Glander, C. Emory

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The New Ohio Highway Use TaxC. EMoRY GLxmrDR*One of the major legislative enactments of the 100th GeneralAssembly of Ohio was Amended Substitute House Bill No. 619which provides additional taxes for the construction of highways.In broad outline, the act contains four main divisions. Sections 1through 15 levy a highway use tax, generally known as an axle-mile tax, upon commercial vehicles. Section 16 levies an additionaltax of one cent per gallon on motor fuel. Section 17 creates in thestate treasury a "state highway construction and bond retirementfund," to which shall be credited the receipts from the highwayuse tax and the additional one cent motor fuel tax. Sections 18through 21 create a "state highway construction council" and pre-scribe its powers, duties, and functions.For the purposes of this survey, analysis will be limited to theprovisions of Sections 1 through 15 of the act. No consideration willbe given herein to the remaining provisions levying an additionalmotor fuel tax, providing for a state highway construction and bondretirement fund, and creating a state highway construction council,since the main issue which confronted the General Assembly andwhich created the most controversy was the axle-mile tax.In considering the nature and purposes of this tax, the levyingprovisions which follow must be kept clearly in mind.'For the purpose of providing revenues to pay the costof administering and enforcing the laws pertaining to thelevy and collection of the tax imposed by this section, todefray the expenses of the highway construction council,to provide funds to pay the state's share of the cost of con-structing or reconstructing highways and eliminating rail-way grade crossings on the major thoroughfares of thestate highway system and urban extensions thereof and topay interest, charges and principal of bonds issued to pro-vide funds to pay the state's share of the cost of such con-struction, reconstruction and elimination of railway gradecrossings, there is hereby levied a highway use tax uponeach commercial car with three or more axles, each com-mercial car used as part of a commercial tandem and eachcommercial tractor used as part of a commercial tractorcombination or commercial tandem ....* Of the firm of Wright, Harlor, Purpus, Morris & Arnold; Lecturer, Col-lege of Law, The Ohio State University; Past Tax Commissioner of Ohio;Past President of the National Association of Tax Administrators; Memberof the Ohio Bar.I Sec. 6OHIO STATE LAW JOURNALThe tax so levied is at graduated rates according to mileage travel-ed in Ohio, as follows:(1) Commercial car with three ormore axles ........................ 1/2 cent per mile(2) Commercial tractor authorizedby permit to operate as part ofa commercial tractor combina-tion with a maximum of threeaxles ............ ................. 1 cent per mile(3) Commercial tractor authorizedby permit to operate as part ofa commercial tractor combina-tion with a maximum of fouraxles ............................ 11/ cents per mile(4) Commercial tractor authorizedby permit to operate as part ofa commercial tractor combina-tion with a total of five or moreaxles .............................. 2 cents per mile(5) Commercial car or commercialtractor authorized by permit tooperate as part of a commercialtandem with four or more axles .... 21/2 cents per mileThus, it will be observed that the highway use tax is, in form,a mileage tax in which the graduated rates are determined ac-cording to the number of axles on each vehicle or vehicular com-bination for which highway use permits are obtained. As such,it is to be distinguished from a weight-distance tax like that ofNew York in which tax rates are graduated according to the maxi-mum gross weight of each vehicular unit. It is also to be distin-guished from the ton-mile tax which, simply stated, is computedby multiplying weight times distance times a tax rate. The onlyother state using the axle factor is Alabama which levies a tax ofone-fourth cent per mile per axle on all vehicles transportingproperty for hire.In view of the fact that the tax is levied upon "each commer-cial car with three or more axles, each commercial car used as partof a commercial tandem and each commercial tractor used as partof a commercial tractor combination or commercial tandem," it isnecessary to note the definitive provisions of the act. The term"commercial car" means any motor vehicle used for transportingproperty, wholly on its own structure, on a public highway. Theterm "commercial tractor" means any motor vehicle designed andused to propel or draw a trailer or semi-trailer or both on a publichighway without having any provisions for carrying loads inde-pendently of such trailer or semi-trailer. The term "commercialtandem" is defined to mean any commercial car and trailer or anycommercial tractor, semi-trailer and trailer when fastened together[Vol. 14NEW OHIO HIGHWAY USE TAXand used as one unit. A "commercial tractor combination" is de-fined as any commercial tractor and semi-trailer when fastened to-gether and used as one unit. The statutory definition of the terms"trailer" and "semi-trailer" corresponds with the general under-standing of those terms, with certain