.  Moreover, in Natl. Private Truck Council, Inc. 
v. Oklahoma Tax Comm. (1995), 515 U.S. _____, 115 S.Ct. 2351, 132 
L.Ed.2d 509, the United States Supreme Court held that these code sections 
provide no basis for relief if the state has an adequate remedy at law.  Since 
Ohio provides an appellate procedure to determine these constitutional 
claims, PPG does not receive attorney fees. 
 
Accordingly, we affirm the BTA’s decision because it is reasonable 
and lawful. 
Decision affirmed. 
 
MOYER, C.J., DOUGLAS, WRIGHT, RESNICK, F.E. SWEENEY and COOK, 
JJ., concur. 
 
PFEIFER, J., dissents.