COLUMBUS, Ohio (CN) — In a unanimous decision, the Ohio Supreme Court ruled Wednesday that a Lake Erie island’s tax on rental vehicles, including bicycles and golf carts, does not violate the state constitution.
The high court affirmed an Ohio Court of Appeals decision from January 2019 finding that Mark Mathys, owner and operator of Put-in-Bay’s Islander Inn, had to pay taxes for the golf carts he rented out for use on local roads.
The village of Put-in-Bay, located on South Bass Island in Lake Erie, imposed its vehicle-for-hire tax in 1995. The ordinance applies to any “horse-driven, taxicabs, pedicabs, bicycles, self-powered trams, rental motor vehicles or towed tram car/units.”
Mathys failed to pay the tax on golf carts owned by him and his business in 2014. He argued in the Ottawa County Court of Common Pleas that the ordinance is unconstitutional, claiming that Put-In-Bay’s tax piggybacks on state taxes. The Ohio Constitution prohibits municipalities from taxing to use public roads and state law allows anyone with an Ohio license to use public roads, including those on the island.
The trial court agreed with Mathys and dismissed Put-in-Bay’s case against him, but the state appeals court reversed and held that the ordinance on rental vehicles “is a valid exercise of the village’s taxing power.”
Although the Ohio Supreme Court’s decision Wednesday to uphold that finding was unanimous, the reasoning by the justices was not.
Justice Melody Stewart, writing for the majority, explained that the fee is imposed on rental businesses and is not a tax for the use of the road. She said the Islander Inn would not have to pay the fee if the vehicles were for personal use or if they lent them out for free.
Stewart wrote that Mathys’ argument that the tax is on the use of vehicles rather than the rental business is a “faulty assumption.”
“The ‘license fee’…does nothing to authorize or prohibit a motor vehicle, including the rental vehicles at issue here, from being operated on a public roadway within the village. And nothing in the ordinance requires that the license fee be paid for vehicles that are not rented out by the owner,” she wrote.
The judge added, “Put another way, Matthys and Islander Inn may drive their golf carts in the village and may even let others use the carts without charging for their use. But if Mathys and Islander Inn want the privilege of renting those vehicles to others for use within the village, they are required to pay the tax imposed by the ordinance on their rental vehicle.”
Stewart was joined in her opinion by Chief Justice Maureen O’Connor, Justice Michael Donnelly and Judge Robin Piper, an appeals court judge sitting in for Justice Judith French.
In a concurring opinion, Justice Patrick Fischer wrote that the majority’s opinion was too simplistic.
“I write separately because I believe that additional analysis relating to Mathys and Islander Inn’s argument as to the application of Article XII, Section 5a of the Ohio Constitution is necessary,” he wrote, referring to the state law barring additional taxes to use roads.
Fischer explained that Mathys argues that because that section contains no language limiting the law’s application, it applies to municipal taxes. But the judge wrote that accepting such an argument would require the court “to ignore the words ‘statutory’ and ‘highway’ in Section 5a, which directly point to state function.”
He noted that the local ordinance taxing rental vehicles states that the revenue “shall be credited and paid into a separate fund” that “shall be used for the sole purpose of repairing streets, avenues, alleys and lanes within the village of Put-in-Bay.”
“This purpose appears to be in line with the purpose indicated in Article XII, Section 5a,” Fischer wrote.
Justices Sharon Kennedy and Patrick DeWine, son of Ohio Governor Mike DeWine, joined Fischer in his concurring opinion.
Mathys and the Islander Inn were represented by Andrew Mayle of Mayle LLC. Put-in-Bay was represented by Susan Anderson of Walter Haverfield LLP.
Neither lawyer was available for comment Wednesday.
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