State Tax Authorities Give Breaks To Big Lines Only

Castle Aviation of North Miami, Ohio, is a Part 135 freight carrier that competes with other on-demand freight carriers to move small packages around the north-central industrial states, and that operates some scheduled freight flights. It's now before the Ohio Supreme Court with a tax case that asks: Should all carriers get equal treatment? 

And, if, in general, they should, is the state's unequal treatment of Castle wrong, or is an exception justified by differences between it and its competitors?

The company, assuming that it deserved the same tax breaks as other freight carriers, held and submitted state tax receipts on that basis.  During an audit, state tax authorities ruled that Castle had underpaid $112,000, and was now liable for that money, plus interest and penalties.

The case has made its way through the Tax Commission and Board of Tax Appeals to the Supreme Court.

Castle's position is that its eight-plane fleet provides both scheduled (to specific customers) and on-demand (to the public) freight service under Part 135, making it under Federal laws a common carrier entitled to the same treatment as its larger competitors, such as FedEX. It argues that the state is unlawfully and unfairly basing the tax exemption on the size of the company.

The State of Ohio's position is that because more of Castle's traffic is on-demand than scheduled, Castle is not performing the kind of public service that the writers of the tax exemption had in mind -- the kind that, say, FedEX is performing.

The Ohio Supreme Court heard oral arguments on Wednesday, January 11. 

The court's decision may be announced as soon as the 18th. Scheduled and on-demand 135 operators in Ohio are watching the case with great interest, as are their national -- and, under current Ohio law, favored -- competitors.

FMI: www.sconet.state.oh.us/Communications_Office/oral_arguments/06/0111/0111.asp#050304