CAT Refunds Require Documentary Proof of the Refund “Amount” for Out-of-Ohio Delivery

Introduction

In Jones Apparel Group/Nine West Holdings v. Harris, Slip Opinion No. 2026-Ohio-74 (Jan. 14, 2026), the Supreme Court of Ohio reviewed a Commercial Activity Tax (“CAT”) refund denial involving wholesale sales by Jones Apparel Group/Nine West Holdings (“Jones Apparel”) to DSW, Inc. (“DSW”). Jones Apparel shipped all merchandise to DSW’s Columbus, Ohio distribution center, after which DSW redistributed goods to retail stores nationwide. Jones Apparel later sought a CAT refund for the portion of receipts allegedly attributable to goods ultimately sent to non-Ohio stores, arguing those receipts lacked an Ohio situs under R.C. 5751.033(E).

The key issues were (1) whether CAT situsing under R.C. 5751.033(E) depends on the taxpayer’s contemporaneous knowledge of ultimate delivery location, and (2) what level and type of proof is required under R.C. 5751.08(A) to establish the amount of a claimed refund when goods initially enter Ohio but are later transported out of state.

Summary of the Opinion

The Court (Brunner, J.) affirmed the Board of Tax Appeals (“BTA”) and upheld the Tax Commissioner’s denial of the refund claim. The Court held:

  • R.C. 5751.033(E) does not impose a “contemporaneous knowledge” requirement; the statute does not limit situsing evidence to records created at the time of sale or shipment.
  • Even though after-the-fact evidence could theoretically prove out-of-Ohio ultimate receipt, Jones Apparel failed under R.C. 5751.08(A) to provide documentary evidence establishing the amount of gross receipts tied to goods actually transported out of Ohio; testimony and inferential analyses were insufficient to quantify the refund.

Chief Justice Kennedy dissented (joined by Fischer, J.), agreeing there is no contemporaneous-knowledge requirement but concluding the evidence was sufficient to prove at least 80% of goods left Ohio and that the refund should have been granted.

Analysis

Precedents Cited

  • Defender Sec. Co. v. McClain, 2020-Ohio-4594: Cited for the broader CAT allocation difficulty across jurisdictions (the “thorny issue” of allocating receipts to Ohio). The Court used it as contextual support for why R.C. 5751.033 exists and why situsing disputes arise.
  • Adams v. Harris, 2024-Ohio-4640: Provided the standard of review for BTA decisions—whether the decision was “reasonable and lawful” under R.C. 5717.04. This deferential framing mattered because the Court evaluated whether the BTA reasonably found the proof inadequate.
  • Moskowitz v. Cuyahoga Cty. Bd. of Revision, 2017-Ohio-4002 and Dayton-Montgomery Cty. Port Auth. v. Montgomery Cty. Bd. of Revision, 2007-Ohio-1948: These controlled appellate posture. The Court held Jones Apparel could not pursue a proposition of law on which it was not aggrieved (Jones Apparel agreed with the BTA’s rejection of a contemporaneous-knowledge requirement). The Commissioner could still press that theory as an alternative affirmance basis via cross-appeal.
  • Rockies Express Pipeline, L.L.C. v. McClain, 2020-Ohio-410, In re N.M.P., 2020-Ohio-1458, State ex rel. Lee v. Karnes, 2004-Ohio-5718, and Johnson v. Montgomery, 2017-Ohio-7445: These are statutory-interpretation authorities. They anchored the Court’s textual approach: start with the statutory language; presume the legislature means what it says; apply unambiguous text as written.
  • Wheeling Steel Corp. v. Porterfield, 24 Ohio St.2d 24 (1970): Central to rejecting the Commissioner’s “contemporaneous knowledge” theory. The Court invoked it to emphasize that courts and the BTA may not “legislate” by adding requirements not found in the statute.
  • SFZ Transp., Inc. v. Limbach, 1993-Ohio-240 and Rowe-Reilly Corp. v. Tracy, 1999-Ohio-326: Cited and distinguished. Jones Apparel relied on them to argue the BTA improperly rejected “uncontroverted” evidence. The Court responded that those cases did not involve CAT situsing on a refund claim under R.C. 5751.08(A)’s documentation-and-amount requirement.
  • VVF Intervest, L.L.C. v. Harris, 2025-Ohio-5680: Discussed only in the dissent, which highlighted a perceived tension between VVF Intervest and the statute’s “ultimately received after all transportation has been completed” language. While not part of the majority’s ratio decidendi, the dissent signals an active doctrinal debate about how “completed transportation” interacts with distribution models and resale chains.

Legal Reasoning

1. Situsing under R.C. 5751.033(E): no “contemporaneous knowledge” requirement

The Commissioner argued that situsing must be based on the taxpayer’s contemporaneous records and what the taxpayer “contemplated” at the time of sale/shipment—effectively, that shipment to an Ohio distribution center is enough to situs receipts to Ohio unless the taxpayer knew then that goods would be delivered outside Ohio.