exceptions, while the term"axle" is technically defined as two or more load carrying wheelsmounted in a single transverse vertical plane. The definition of"public highway" excludes any highway under the jurisdiction ofthe Ohio Turnpike Commission.2The procedural and administrative provisions of the act maybe conveniently summarized under four group headings: (1) high-way use permits, (2) quarterly returns, (3) refund claims, (4)assessment and enforcement provisions, (5) reciprocity agreements,and (6) specific exemptions. Without undertaking an exhaustiveanalysis, the following explanation will permit a panoramic viewat least of each of these provisions.Highway Use Permits3The act requires each owner of a commercial car or a commer-cial tractor, as to which the tax applies, to apply to the Registrarof Motor Vehicles for a highway use permit on or before October 1,1953, and on or before the first day of April in each year thereafter.Each application for a commercial car must state the number ofaxles on such car and the maximum number of axles in any com-mercial tandem of which such car may be a part. In the samemanner, each application for a commercial tractor must state themaximum number of axles in any commercial tractor combinationor commercial tandem of which such commercial tractor may be apart. The reference to the maximum number of axles of the ve-hicular combination is important because, as indicated later, the taxrate is determined in the first instance on this basis.Upon filing such application, and payment of a statutory feeof two dollars, the registrar is required to issue a highway use per-mit together with a non-transferable identification plate or sticker.Such identification plate or sticker must be displayed on the com-mercial car or tractor for which it was issued at all times and insuch manner as the registrar shall prescribe. Within twenty daysafter the issuance of a highway use permit, the registrar is also re-quired to deliver a copy thereof to the tax commissioner.The highway use permit and identification plate or sticker areobviously an enforcement device. They will provide the tax com-missioner with a record of vehicles subject to the taxing provisionsof the lav, and will also enable enforcement officers to ascertainwhether a particular vehicular combination is in comformity with2 Sec. 13 Secs. 2 and 3OHIO STATE LAW JOURNALthe maximum axle declaration upon which the tax is initiallyassessed.Quarterly ReturnsThe act provides that highway use tax returns must be filedby the owner of each commercial car and each commercial tractorsubject to the tax on or before the 20th day of January, April, July,and October in the year 1954 and on or before the same dates ineach year thereafter. Such returns must be filed with the treasurerof state on forms prescribed by the tax commissioner and, at thesame time, payment of the tax due for the preceding three calendarmonths must be made. Upon receipt of each return, the treasurerof state is required to mark thereon the date of receipt thereof andthe amount of tax payment, and to transmit the return to the taxcommissioner. The first returns will be due on or before January20, 1954, covering the preceding three calendar months.4For the purpose of assuring compliance with its provisions, theact requires taxpayers to keep complete and accurate records,upon forms prescribed by the tax commissioner, of the total milestraveled in Ohio together with such other information as the com-missioner may require. Such records must be preserved for a periodof four years. 5 It should be noted that these records must be keptnot only by the vehicle owner to whom the highway use permitwas issued but also by any person other than the owner whooperates the equipment pursuant to a certificate issued by thepublic utilities commission. This requirement was undoubtedly in-serted because of the practice among some commercial carriers ofleasing certain equipment from employees and other owners. Inthe case of leased equipment, however, it should be noted that taxliability is imposed upon the owner thereof and that, while thelessee may undoubtedly pay the tax, his failure to do so does notabsolve the owner.6Although the tax rate, as previously shown, is determined bythe declared maximum number of axles, taxpayers should alsokeep accurate records of miles traveled by taxable equipmentwhere the actual number of axles employed is less than the de-clared maximum number. The reason for this suggestion lies in thefact that there is a provision in the act for refund of tax wherethe axles actually used for a specified number of miles is less thanthe declared maximum number, as hereinafter explained.In addition to the highway use tax return, the act also pro-vides that every person who is the holder of a certificate issued4 Sec. 8s Sec. 76 Sec. 6[V'ol. 14NEW OHIO HIGHWAY USE TAXby the public utilities commission must file with the tax commis-sioner certain information returns.7Refund Claims8As previously indicated, the tax rate is governed by the declaredmaximum number of axles for which each commercial car andtractor is registered as indicated on the highway use permit. Thismeans that the tax is paid in the first instance on the maximumbasis even though the actual number of axles used