# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

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No. 1 6- 27 91

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Div ers ifi ed Ing red ie nt s, In c.

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el la nt

v.

Jo se ph W . Test a, Ohi o S ta te Tax C om m is si on er

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t - Ap pe ll ee

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App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e Eas te rn Dis tri ct of M is so ur i - St . Lou is

__ __ __ __ __ __

Su bm it te d: Jan ua ry

12 , 20 17
Fi le d: Jan ua ry

23 , 20 17

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Befo re LOKEN, BEAM, and BENTON, Circu it Ju dg es

.

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LOKEN, Ci rcu it Ju dg e.

In a pr el i mina ry pr op os ed au di t, th e Ohi o Dep art m en t of Tax at io n as se ss ed

Div ers ifi ed In gr ed ie nt s, In c. (“ Div e r s ifi ed ”), a Mi ss ou ri co rp or at io n, as owi ng $5 61 ,44 8.0 0 in un pa id ta x, pe na lt ie s, an d in te res t un de r Ohi o’s Co m m erci al Acti vi ty

Tax (“ CAT”). Div ers ifi ed co m m en ced th is act io n in th e East ern Dis tri ct of Mi ss ou ri

ag ai ns t Jo se ph W

. Test a, th e Ohi o St at e Tax Co m m is si on er, se ek in g a de cl ar a t o ry jud gm en t th at th e In te rs ta te In co m e Act, 15 U.S. C

. § 38 1, de pr iv es Ohi o ofjuri sd ic ti on to as se ss an d co ll ect th e CAT on Div ers ifi ed ’s sa le s of go od s

m an uf act ur ed an d s h i p p e d f

r om ou ts id e Ohi o to lo cat io ns in Ohi o, an d an or de r

en joi ni ng th e St at e Tax Co m m is si on er fro m as se rti ng th at juri sd ic ti on . Div ers ifi ed

ap pe al s th e di st ric t co ur t or de r di sm is si ng th e act io n as ba rred by th e Tax In jun ct io n 1

Act, 28 U.S.C. § 13 41

, an d by lo ng -s ta nd in g pr in ci pl es of co m it y th at “ res tra in []

fed eral co ur ts fro m en te rta in in g cl ai m s fo r rel ie f th at ris k d i s r u p ti ng st at e ta x
ad m in is tra t io n.” Lev in v. Co m m erce Ene rg y , In c., 56 0 U.S. 41 3, 42 4 (2 01 0)

. Rev ie win g th e di s miss al fo r la ck of su bjec t m at te r juri sd ic ti on de no vo , we affi rm

. See Dak ot a, Mi nn ., & E.R.R. v. Sch ie ffer , 71 1 F .3d 87 8, 8 80 (8t h C ir. 2 01 3)

.

The Ohi o CAT is an an nu al t a x o n “t he pr iv il eg e of do in g bu si ne ss in th is

st at e.” See Ohi o Rev

. Co de § 57 51 .02 (A); Bea ve r Exc av at in g Co

. v. Test a, 98 3

N.E

. 2 d 1 3 1 7

, 13 24 (2 01 2)

. The CAT is im po se d on “ gr os s rece ip ts si tu se d to th is

st at e,” § 57 51 .01 (G). Gro ss rece ip ts are si tu se d to Ohi o “ if th e pr op ert y is rece iv ed

in th is st at e by th e pu rch as er,” § 57 51 .03 3( e). Su bjec t to ex cl us io ns , “ ‘gro ss rece ip ts ’

m ean s th e to ta l am ou nt real iz ed by a pe rs on , wit ho ut de du ct io n fo r th e co st of go od s

so ld or ot he r ex pe ns es in cu rred

, th at co nt rib ut es to th e pr od uc ti on of gr os s in co m e,”
§ 5 75 1.0 1( F). The ex cl us io ns in cl ud e “ [a]ny rece ip ts fo r whi ch th e ta x i m po se d b y
th is ch ap te r is pr oh ib it ed by th e co ns ti tu ti on or la ws of th e Uni te d St at es or th e

co ns ti tu ti on of t hi s s ta te ,” § 5 75 1.0 1( F)(2 )(l l).

