Diversified Ingredients v. Testa

Diversified filed suit seeking a declaratory judgment that the Interstate Income Act (IIA), 15 U.S.C. 381, deprives Ohio of jurisdiction to assess and collect the Commercial Activity Tax (CAT) on Diversified's sales of goods manufactured and shipped from outside Ohio to locations in Ohio, and an order enjoining the State Tax Commissioner from asserting that jurisdiction. The district court dismissed the suit as barred by the Tax Injunction Act (TIA), 28 U.S.C. 1341, and by long-standing principles of comity. The court held that the TIA applies to a suit in federal court seeking to enjoin assessment, levy or collection of a state tax “where a plain, speedy and efficient remedy may be had in the courts of such State.” Here, Diversified's argument that the Ohio CAT does not provide a "plain" state court remedy is without merit. In this case, the Ohio Revenue Code provides taxpayers an appeal of right to an Ohio appellate court which will “hear and decide” a claim that a state tax has been invalidly assessed or collected. The court explained that this obviously includes authority to decide that imposing the CAT on Diversified’s out-of-state transactions violates the IIA, regardless of the Ohio Legislature’s contrary intention. The court further concluded that its decision that the TIA effectively transferred jurisdiction over Diversified’s equitable claims to the Ohio state courts is not at odds with comity principles. Accordingly, the court affirmed the judgment. View "Diversified Ingredients v. Testa" on Justia Law