The Court rejected this as textually unsupported. R.C. 5751.033(E) focuses on where property is “ultimately received after all transportation has been completed,” and R.C. 5751.08(A) requires a refund claim within four years with “documentation to support” it, but does not specify that documentation must be contemporaneous. Invoking Wheeling Steel Corp. v. Porterfield, the Court refused to add a statutory element.

2. Refund proof under R.C. 5751.08(A): documentary evidence must establish the “amount”

The decisive move is the Court’s treatment of R.C. 5751.08(A)’s requirement that the taxpayer provide “the amount of the requested refund” with “documentation to support” issuance. The Court read “amount” as demanding a quantitative showing tied to gross receipts that should not have been sitused to Ohio.

The Court accepted that goods likely moved out of Ohio, but held that Jones Apparel did not prove how much of the relevant gross receipts corresponded to goods ultimately received outside Ohio. The proof problems were:

  • Neeman’s “absolute certainty” that at least 80% left Ohio was treated as an “educated guess” because it lacked a documented methodology quantifying shipments, destinations, or receipts.
  • Oeler’s “Ohio offering” analysis (3.85% availability in Ohio stores) was methodologically more structured but used a 2018 sample outside the 2010–2016 refund period and covered only three months, not a seven-year span; the Court treated it as unreliable for quantifying the refund.
  • DSW Form 10-Ks and “common knowledge” that distribution centers ship nationwide could support inference of out-of-state redistribution, but did not translate into a documented, transaction-linked refund amount.

The result is a two-step framework implicit in the majority: (a) R.C. 5751.033(E) allows situsing to follow ultimate receipt after completed transportation (not limited by the taxpayer’s knowledge at shipment), but (b) R.C. 5751.08(A) requires documentary, quantitative substantiation of the refund amount tied to gross receipts for out-of-Ohio ultimate receipt.

3. Relationship to alternative situsing methods

The Court underscored that the CAT provides certain alternative methods in specific contexts (e.g., R.C. 5751.033(G) and (I)) and a broader alternative-situsing request mechanism when standard situsing “do[es] not fairly represent” Ohio activity (R.C. 5751.033(J)). None applied here, reinforcing that the taxpayer could not substitute approximation for statutory documentation when pursuing a refund.

Impact

  • Refund claims become documentation-centric, not inference-centric. Taxpayers seeking CAT refunds for goods routed through Ohio distribution centers must expect that general business logic (“most stores are out of state”) and post-period sampling may be insufficient without shipment-level or receipt-linked documentation.
  • After-the-fact proof is permissible in principle, but must be quantifiable. The Court and BTA expressly contemplated that later-acquired evidence could support a refund; the practical lesson is that such evidence must be strong enough to compute the refund “amount.”
  • Distribution-center models intensify the need for data access and contracting. Where the purchaser controls downstream shipping data (as DSW did), vendors may need contractual audit/data-sharing provisions to preserve refund rights and manage CAT exposure, or consider pursuing alternative situsing routes where available.
  • Litigation focus shifts from statutory meaning to evidentiary sufficiency. The Court largely avoided re-litigating the meaning of “ultimately received” because the case turned on proof of “amount” under R.C. 5751.08(A). Future CAT disputes in similar supply chains may hinge on whether the taxpayer can assemble transaction-specific documentation.
  • Dissent flags continuing doctrinal friction. Although not controlling, the dissent’s discussion of VVF Intervest, L.L.C. v. Harris, 2025-Ohio-5680 signals that “completed transportation” and the effect of resale/distribution steps remain contested terrain in Ohio CAT jurisprudence.

Complex Concepts Simplified

Commercial Activity Tax (CAT)
A gross-receipts tax imposed for the privilege of doing business in Ohio. It taxes “taxable gross receipts”—gross receipts that are “sitused” to Ohio.
Situs / Situsing
The legal rule for determining which state gets to tax a receipt. Under R.C. 5751.033(E), tangible-personal-property receipts are sitused where the purchaser “ultimately” receives the property after transportation is completed.
Refund “amount” requirement (R.C. 5751.08(A))
A taxpayer seeking a refund must not only claim entitlement in principle, but also provide documentation showing the numeric amount to be refunded. This decision reads “amount” as requiring a quantitative, document-supported computation—not a plausibility estimate.
Contemporaneous knowledge
The Commissioner’s proposed rule that situsing depends on what the taxpayer knew at the time of sale/shipment. The Court rejected this as not found in R.C. 5751.033(E).
Reasonable-and-lawful review (BTA appeals)
On appeal from the BTA, the Supreme Court asks whether the BTA’s decision was reasonable and lawful, not whether the Court would weigh evidence exactly the same way in the first instance.

Conclusion

Jones Apparel Group/Nine West Holdings v. Harris establishes that while R.C. 5751.033(E) does not confine CAT situsing to the taxpayer’s contemporaneous knowledge, a CAT refund claimant must still satisfy R.C. 5751.08(A) by producing documentary evidence that quantifies the amount of gross receipts tied to goods ultimately received outside Ohio. The case is a cautionary precedent for taxpayers operating through Ohio distribution hubs: proving “most goods left Ohio” is not enough; the refund must be computable from reliable, documented data.