23 January 2025 Ohio Supreme Court issues decision on the situs of healthcare services In Total Renal Care, Inc.,1 the Ohio Supreme Court (court) upheld a decision by the Ohio Board of Tax Appeals (BTA) that sourced certain healthcare service to Ohio, for purposes of the Ohio Commercial Activity Tax (CAT). The taxpayer provided kidney dialysis services to patients in Ohio. The taxpayer, through an affiliated company, also performed laboratory and other back office administrative services outside of Ohio. The taxpayer conceded that the laboratory and administrative services were solely performed in support of its dialysis services to patients in Ohio. The taxpayer sought a refund of CAT on the portion of gross receipts relating to the laboratory and administrative services, citing Ohio Administrative Code 5703-29-17(C)(28), which provides that if healthcare services are provided partly within Ohio and outside Ohio, a reasonable allocation for the services performed in Ohio must be made. The Ohio Department of Taxation (Department) denied the refund claim on the grounds that Ohio Rev. Code 5751.033(I) requires the gross receipts for services to be sourced to where the purchaser receives the benefit of those services. The BTA upheld the Department's denial of the refund claim. In upholding the BTA, the court rejected the taxpayer's argument that the administrative rule should control the legal analysis in the case, finding that there was no conflict between the statute and the administrative rule. The court observed that the taxpayer did not provide the laboratory or administrative service as a stand-alone service; instead, that service was "ancillary to and supportive of" the dialysis services provided to Ohio patients. This ruling is the court's most recent decision applying the CAT's sourcing rules and indicates that ancillary activities performed to support a primary service cannot be treated as separate gross receipts-generating activities for purposes of applying the CAT sourcing rule for services.
Document ID: 2025-0310 | ||||||