FROM: Joanne Limbach, Tax Commissioner April 8, 1987

RE: Personal Property Taxation of Goods Stored in Federal Customs-Bonded Warehouses

A recent decision of the United States Supreme Court has changed the applicability of the Ohio Personal Property Tax to certain goods stored in federal customs-bonded warehouses*.

In R. J. Reynolds Tobacco Company v. Durham County, North Carolina, et al.,.479 US ____, 93 L Ed 2d 449, 107 S Ct 499 (December 9, 1986), the United States Supreme Court held that personal property imported from a foreign source, destined for domestic use and stored in federal customs-bonded warehouses is subject to a state's nondiscriminatory property tax.

Prior to this R. J. Reynolds decision foreign imports stored in customs-bonded warehouses were considered immune from state and local property taxes based upon were stored pending foreign destination. This R. J. Reynolds decision has now an earlier decision of the U. S. Supreme Court ** wherein the foreign source goods clarified that such immunity does not apply to foreign goods stored in federal customs bonded warehouses and destined for domestic use, sale or consumption. The immunity from the Ohio Personal Property Tax continues to apply to foreign source property so stored and held for foreign shipment.

As a result of the R. J. Reynolds decision, all property imported from a source outside of the United States, stored in Ohio in federal customs-bonded warehouses and to be used in the United States, is subject to the Ohio Personal Property Tax provided:

1.) The property has a situs in a taxing district in Ohio, and

2.) The property is used in business as provided by Section 5701.08 of the Ohio Revised Code, and

3.) The property is no longer in transit in interstate or foreign commerce.

All Personal Property Tax Returns for the years 1987 and thereafter shall be prepared and filed in accord with these principles.

*Customs-bonded warehouses are provided for and established by Federal Law, Title 19 United States Code, Sections 1555 through 1565.

**Xerox Corporation v. County of Harris, 459 US 145, 74 L Ed 2d 323, 103 S Ct. 523. (December 13, 1982)