Recent Ohio Supreme Court decisions addressing the situsing of receipts under the Commercial Activity Tax (CAT) underscore both the limits of the “continuous delivery theory” and the evidentiary hurdles taxpayers face when seeking refunds for transactions involving Ohio distribution centers.
- VVF Intervest: Rejection of the Continuous Delivery Theory
VVF contract-manufactured products in Kansas for its customer, High Ridge Brands (HRB). At its Kansas manufacturing facility, VVF loaded the finished products onto trucks, arranged by HRB, which were then transported to a third-party distribution center in Columbus, Ohio. The products were warehoused there until they were ordered by HRB’s national retailer customers. At that point, the products were transported by third-party carriers (again arranged by HRB) to the customers’ locations. Approximately 97% of the warehoused products were ultimately transported outside Ohio.
VVF argued that its receipts from sales of products to HRB that were ultimately transported outside Ohio should not be sitused to Ohio, because the Columbus distribution center was merely an interim stop in a continuous delivery process that ultimately ended outside the state. The Board of Tax Appeals agreed with VVF, concluding that Ohio was just one leg in a single transportation chain for purposes of Ohio Revised Code (R.C.) section 5751.033(E). This section provides in relevant part that (i) gross receipts from the sale of tangible personal property are sitused to Ohio if the property is received there by the purchaser, and (ii) when tangible personal property is delivered by motor carrier or other means of transportation, the place at which the property is ultimately received after all transportation has been completed is considered the place where the purchaser receives the property. To the Board, the receipts associated with products that were ultimately shipped from the warehouse to destinations outside Ohio could not be taxed by Ohio.
But the Board’s ruling proved to be only an interim stop in the dispute. On appeal, the Ohio Supreme Court rejected the “continuous delivery theory,” emphasizing that the statute focuses on where the purchaser receives the property from the seller, not on where the property ultimately ends up after subsequent resales by the purchaser. The court held that HRB, as the purchaser, received VVF’s products in Ohio when they arrived at the Columbus distribution center. What HRB did with the products afterward (i.e., reselling and shipping them to retailers outside Ohio), the court explained, was a separate transaction and inconsequential for purposes of situsing VVF’s receipts. Once HRB received the goods in Ohio and took control over storage and later shipments, Ohio became the situs of VVF’s receipts.
- Jones Apparel Group/Nine West: No Contemporaneous Knowledge Requirement, but Proof Still Required
Only weeks later, the court addressed a different distribution-center scenario in Jones Apparel Group/Nine West Holdings v. Harris. Jones Apparel sold merchandise to DSW, which shipped all such merchandise to its distribution center in Columbus, Ohio, before redistributing it to its retail stores nationwide. Unlike in VVF Intervest, there was no intervening resale by the purchaser. On the basis of later-obtained evidence, Jones Apparel maintained that receipts attributable to sales of merchandise that DSW ultimately transported to its retail stores outside Ohio could not be sitused to Ohio under the CAT.
The case initially appeared to break in the taxpayer’s favor. The Ohio Supreme Court rejected the Tax Commissioner’s view that CAT situsing turns on the seller’s contemporaneous knowledge—at the time of the sale—of the goods’ ultimate destination. The Commissioner had seized upon Jones Apparel’s shipping labels and bills of lading reflecting delivery to Ohio, as well as the taxpayer’s apparent lack of awareness, at the time those documents were created, of whether the merchandise would later be delivered outside the state. Instead, the court held that the Commissioner’s argument “fail[ed] for a simple reason: The contemporaneous-knowledge requirement she claim[ed] to exist in R.C. 5751.033(E) is not there.” Accepting the Commissioner’s position, the court explained, would mean reading a requirement into the statute that the General Assembly did not enact.
But ultimately, the court affirmed the denial of the refund sought by Jones Apparel on evidentiary grounds. The court found that the company had failed to provide documentary evidence quantifying the amount of the refund it sought, i.e., the actual gross receipts attributable to merchandise ultimately received outside Ohio, as required by the refund procedures in R.C. 5751.08(A). The taxpayer’s proffered estimates, data sampled from a limited time period postdating the period at issue, and economic inferences were deemed insufficient.
- Reading the Cases Together
VVF Intervest underscores that Ohio courts will apply a transaction-by-transaction approach to situsing sales of tangible personal property for CAT purposes, even where evidence shows that the property ultimately comes to rest outside Ohio. Jones Apparel Group/Nine West Holdings, in turn, makes clear that taxpayers seeking refunds on the basis of situsing receipts outside Ohio must precisely quantify such receipts with documentary evidence, rather than estimates, inferences, or limited data samplings. Taxpayers selling to companies that rely on Ohio distribution centers should therefore reassess their CAT exposure and their documentation practices.
The cases are VVF Intervest, L.L.C. v. Harris, Slip Op. No. 2025-Ohio-5680 (Dec. 24, 2025), available at https://www.supremecourt.ohio.gov/rod/docs/pdf/0/2025/2025-Ohio-5680.pdf and Jones Apparel Group/Nine West Holdings v. Harris, Slip Op. No. 2026-Ohio-74 (Jan. 14, 2026), available at https://www.supremecourt.ohio.gov/rod/docs/pdf/0/2026/2026-Ohio-74.pdf.