Jet fuel purchased by an air cargo business from the taxpayer qualified for the Ohio sales tax exemption for property used directly in the rendition of a public utility service because the taxpayer’s customer was a common carrier for purposes of the exemption. Though the Tax Commissioner claimed that a certificate of public convenience and necessity was required to be eligible for the public utility exemption, the plain language of the statute states no such condition.
Instead, the court held that the proper test to apply to an air carrier is the common carrier test developed by case law. This standard requires that in order to qualify for the public utility exemption, “(1) the purchaser must be a common carrier, (2) the purchaser must actually be operating as a common carrier, and (3) the primary-use test is to be applied if the property is used both in a way that would make it eligible for the [exemption] and in a way that would make it not eligible.” Here, the taxpayer’s customer qualified as a common carrier service because it provided regular package delivery service at a reasonable and nondiscriminatory price according to preannounced schedules.
As jet fuel constituted fungible items, its use was subject to specific apportionment as opposed to the application of a primary-use test. Consequently, the court remanded the case to the Tax Commissioner to conduct additional proceedings and to determine the exempt portion of fuel sales under the common-carrier standard.
Epic Aviation LLC v. Testa, Ohio Supreme Court, No. 2016-Ohio-3392, June 15, 2016, ¶404-503