Epic Aviation, L.L.C. v. Testa

Summary

The Supreme Court of Ohio held that Ohio's public-utility-service sales-tax exemption does not require an air carrier to hold a federal certificate of public convenience and necessity. The court clarified that the exemption turns on whether the carrier actually operates as a common carrier, including providing cargo service at publicly announced times and locations for reasonable, nondiscriminatory charges. It vacated the Board of Tax Appeals' decision and remanded for an audit and apportionment of jet-fuel purchases used for exempt and nonexempt purposes.

Holdings

1. R.C. 5739.01(P) does not make possession of a certificate of public convenience and necessity a necessary condition for the public-utility-service sales-tax exemption. The statute includes certificate holders among qualifying public utilities but does not exclude carriers that lack such a certificate.
2. The proper test for determining whether an air carrier provides an exempt public-utility service is the common-carrier test, not the special-regulation-and-control test stated as the focus in Castle Aviation.
3. For purposes of the exemption, qualifying common-carrier service consists of shipping cargo at a time and to a place announced to the public in advance and doing so at a reasonable and nondiscriminatory charge.
4. Because jet fuel is a fungible item used for both taxable and nontaxable purposes, the exemption must be apportioned to the portion used directly in exempt common-carrier service rather than determined on an all-or-nothing basis.
5. Epic must be given an opportunity to submit evidence establishing the portion of AirNet's fuel purchases attributable to exempt common-carrier service because the court's clarification of the governing law was not reasonably anticipated under the prior case law.

Questions Presented

1. Whether holding a federal certificate of public convenience and necessity is a necessary condition for the public-utility-service sales-tax exemption under R.C. 5739.02(B)(42)(a) and R.C. 5739.01(P).
2. What test determines whether an air carrier provides a qualifying public-utility service for purposes of the exemption.
3. Whether the exemption applies on an all-or-nothing basis or must be apportioned when fungible jet fuel is used for both exempt and nonexempt purposes.
4. Whether Epic should be permitted on remand to present evidence establishing the portion of AirNet's fuel purchases attributable to exempt common-carrier service.

Disposition

vacated