The Supreme Court of Ohio ruled that Perrigo Sales Corporation correctly paid state taxes based on the actual amounts received from distributors for its generic drugs, rather than the higher list prices. The court upheld a ruling by the Ohio Board of Tax Appeals (BTA), clarifying that the commercial activity tax (CAT) should be calculated on the “amount realized” from sales transactions.
Key Points:
- Background: Perrigo was audited by the Ohio Department of Taxation, which found underreported gross receipts based on not using list prices for tax calculations.
- Court’s Rationale: Justice R. Patrick DeWine cited common pharmaceutical industry practices where list prices exceed actual selling prices due to agreements between Perrigo, distributors, and retailers.
- Tax Definition: The CAT applies to “each person with taxable gross receipts” and is based on the amount received from sales, regardless of invoiced amounts.
- Arguments Against Perrigo: The tax commissioner argued that the list price should be used for tax assessment; however, the court found this unpersuasive, noting that Perrigo never received the list price.
- Conclusion: The BTA’s assessment of Perrigo’s taxes was upheld, affirming that Perrigo owed taxes based on actual sales receipt amounts.
For more detailed information, you can view the full legal opinion here.