Diver sif ie d se lls co m

m od it ie s su ch as pe t fo od in gr ed ie nt s to cu st om ers lo cat ed

ou ts id e of Ohi o an d us es fo r-h ire m ot or carr ie rs to sh ip th es e co m m od it ie s to

de st in at io ns di rect ed by th e cu st om er. The co nt ract s are n e g ot ia te d an d ex ecu te d

ou ts id e Ohi o. Div ers ifi ed ha s no em pl oyees lo cat ed in Ohi o an d is no t reg is te red to

do bu si ne s s in Ohi o. At is su e are Div ers ifi ed ’s sa le s to cu st om ers who di rect th e
de li ve ry of Div ers ifi ed pr od uc ts to m an uf act ur in g pl an ts in Ohi o. A l t h o u g h th e

The Hon or ab le Ro nn ie L. W hi te

, Uni te d St at es Dis tri ct Ju dg e fo r th e East ern 1

Dis tri ct of M is so ur i.

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-In te rs ta te In co m e Act (“ IIA”) li m it s st at e ta xa ti on of “ ne t in co m e,” 15 U.S.C. § 38 1,

an d th e CAT is im

po se d on a co rp or at io n’s gr os s rece ip ts

, Div ers ifi ed cl ai m s th at th e

IIA di ve st s Ohi o of juri sd ic ti on to as se ss th e CAT ag ai ns t Div ers ifi ed ’s ou t-o f-s ta te

sa le s t ha t ar e d el iv ered to it s cu st om ers in Ohi o.

Rea ct in g to Su pr em e Co ur t de ci si on s th at reject ed co ns ti tu ti on al ch al le ng es to

th e im po si ti on o f s ta te in co m e ta xe s on th e in co m e of ou t-o f-s ta te co rp or at io ns , Co ng res s pa ss ed th e IIA to es ta bl is h a m in im um st an da rd fo r im

po si ng ne t in co m e

ta xe s ba se d on so li ci ta ti on of in te rs ta te sa le s. See W is

. Dep t. of Rev en ue v. W il li am

W rig le y , Jr

., Co

., 50 5 U.S. 21 4, 22 0- 23 ( 1 9 92 ). Sp eci fic al ly, 15 U.S.C. § 38 1

pr ov id es in rel ev an t p art :

No St at e, or po li ti cal s u b d iv is io n th ereo f, sh al l ha ve po wer to im po se

. . . a ne t in co m e ta x on th e in co m e de riv ed wit hi n su ch St at e by

an y pe rs on fro m in te rs ta te co m m erce if th e on ly bu s i ne ss act iv it ie s

w i t hi n su ch St at e by or on be ha lf of su ch pe rs on du rin g su ch t a x a b l e

y ear a re ei th er, o r bo th , of t he fol lo win g:

(1 ) th e so li ci ta ti on of or de rs by su ch pe rs on , or hi s rep res en ta ti ve , in su ch S ta te fo r sa le s of ta ng ib le pe rs on al pr op ert y , whi ch or de rs are

se nt o u ts id e th e St at e fo r ap pr ov al or reject io n, an d, if ap pr ov ed

, are fil le d b y sh ip m en t o r de li ve ry

fro m a po in t o ut si de th e St at e; an d

(2 ) th e so li ci ta ti on of or de rs by su ch pe rs on , or hi s rep res en ta ti ve , in su ch St at e in th e na m e of or fo r th e be ne fit of a pr os pe ct iv e cu st om er of su ch pe rs on , if or de rs by su ch cu st om er to su ch pe rs on to en ab le su ch

cu st om er to fil l or de rs r e s u l t i n g fro m su ch so li ci ta ti on are or de rs de sc rib ed in pa rag rap h (1 ).

The di st ric t cou rt de cl in ed to ru le on whe th er the IIA stri ps Ohi o of aut ho rit y

to im po se th e CAT ba se d on th e Div ers ifi ed tra ns act io ns at is su e. In st ead

, th e co ur t

he ld th at th e Tax In

jun ct io n Act (“ TIA”) de pr iv ed it of su bjec t m at te r juri sd ic ti on to

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-en te rta in th is act io n. Div ers ifi ed In gr ed ie nt s, In c. v. Test a, 20 16 W L 29 32 16 0 (E.D.

Mo . May 19 , 20 16 ). W e ag ree.

