“Beyond the Furrow”: Ohio Supreme Court Holds that Items Used in Intermediate Farming Steps Qualify for the R.C. 5739.02(B)(42)(n) Sales/Use-Tax Exemption

1. Introduction

In Claugus Family Farm, L.P. v. Harris, Slip Opinion No. 2025-Ohio-2807, the Supreme Court of Ohio resolved a long-simmering interpretive dispute surrounding Ohio’s farming sales and use-tax exemption. The Court held that, after the General Assembly’s 2011 deletion of the word “directly” from R.C. 5739.02(B)(42)(n), tangible personal property need not be used in immediate or “direct” production of agricultural goods to qualify for the exemption. So long as the property is primarily used in a bona fide farming enterprise and furthers the production of marketable agricultural products—even through intermediate steps—the exemption applies.

The case arose when the Tax Commissioner assessed use tax on a Mercedes-Benz Geländewagen purchased by Claugus Family Farm (“CFF”), a century-old timber operation. Both the Commissioner and the Ohio Board of Tax Appeals (“BTA”) insisted that the SUV failed a presumed three-part “direct use” test. The Supreme Court disagreed, reversed the BTA, and remanded for cancellation of the assessment, thereby broadening the statutory protection for modern agricultural enterprises—especially timber farms that operate on multi-decade harvest cycles.

2. Summary of the Judgment

Statutory Focus: R.C. 5739.02(B)(42)(n) and R.C. 5741.02(C)(2), which extend identical exemptions to sales tax and use tax, respectively.
Key Holdings:
1. The removal of the term “directly” from the statute means courts may not re-insert a “direct use” limitation.
2. A vehicle used to reach, inspect, and remediate a timber stand is “used in farming,” even if it does not itself harvest timber.
3. Timber farming is a “business” despite irregular harvests; profit objective rather than contemporaneous sales controls.
4. Uncontroverted testimony that 95 % of the vehicle’s use was farm-related satisfied the “primarily used” requirement; statutory text does not compel mileage logs.
Outcome: Assessment of $9,461.58 in use tax, interest, and penalty reversed; cause remanded to cancel assessment.

3. Detailed Analysis

3.1 Precedents Cited and Their Influence

Stingray Pressure Pumping, L.L.C. v. Harris, 2023-Ohio-2598
Confirmed the parity between sales-tax and use-tax exemptions. Provided doctrinal backdrop.
Saunders Mills v. Evatt, 139 Ohio St. 227 (1942); Tri-State Asphalt Corp. v. Glander, 152 Ohio St. 497 (1950)
Early “direct use” cases interpreting predecessor statutes. Court distinguished them because they relied on statutory language now deleted.
Wheeling Steel Corp. v. Porterfield, 24 Ohio St.2d 24 (1970)
Cited to stress that courts may not insert words (“directly”) omitted by the General Assembly.
Topola v. Levin, BTA No. 2011-K-4549 (2012)
BTA decision used to deny exemptions for on-farm vehicles; effectively overruled sub silentio.
Obetz v. McClain, 2021-Ohio-1706
Rule that a change in statutory wording signals a change in meaning—critical to the Court’s textual analysis.

3.2 The Court’s Legal Reasoning

Textual Primacy. The Court began with the statutory text. Prior to 2011, R.C. 5739.02(B)(42) used the phrase “directly in producing…by farming.” The legislature’s conscious deletion of the adverb plainly signaled a different, broader reach. On a strict textualist approach (citing Obetz and Scalia & Garner), the Court refused to resurrect the discarded word.
Redefining “Farming” as a Business. Looking to Adm.Code 5703-9-23(A)(1) and R.C. 5739.01(F), the Court held that “business” requires only an “object of gain,” not ongoing profit. Multi-decade silviculture cycles, removal of invasives, and selective harvesting constitute active business conduct despite an absence of recent sales.
Intermediate Use Suffices. By analogy to a tractor pulling a plow, the Geländewagen was deemed an indispensable tool delivering the “instruments of remediation” (chainsaws, herbicides, experts) to the forest floor. Under the amended statute, that intermediate facilitation is enough.
Primacy of Use. The Court accepted unrefuted testimony that 95 % of the vehicle’s time was farm-related. No statutory basis existed to demand logs; evidentiary weight of sworn testimony was adequate.

3.3 Practical & Prospective Impact

Broader Agricultural Exemptions. Farmers may now claim sales/use-tax relief for pickups, UTVs, drones, and other property that help access, monitor, or prepare land—even if not in the final act of planting or harvesting.
Timber and Perennial Agriculture. Operations with elongated growth cycles (orchards, vineyards, Christmas-tree farms) gain clarity: periodic revenue is not a prerequisite for “business” status.
Administrative Shifts. The Tax Commissioner and BTA must recalibrate audit standards; demands for mileage logs or proof of contemporaneous sales now carry diminished weight.
Statutory Interpretation Doctrine. The decision fortifies Ohio’s textualist trend—courts will not restore excised words under theories of legislative oversight or policy preference.
Fiscal Considerations. Expect an uptick in exemption claims; potential revenue loss to state and local governments. The legislature may revisit the language if fiscal impact becomes material.

4. Complex Concepts Simplified

Sales Tax vs. Use Tax: Sales tax is paid at the point of purchase inside Ohio; use tax applies when taxable items are bought elsewhere (or tax unpaid) but used in Ohio. Exemptions usually mirror one another.
R.C.: “Revised Code” – Ohio’s statutory compilation.
BTA (Board of Tax Appeals): Quasi-judicial tribunal reviewing tax determinations before further appeal to the Supreme Court of Ohio.
“Primarily Used”: More than 50 % of the item’s functional time is devoted to the exempt activity.
Timber Stand Improvement: Silvicultural practice of removing undesirable or invasive vegetation to promote growth of high-value trees.

5. Conclusion

The Court’s decision in Claugus Family Farm recalibrates Ohio’s farming tax-exemption jurisprudence for the 21st-century agricultural landscape. By anchoring its analysis in textual fidelity and practical agricultural realities, the Court:

Removed the judicially implied “direct use” straightjacket;
Affirmed that the profit objective, not immediate profit realization, defines a farming “business” for tax purposes;
Provided much-needed guidance on the evidentiary threshold for proving “primary use.”

Going forward, the decision will serve as a lodestar for farmers, auditors, and counsel alike—emphasizing that Ohio’s tax code must be read as written, and that modern agriculture often requires sophisticated, intermediate tools whose tax status now enjoys clearer protection.