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Ohio Supreme Court sources revenue from intangible contract rights outside Ohio

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October 2020


For Commercial Activity Tax (CAT) purposes, the Ohio Supreme Court recently held that revenue received by a taxpayer for selling alarm-services contracts was sourced outside of Ohio because its customer received the benefit of such intangible contract rights at the location outside Ohio where the customer received payments and performed monitoring services.

The takeaway

The Ohio Supreme Court’s decision in Defender may come as a surprise to many CAT taxpayers. The Ohio Department of Taxation frequently has argued that a ‘look through’ approach should be used on certain transactions such as services.  Although the facts in this case are unique, CAT taxpayers may want to revisit receipts situsing methodologies to analyze if they are consistent with the holding in Defender.

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Peter Michalowski

State and Local Tax Leader, PwC US

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