The TIA pr ov id es : “ The di st ric t co ur ts sh al l no t en joi n, su sp en d or res tra in th e

as se ss m en t, l ev y

or c ol le ct io n o f an y

tax un de r St at e la w wher e a p la in , sp eed y an d

effi ci en t rem ed y m ay be ha d in th e co u r t s of su ch St at e.” 28 U.S.C. § 13 41

. Co ng res s en act e d th e TIA to “ tra ns fer juri sd ic ti on

. . . to th e st at e co ur ts ” to gr an t

in jun ct iv e rel ie f th at co ul d in te rfer e wit h th e St at e’s po wer to as se ss , le vy, an d co ll ect

ta xe s. Ro se well v. LaSal le Nat. Ban k, 45 0 U.S. 5 03 , 5 1 5 n

. 1 9 ( 19 81 ); se e Tul ly v

. Grif fin

, In c., 42 9 U.S. 68

, 73 (1 97 6)

. As or ig in al ly en act ed

, th e st at ut e pr ov id ed th at

“ no di st ric t co ur t sh al l ha ve juri sd ic ti on of an y su it to en joi n, su sp en d, or res tra in

. . . . ” Act o f Aug . 21 , 19 37 , 50 St at . 7 38 , c od ifi ed at 28 U.S.C. § 4 1( 1) (19 40 ed .).

Tho ug h th e ex pl ic it refe ren ce to juri sd ic ti on was rem ov ed in th e 19 48 Uni te d St at es

Co de rev is io ns , th e Su pr em e Co ur t ha s co nt in ue d to refe r t o th e TIA as li m it in g

su bjec t m at te r juri sd ic ti on

. See Dire ct Mar ke ti ng A ss ’n v. Bro hl

, 13 5 S. Ct

. 11 24

, 11 33 -3 4 (2 01 5) ; Lev in , 5 60 U.S. a t 4 2 9 n .10 & 43 3 (Tho m as , J ., c on cu rri ng ); Ark

.

v

. Farm Cred it Serv s. of Cen tra l Ark

., 52 0 U.S. 82 1, 82 5- 26 (1 99 7) ; Cal

. v. G r a c e

Bret hr en Ch ur ch

, 45 7 U.S. 39 3, 40 8 (1 98 2) (TIA st rip s di st ric t co ur ts of juri sd ic ti on

to award de cl arat or y rel ie f). Thu s, th e di st ric t co ur t pr op erl y de ci de d th is is su e of la w

in ru li ng on Test a’s Ru le 12 (b )(1 ) m ot io n to di sm is s fo r l a c k of su bjec t m at te r juri sd ic ti on

.

Div ers ifi ed ’s pr im ary co nt en ti on is th at th e di st ric t co ur t erre d in fai li ng to

de te rm in e whe th er th e IIA ba rs Ohi o fro m im po si ng th e CAT on Div ers ifi ed ’s ou t-o fst at e sa le s be cau se fed eral co ur ts ha ve ex cl us iv e juri sd ic ti on to in te rp ret an d en fo rce

th e IIA’s “ fed eral ly co nf

erre d ta x im m

un it y .” It is tru e th at th e TIA ha s be en he ld no t

to pr ecl ud e th e gr an t of fed eral eq ui ta bl e rel ie f to a pa rty su in g un de r a fed eral st at ut e

th at co nf erre d or ig in al or ex cl us iv e juri sd ic ti o n o n th e fed eral co ur ts

. See Mo e v.

Co nf ed erat ed Sal is h & Koo te na i Trib es of Fl at he ad Res erv at io n, 42 5 U.S. 46 3, 47 2
(1 97 6) (In di an tri be su in g un de r 28 U.S.C. § 13 62 ); Ci ty Ven di ng of Mu sk og ee, In c.

-4

-v. Okl a. Tax C o mm ’n

, 8 9 8 F.2 d 12 2, 12 3 (1 0t h Ci r. 19 90 ) (Ban kr up tc y Co de

ex cep ti on to th e TIA); Se. Pa. Tran sp

. Aut h. v. Pa. Pu b. Uti li ty Co m m ’n, 80 2 F. Su pp

. 12 73

, 12 81 -8 5 (E.D. Pa. 19 92 ) (co ns tru in g 45 U

. S

. C

. §§ 54 6b an d 58 1( c)(5 )

ex cep ti on ); Fi res to ne Tire & Ru bb er Co . v . B od le , 6 45 F. Su pp . 3 05 , 3 10 -1 1 (N.D.

Ohi o 1 98 6) (ERISA ex cep ti on ).

The IIA do e s no t ex pl ic it ly pr ov id e fo r ex cl us iv e fed eral juri sd ic ti on , an d

nu m ero us ap pe ll at e st at e co ur t de ci si on s ha ve ap pl ie d th e IIA to sp eci fic st at e ta x

cas es . See, e.g ., Gi ll et te Co . v . De p’t o f Treas ur y , 49 7 N.W.2d 5 95 , 59 7- 99 (Mi ch

. App . 1 99 3)

. Th e s e de ci si on s co nf irm th at th e “ de ep ly ro ot ed pr es um pt io n in fav or

of co nc ur ren t st at e co ur t juri sd ic ti on ” ap pl ie s to th e IIA. Taffl in v. Lev it t, 49 3 U.S.

