COLUMBUS, Ohio (CN) – Companies servicing draft tap lines to ensure free-flowing and fresh-tasting beer should not be taxed, the Ohio Supreme Court ruled just days before New Year's Eve celebrations in bars across the country.
The Ohio Department of Taxation charged Toledo-based Great Lakes Bar Control more than $102,000, finding that its service was taxable as a janitorial service. The company unclogs and flushes draft lines of yeast, sediment and bacteria that can block lines and taps, and make beer taste bad.
Under Ohio’s liquor laws, bars and other permit holders must clean their taps every two weeks.
Great Lakes, which services dozens of bars and permit holders in Northwest Ohio, fought the department’s assessment of sales tax, arguing that it was providing neither building maintenance nor janitorial services under the state tax code.
The Board of Tax Appeals agreed and reversed the department’s decision.
Ohio’s Supreme Court rejected the state’s appeal Thursday and affirmed in a 6-1 decision.
Associate Justice Pat DeWine, son of Ohio Attorney General and Governor-elect Mike DeWine, wrote that Great Lakes was not providing a cleaning service in the context of janitorial services in the sales tax code. He related such services to activities such as vacuuming, dusting, washing and trash removal.
“While that is certainly not an exhaustive list, no one would take the ordinary meaning of janitorial cleaning to include inspecting and flushing beer-tap lines,” DeWine wrote in the majority opinion. “Because the beer-line service does not fit the plain meaning of ‘cleaning’ in the context of providing a ‘janitorial service,’ Great Lakes can keep the taps flowing sans tax.”
Great Lakes’ principal Mike Cassidy said Friday that he had not had a chance to read the ruling but described his company as a “minority player” in a large market.
“You win, you're happy. You lose, you're not happy,” Cassidy said in a brief phone interview.
His attorney Steven Dimengo said Great Lakes should never have been taxed and called the Ohio Department of Taxation’s actions “ridiculous.”
Dimengo’s law firm represents other clients who were also challenging tax bills they received under the same code, the Buckingham, Doolittle & Burroughs tax attorney said.
"We believe that the ruling extends to other areas that the tax commissioner believes are taxable, and so the ruling has application in many other contexts," Dimengo said in a phone interview.
Chief Justice Maureen O’Connor dissented. She argued that Great Lakes was providing a service related to the cleaning of “tangible personal property” and that it is taxable under state law.
Kate Hanson, a spokeswoman with the Ohio attorney general’s office, deferred comment to its client, the Department of Taxation.
The department's chief legal counsel, Matt Chafin, said Great Lakes’ service clearly relates to the cleaning of tangible personal property.
He added that it is sometimes difficult for the department to apply decades-old laws to new businesses and business models.
"Anytime we can get directives from the court it's helpful," Chafin said.
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