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CAT 2006-05 - Highway Transportation Services: Bright-Line
Presence and Situsing - Issued April, 2006; Revised May, 2006
This is version 2 of a draft rule to address highway
transportation services for purposes of Chapter 5751 of the
Ohio Revised Code. This rule has been updated to
reflect the language of the rule as filed. Please direct any
questions you may have to the CAT Division of ODT at
1-888-722-8829.
Reason for rule. Division (I) of
section 5751.01 of the Revised Code defines “bright-line
presence” for purposes of the commercial activity tax. The
Tax Commissioner is promulgating this rule in order to
clarify the definition included in Chapter 5751 as it applies
to highway transportation services and to provide examples as
guidance to the public. In addition, the rule addresses how
such property should be sitused under section 5751.033 of the
Revised Code.
Proposed Rule 5703-29-15 Highway Transportation
Services – Bright-Line Presence and Situsing.
(A) Pursuant to division (I) of section 5751.01 of the
Revised Code, a person is deemed to have “bright-line
presence” in this state for purposes of the commercial
activity tax if the person meets one of the five tests listed
in that section, one being that the person has property in
this state with an aggregate value of at least fifty thousand
dollars at any time during the calendar year. This rule is to
address the application of the property test to highway
transportation services.
(B) For purposes of paragraph (A) of this rule, a person
providing highway transportation services will be presumed to
have at least fifty thousand dollars of property in the
aggregate during the calendar year if the person has property
of such value in this state for more than thirteen days,
which need not be consecutive.
(C) For purposes of paragraph (B) of this rule, “day” means a
calendar day or any portion thereof. Multiple trips during
the same day do not constitute more than one day.
(D)(1) Persons providing highway transportation services must
situs gross receipts from such services pursuant to division
(G) of section 5751.033 of the Revised Code in proportion to
the miles traveled by the carrier during the tax period
within the state compared with the miles traveled by the
carrier during the tax period everywhere. Even if a person
has bright-line presence, however, that person must also have
at least one hundred fifty thousand dollars in taxable gross
receipts in order to be a taxpayer for purposes of the
commercial activity tax. That threshold applies to a person
who would otherwise be a separate taxpayer or to a group of
persons who would otherwise be members of a combined taxpayer
group, but does not apply to members of a consolidated
elected taxpayer group. Please see Ohio Adm. Rules 5703-29-02
and 5703-29-04 for further clarification on this issue.
(2) For example, assume a widget manufacturer located in
Kansas contacts ABC Trucking Company (ABC), a Kansas
transportation company, to arrange the transportation of one
hundred thousand dollars worth of the manufacturer’s widgets
to XYZ Retailer (XYZ), located in Pennsylvania. The total
trip is nine hundred miles, of which two hundred fifteen
miles are traveled in Ohio, and ABC charges the manufacturer
ten thousand dollars. ABC loads the widgets onto its trucks
in Kansas and drives them through this state to XYZ’s
Pennsylvania location. ABC’s truck is worth eighty thousand
dollars, and this is the only trip ABC makes through this
state during the calendar year. ABC would not be deemed to
have bright-line presence for purposes of the commercial
activity tax because ABC is not in this state for more than
thirteen days during a calendar year.
If, however, ABC contracted with the widget manufacturer to
make bi-weekly trips to XYZ in Pennsylvania for purposes of
transporting the widgets, and ABC drove through this state
each trip, ABC would be deemed to have bright-line presence
in this state for purposes of the commercial activity tax. It
is important to remember, however, that ABC would not be
considered a taxpayer subject to the commercial activity tax
until ABC has at least one hundred fifty thousand dollars in
taxable gross receipts (those gross receipts sitused to this
state) during the calendar year. If ABC is a combined
taxpayer, the entire group must add its taxable gross
receipts together to determine if the group reaches the one
hundred fifty thousand dollar threshold amount. (Please note
that if ABC was a member of a consolidated elected taxpayer
group, the one hundred fifty thousand dollar threshold would
not apply.) In this example, assuming ABC meets the
bright-line standard, ABC’s ten thousand dollars of gross
receipts would be sitused to this state based on the
proportion of miles driven within this state compared with
miles driven everywhere.