Ohio Air Taxi Not Exempt Public Utility

Monday, September 8th, 2014

An air taxi.

The Ohio Board of Tax Appeals ("Board") recently ruled that an air taxi operator did not qualify as a public utility for a sales tax exemption.

The taxpayer provided cargo air transportation services. It specialized in transporting time-sensitive cargo, such as checks for transfer among financial institutions, radio pharmaceuticals, and sensitive government documents. The taxpayer could have sought a certificate of public convenience and necessity, but it chose not to do so.

Ohio exempts sales of items used or consumed directly in rendering a public utility service. To determine whether a business is a "public utility," Ohio looks at the amount of special regulation and control by a government regulatory agency. Businesses that are not subject to a great degree of such regulation are not public utilities. A "public utility" includes a United States citizen that holds a certificate of public convenience and necessity. To get such a certificate, a person must undergo review by the federal Department of Transportation and submit periodic reports to that Department, among other things.

The Board ruled that the air taxi operator was not a public utility. The Board said that it was not necessary to have a certificate of public convenience and necessity to be a public utility, but a public utility must be subject to a great deal of government regulation. Although the taxpayer had to comply with certain requirements from its customers because of the sensitive services it provided, the taxpayer voluntarily undertook those obligations. The government did not impose those obligations. The taxpayer did not have a certificate of public convenience and necessity and did not have enough government regulation. The taxpayer was therefore not a public utility.


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