45 5, 45 9 (1 99 0) ; se e Gul f Offs ho re Co

. v. Mo bi l Oil Co rp ., 45 3 U.S. 47 3, 47 8 (1 98 1)

. As th e Su pr em e Co ur t de ci si on affi rm in g a st at e co ur t de ci si on in W rig le y il lu st rat es , th e IIA di ve st s st at e le gi sl at ur es of th e po wer to im po se ne t in co m e ta xe s on cert ai n

ou t-o f-s ta te tra ns act io ns , b ut it do es no t di ve st st at e co ur ts of juri sd ic ti on to de ci de

whe th er th e IIA ba rs a pa rti cu la r st at e ta x as se ss m en t, le vy, or co ll ect io n. Of co ur se , th is is a qu es ti on of fed eral la w th at m ay ul ti m at el y be rev ie wed by th e Uni te d St at es

Su pr em e Co ur t.

The TIA ap pl ie s to a su it in fed eral co ur t se ek in g to en joi n as se ss m en t, le vy or

co ll ect io n of a st at e ta x “ whe re a pl ai n, sp eed y an d effi ci en t rem ed y m ay be ha d in th e

co ur ts of su ch St at e.” 28 U.S.C. § 13 41

. Div ers ifi ed arg ue s th at th e Ohi o CAT do es

no t p ro vi de a “ pl ai n” st at e co ur t re m ed y be cau se th e st at ut e ex pr es sl y pr ov id es th at

th e CAT is “ no t su bjec t to ” th e IIA. Ohi o Rev

. Co de § 57 51 .02 (A). The co nt en ti on
is wit ho ut m eri t. Thi s TIA ex cep ti on is pr oc ed ur al

. It ad dr es se s on ly whe th er sta te

la w pr ov id es a rem ed y th at pe rm it s a ta xp a y er to ch al le ng e th e st at e ta x at is su e in

st at e co ur t. See Ro se well

, 45 0 U.S. at 51 4- 17

. Here, t h e O h i o Rev en ue Co de

pr ov id es ta xp ay ers an ap pe al of rig ht to an Ohi o ap pe ll at e co ur t whi ch wil l “ he ar an d

de ci de ” a cl ai m th at a st at e ta x ha s be en in va li dl y ass es se d o r co ll ect ed . Id. at 51 7;

se e Ohi o Rev

. Co de § 57 17 .04

. Th is ob vi ou sl y in cl ud es au th or it y to de ci de th at

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-i mp o s i n g th e CAT on Div ers ifi ed ’s ou t-o f-s ta te tra ns act io ns vi ol at es th e IIA,

reg ard le ss of th e Ohi o Leg is la tu re’s co nt rary in te nt io n. Cf. Bea ve r Exc av at in g, 98 3

N.E.2d at 1 32 4.

The di st ric t co ur t fu rth er co nc lu de d th at it sh ou ld ab st ai n fro m en te rta in in g th is

la wsu it un de r co m it y pr in ci pl es

. In Lev in

, 56 0 U.S. at 41 7, th e Su pr em e Co ur t no te d

th at th e lo ng

- s t a n di ng do ct rin e res tra in in g fed eral co ur t rel ie f th at ris ks di sr up ti ng

st at e ta x ad m in is tra ti on is “ [m ]ore em br aci ve th an th e TIA.” Thu s, ou r de ci si on th at

th e TIA effe ct iv el y tra ns ferr ed juri sd ic ti on ov er Div ers ifi ed ’s eq ui ta bl e cl ai m s to th e

O h io st at e co ur ts is no t at od ds wit h co m it y pr in ci pl es ap pl ie d in Lev in an d e a r l i e r

cas es

. Howev er, as we ag ree wit h th e di st ric t co ur t th at th e TIA de pr iv ed th at co ur t

of su bjec t m at te r juri sd ic ti on ov er Div ers ifi ed ’s cl ai m , we de cl ine to co ns id er whe th er
di sm is sa l was als o a pp ro pr ia te un de r pr ud en ti al co m it y pri nc ip le s.

The jud gm en t o f th e d is tri ct co ur t i s af fir m ed

.

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