Put-In-Bay Island Taxing Dist. Auth. v. Colonial, Inc. - Ohio Supreme Court Opinion - Ohio Supreme Court Decision

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OPINIONS OF THE SUPREME COURT OF OHIO
The full texts of the opinions of the Supreme Court of
Ohio are being transmitted electronically beginning May 27,
1992, pursuant to a pilot project implemented by Chief Justice
Thomas J. Moyer.
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Put-In-Bay Island Taxing District Authority, Appellee, v.
Colonial, Inc., Appellant.
[Cite as Put-In-Bay Island Taxing Dist. Auth. v. Colonial,
Inc. (1992), Ohio St.3d .]
Taxation -- Island taxing districts -- R.C. 5739.101 et seq.
violates Section 26, Article II of the Ohio Constitution.
R.C. 5739.101 et seq. violates Section 26, Article II of
the Ohio Constitution.
(No. 91-2064 -- Submitted November 9, 1992 -- Decided
December 11, 1992.)
Appeal from the Court of Appeals for Ottawa County, No.
90-OT-024.
Effective June 1, 1983, the General Assembly enacted R.C.
5739.101 through 5739.107 for the purpose of authorizing the
imposition of an excise tax on vendors engaged in the business
of making sales on "islands" in Ohio. These sections were
added to R.C. Chapter 5739, governing sales tax in Ohio.
In March 1984, the Council of the village of Put-In-Bay,
pursuant to R.C. 5739.101, affirmed the establishment of the
Put-In-Bay Island Taxing District and appointed members to
appellee, Put-In-Bay Taxing District Authority. Thereafter,
pursuant to R.C. 5739.101(C), appellee adopted a resolution
imposing a one-half percent tax on all businesses conducting
sales within the taxing district. The resolution became
effective May 1, 1984.
On January 18, 1989, appellee filed a complaint against
appellant, Colonial, Inc. ("Colonial"), and its president,
seeking to recover the one-half percent tax imposed for the
period from May 1, 1984 through October 31, 1987. Appellee
also sought to recover interest on the accumulated unpaid tax.
Colonial responded to appellee's complaint by filing an answer
which challenged the constitutionality of the tax. Colonial
contended, among other arguments, that R.C. 5739.101 et seq.
violated Section 26, Article II of the Ohio Constitution.1
The parties stipulated to the material facts and submitted
cross-motions for summary judgment. On April 6, 1990, the
trial court granted summary judgment in favor of appellee,
concluding, inter alia, that R.C. 5739.101 et seq. was

constitutional in all respects. Subsequently, in a judgment
entry dated May 17, 1990, the trial court assessed the amount
of tax and interest owed by Colonial to appellee.
Upon appeal by Colonial, the court of appeals, in a
divided vote, relying on State ex rel. Zupancic v. Limbach
(1991), 58 Ohio St.3d 130, 568 N.E.2d 1206, affirmed the
judgment of the trial court. The court concluded that R.C.
5739.101 et seq. was constitutional because "* * * islands have
unequal conditions that the statute seeks to deal with in a
rational manner."
The cause is now before this court pursuant to the
allowance of a motion to certify the record.

Stewart I. Mandel, for appellee.
Cooper, Straub, Walinski & Cramer, L.P.A., T. Scott
Johnston, Margaret J. Lockhart and Terrell A. Allen, for
appellant.

Douglas, J. The issue in this case is whether R.C.
5739.101 et seq. is at odds with Section 26, Article II of the
Ohio Constitution. For the reasons that follow, we find that
R.C. 5739.101 et seq. contravenes Section 26, Article II.
R.C. 5739.101 establishes each island in Ohio "* * * as a
special taxing district solely for the purpose of imposing tax
authorized by this section * * * to raise revenue for the
general funds of the townships and municipal corporations whose
boundaries include such island territory." "Island," as used
in R.C. 5739.101 et seq., "* * * means an island that is not
connected to the mainland by a highway or a bridge." R.C.
5739.101. In addition, R.C. 5739.101 provides that "[t]he
taxing authority of an island taxing district may, by
resolution[,] * * * impose or repeal a tax upon the privilege
of engaging in the business of making sales on the island[,]
* * * [which] rate of the tax shall be one-half, one, or one
and one-half percent of the receipts derived from all such
sales * * *." Further, the taxes authorized by the legislation
are imposed upon vendors, not consumers. Id. All revenues
received by a township or municipal corporation must be
deposited in its general fund. R.C. 5739.102.
Section 26, Article II requires that "[a]ll laws, of a
general nature, shall have a uniform operation throughout the
state * * *." (Emphasis added.) Section 26, Article II
applies to all subjects except those explicitly and exclusively
provided for by other sections of the Constitution. See
Mallison, General Versus Special Statutes in Ohio (1950), 11
Ohio St.L.J. 462, at 463-464. Further, it is well settled that
this section of the Constitution is mandatory and not merely
directory. See State ex rel. v. Spellmire (1902), 67 Ohio St.
77, 65 N.E. 619. In addition, this court has observed that
"* * * 'uniform operation throughout the state' means universal
operation as to territory; it takes in the whole state. And,
as to persons and things, it means universal operation as to
all persons and things in the same condition or category. When
a law is available in every part of the state as to all persons
and things in the same condition or category, it is of uniform
operation throughout the state." (Emphasis added.) Id. at 86,
65 N.E. at 622.

