September 18, 2020
On September 16, 2020, the Supreme Court of Ohio ruled in favor of the Village of Put-in-Bay’s imposition of a tax on owners of vehicles available for hire. Walter | Haverfield partner, Benjamin Chojnacki and former Walter | Haverfield partner, Susan Keating Anderson represented the Village in the case against a Put-in-Bay business owner.
In Village of Put-in-Bay v. Mathys et al, the Village charged the business owner for failure to pay the annual license fee on each of the golf carts that he rents out for use in the Village.
The case proceeded all the way to Ohio’s high court which addressed two propositions of law:
- Because Ohio licenses vehicles for use on all public roadways in exchange for payment of an annual statutory tax on vehicles, no municipality in this state may levy an additional local tax for similar purposes—otherwise, localities could negate or attach additional strings to statewide licenses.
- Under Ohio Constitution Art. XII, Section 5a, any moneys collected from taxes levied on motor vehicles must be expended solely for a statutory purpose, therefore, a statute—not an ordinance—must enable the expenditure, and hence the exaction, of a vehicle tax.
Implicit within the first proposition of law is the owner’s contention that the Village ordinance was preempted by state law which provides for a statutory scheme that taxes vehicle licensure, the proceeds of which pay the expense of administering laws related to registration of motor vehicles and maintaining and repairing state roadways. To this point, the Supreme Court of Ohio reasoned that the General Assembly’s enactment of a statewide vehicle tax is not the equivalent of a municipal ordinance which imposes a business tax on owners of vehicles for hire. The Court placed great emphasis on the fact that Put-in-Bay’s ordinance does not impose a license tax on the operation of motor vehicles in general, but rather, Put-in-Bay’s ordinance imposes a tax on those wishing to have the privilege of operating a vehicle rental business in the village.
As to the second proposition of law accepted, the Court determined that Section 858.01 did not run afoul of Article XII §5a of the Ohio Constitution which requires, in part, that money derived from “fees, excises, or license taxes” relating to registration, operation, or use of motor vehicles on public highways shall not be used for purposes other than the costs associated with administering those laws and construction, maintenance, and repair of public highways and bridges. The Court quickly dismissed the business owner’s second proposition of law by distinguishing the business tax in Section 858.01 of Put-in-Bay’s ordinances from a state law tax on the operation or use of vehicles on public highways.
This decision solidifies the principle that there must be an express act of restriction present in order for a state law to be said to preempt a local ordinance and lends further support to a municipality’s home rule authority.