for particulartrips or a specified number of miles is less than the declared maxi-mum number.However, there is a provision in the act whereby the owner,at the end of any calendar year, may file with the tax commissioneran application for a tax refund where he has paid tax on the basisof the declared maximum number of axles but has actually useda lesser axle combination for a specified number of miles.To illustrate, the owner may have registered a particulartractor for use in a four-axle combination, in which event the taxrate for all miles traveled by that tractor would be at the rate ofone and one-half cents per mile. Actually, the tractor may havebeen used during a portion of its annual mileage in a three-axlecombination, as to which the tax rate is one cent per mile. Undersuch circumstances, the taxpayer may recover the tax differencebetween the two amounts upon approval of the refund applicationby the tax commissioner. It is this provision which renders it im-portant for the taxpayer to keep accurate records of mileage foreach actual axle combination, as hereinafter suggested.This refund provision, it is respectfully submitted, is bothcumbersome and unwise. It means that the taxpayer may havesubstantial amounts of refundable tax money impounded for ex-tensive periods of time, and that the state will be unable to de-termine the net amount of its revenue from this tax source untilafter all refund claims have been processed after the end of eachtax year. It would appear that the same result could have beenachieved without these undesirable consequences if the tax hadbeen assessed in the first instance on the basis of the actual axle-mileage rather than the declared maximum axle-mileage. Anamendment to this effect would probably have the support of boththe trucking industry and the administrative authorities at a subse-quent legislative session.Administrative And Enforcement ProvisionsThe act empowers the tax commissioner to make deficiencyassessments in the event any person required to file a highway7 Sec. 98 Sec. 61953]OHIO STATE LAW JOURNALuse tax return fails to file such return within the time prescribed,files an incomplete return, files an incorrect return, or fails toremit the full amount of the tax due. Such assessments carry amandatory fifteen per cent penalty which is subject to remissionpursuant to rules adopted by the commissioner. 9The entire assessment procedure and the provisions for ad-ministrative and judicial review thereof are substantially the sameas those contained in the Ohio sales and use tax laws.10 The tax-payer has the right to file a petition for reassessment with the taxcommissioner within thirty days after service of the assessmentand thereafter to appeal to the board of tax appeals and the courtsas provided by law. After an assessment becomes final, there isa provision for taking summary judgment in favor of the stateagainst the person assessed. As in the case of sales and use taxes,there is a four-year statute of limitations against assessments, ex-cept when the person assessed failed to file a highway use taxreturn as required by the act.".In addition to assessment procedures, there are other enforce-ment devices which include suspension or revocation of highwayuse permits,'12 service of process upon the secretary of state in anyaction or proceeding instituted in Ohio against a non-residentowner because of his failure to pay the tax,13 and penalties forviolation of specified sections of the act.14Reciprocity Agreements 5A provision which was inserted in the act late in the courseof legislative consideration authorizes the attorney general, the taxcommissioner, and a designated member of the public utilities com-mission to enter into certain reciprocal agreements with otherstates. These reciprocal agreements may exempt the owners ofmotor vehicles duly registered in another state from the Ohio high-way use tax providing certain conditions exist. These conditionsare (1) that the other state levies a highway use tax in additionto motor vehicle registration fees, (2) that the resident of suchother state has complied with the laws of his state of residencepertaining to the registration and taxation of motor vehicles andcontinues to do so while operating in Ohio, and (3) that the ownersand operators of motor vehicles registered in Ohio are exemptfrom all obligations pertaining to the registration and taxation ofmotor vehicles in such other state.9 Sec. 1010 OHmo REvnsE CODE, § § 5739.01-5739.99, 5741.01-5741.9911 Sec. 1012 Sees. 3 and 1113 Sec. 1214 Secs. 4 and 515 Sec. 15[Vol. 14NEW OHIO HIGHWAY USE TAXThe reciprocity board, so designated, has recently announcedthat it will not enter into any reciprocal agreements with otherstates until after a period of experience with the new law.Specific Exemptions1 6In addition to the exclusion of vehicular units having less thanthree axles, the Act specifically exempts from its registration andtaxation provisions motor vehicles, commercial cars or commercialtractors owned and operated by the United States, this state orany political subdivision thereof.1 6 Sec. 131953]

The New Ohio Highway Use Tax

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The New Ohio Highway Use Tax

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