In State ex rel. Dayton Fraternal Order of Police Lodge
No. 44 v. State Emp. Relations Bd. (1986), 22 Ohio St.3d 1, 22
OBR 1, 488 N.E.2d 181, paragraph one of the syllabus, we held
that R.C. Chapter 4117, Ohio's Public Employees' Collective
Bargaining Act, is a law of a general nature. We further
determined that a provision in the law which operated to
exclude selected city of Dayton police officers and fire
fighters from the Act (Dayton Amendment) was unconstitutional.
Specifically, in Lodge No. 44, we held that the "Dayton
Amendment" violated Section 26, Article II, in that it did not
have a "uniform" operation throughout the state, as that term
is used in the Constitution, because "* * * the provision does
not affect any employees in the state except those specific
policemen and fire fighters * * * who have previously been
determined to be 'supervisors.' In its clearest sense, the
provision involved bears every evidence of special legislation
affecting, to their detriment, only one group of employees
while granting to all other employees in the state, likely
situated, the full protection and rights afforded by the Act."
Id. at 5-6, 22 OBR at 5, 488 N.E.2d at 185.
In our recent Zupancic decision, we were asked to
determine whether a statute which classified taxing districts
on the basis of the cost of an electrical power plant complied
with Section 26, Article II. The precise issue was whether the
statute operated uniformly throughout the state.
In Zupancic, we noted that this court has historically
viewed tax statutes to be of a general nature, and that such
statutes must operate in a uniform manner. Id., 58 Ohio St.3d
at 138, 568 N.E.2d at 1213. We further reviewed criteria for
determining whether a statute operates uniformly, citing State
ex rel. Stanton v. Powell (1924), 109 Ohio St. 383, 142 N.E.
401, and held that even though the statute in question applied
to only one particular electric power plant, it operated in a
uniform manner throughout the state. Zupancic, 58 Ohio St.3d
at 138, 568 N.E.2d at 1214.
In reaching this conclusion, we reasoned that the statute
operated in a uniform manner within the meaning of Section 26,
Article II because it had the potential to apply to any county
in the state, and that "* * * there is nothing within the Act
itself to prevent its prospective operation upon any electric
power plant similarly situated throughout the state." Id. at
138, 568 N.E. 2d at 1213. We then stated that the substance of
the statutory classification was reasonable and achieved a
legitimate governmental purpose, operating equally on all
persons or entities included within its provisions. Id. at
138-139, 568 N.E.2d at 1213-1214.
In the case at bar, the parties appear to agree that R.C.
5739.101 et seq. is a law of a general nature. Hence, the
question becomes whether the legislation operates in a uniform
manner throughout the state.
R.C. 5739.101 et seq. specifically targets a limited
geographical class of vendors, i.e., those vendors engaged in
making sales within an island taxing district. Thus, this
statutory scheme applies only to a territorially limited class
of vendors in Ohio. The statute does not apply to all Ohio
vendors. As such, R.C. 5739.101 et seq., without question,
carries with it every indicia of special legislation, imposing

burdens upon particular vendors in a limited geographical
setting while, by application, excepting all other vendors in
the state. Further, the statute here, unlike the statute at
issue in Zupancic, does not have the potential to apply
throughout the state.
Accordingly, based on the foregoing, we believe that R.C.
5739.101 et seq. does not operate in a uniform manner through
the state. Therefore, we hold that R.C. 5739.101 et seq.
violates Section 26, Article II of the Ohio Constitution.
We further believe that today's holding is also consistent
with prior decisions from this court. See, e.g., Hixson v.
Burson (1896), 54 Ohio St. 470, 43 N.E. 1000; Silberman v. Hay
(1899), 59 Ohio St. 582, 53 N.E. 258; Platt v. Craig (1902), 66
Ohio St. 75, 63 N.E. 594; Andrews v. State ex rel. Henry
(1922), 104 Ohio St. 384, 135 N.E. 655; and Brown v. State ex
rel. Merland (1929), 120 Ohio St. 297, 166 N.E. 214.
Accordingly, the judgment of the court of appeals is
reversed.
Judgment reversed.
Moyer, C.J., Sweeney, Holmes, Wright, H. Brown and
Resnick, JJ., concur.

FOOTNOTE:
1 The record indicates that Colonial held an Ohio vendor's
license, operating a general store, a department store, two
restaurants and a bar. Further, Colonial filed sales tax
returns and paid applicable state and county sales taxes, but
did not pay the island district excise tax during the period of
time in question.