[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as Epic
Aviation, L.L.C. v. Testa, Slip Opinion No. 2016-Ohio-3392.]




                                          NOTICE
      This slip opinion is subject to formal revision before it is published in an
      advance sheet of the Ohio Official Reports. Readers are requested to
      promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
      South Front Street, Columbus, Ohio 43215, of any typographical or other
      formal errors in the opinion, in order that corrections may be made before
      the opinion is published.



                          SLIP OPINION NO. 2016-OHIO-3392
   EPIC AVIATION, L.L.C., APPELLANT, v. TESTA, TAX COMMR., APPELLEE.
  [Until this opinion appears in the Ohio Official Reports advance sheets, it
         may be cited as Epic Aviation, L.L.C. v. Testa, Slip Opinion No.
                                     2016-Ohio-3392.]
Sales and use tax—R.C. 5739.02(B)(42)(a) and 5739.01(P)—Tax exemption for
        purchases used directly in the rendition of a public-utility service—Refund
        sought for sales tax paid on purchases of jet fuel by air-cargo carrier—
        Common-carrier test for exemption developed by case law—Purchases of
        fungibles are apportionable when used for both exempt and nonexempt
        purposes—Decision of Board of Tax Appeals vacated and cause remanded
        to tax commissioner for additional proceedings.
      (No. 2014-1691—Submitted January 5, 2016—Decided June 15, 2016.)
               APPEAL from the Board of Tax Appeals, No. 2012-1557.
                                 ____________________
                             SUPREME COURT OF OHIO




        PFEIFER, J.
        {¶ 1} In this case, the tax commissioner, appellee, denied a claim for refund
of sales tax brought by appellant, Epic Aviation, L.L.C. (“Epic”), a vendor of jet
fuel, on behalf of its consumer, AirNet Systems, Inc. (“AirNet”), and the Board of
Tax Appeals (“BTA”) affirmed. Epic argues that AirNet purchased the jet fuel
intending to use the fuel “directly in the rendition of a public utility service” under
R.C. 5739.02(B)(42)(a) and that the purchases are therefore exempt from sales tax.
AirNet does not hold a certificate of public convenience and necessity from the
federal government, and the tax commissioner denied the exemption on the primary
ground that AirNet’s business was not sufficiently regulated to qualify as a “public
utility service.”
        {¶ 2} Epic contends that the tax commissioner and the BTA placed too
much emphasis on the lack of the certificate by essentially concluding that the
certificate is a prerequisite to public-utility-service status. We agree with Epic.
That portion of AirNet’s business that consisted of providing regular package-
delivery service at a reasonable and nondiscriminatory price according to
preannounced schedules qualifies as “common carrier” service under our
precedents and therefore as a “public utility service” under R.C. 5739.02(B)(42)(a)
that is exempt from the sales tax. Accordingly, we vacate the BTA’s decision and
remand this cause to the tax commissioner with instructions that the tax
commissioner allow evidence to be submitted to establish the portion of the fuel
purchases pertaining to the common-carrier service.
                              I. The Statutes at Issue
        {¶ 3} Unless an exemption applies, jet fuel is taxable under the sales-tax
law as tangible personal property transferred for consideration, R.C. 5739.01(B)(1),
and under the use-tax law as tangible personal property subject to being used in the
state, R.C. 5741.02(A)(1). In this case, Epic sold jet fuel to AirNet, collected sales
tax on it, and remitted the tax to the state. Epic, as the vendor, brought a refund




                                          2
                                 January Term, 2016




claim, but the claim is on behalf of AirNet, and it is AirNet’s operations that govern
whether the exemption Epic seeks applies.
        {¶ 4} R.C. 5739.02(B) states that the sales tax “does not apply to”:


                (42) Sales where the purpose of the purchaser is to do any
        of the following:
                (a) * * * use or consume the thing transferred * * * directly
        in the rendition of a public utility service * * *.


        {¶ 5} R.C. 5739.01(P) states that “ ‘[u]sed directly in the rendition of a
public utility service’ means * * * fuel or power used in the production,
transmission, transportation, or distribution system.” R.C. 5739.01(P) concludes
by stating, “In this definition, ‘public utility’ includes a citizen of the United States
holding, and required to hold, a certificate of public convenience and necessity
issued under 49 U.S.C. 41102.” This final sentence of R.C. 5739.01(P) was added
to the statute in 2006. Am.Sub.H.B. No. 699, 151 Ohio Laws, Part V, 8537.
                                   II. Background
        {¶ 6} Epic seeks a $1,727,790.27 refund of sales tax paid by AirNet on its
purchases of jet fuel from Epic during the time period of January 1, 2006, through
April 30, 2009. To support its claim, Epic provided a spreadsheet referencing
invoice numbers and showing the dates and sale prices of fuel purchased, along
with the tax amounts. Epic also submitted a “spaghetti map” showing AirNet’s
hub-and-spoke system of flights and a copy of the schedule of AirNet’s regularly
scheduled cargo service, showing take-off times at departure airports and landing
times at destination points.
        {¶ 7} At the BTA hearing, AirNet’s vice president of operations, Thomas
Schaner, testified that AirNet’s operations are based on a “super expedited” air-
cargo-delivery system using the hub-and-spoke model, which was reflected on the




                                           3
                              SUPREME COURT OF OHIO




“spaghetti map” showing “all the connections where we have aircraft flying from
airport to airport.” He stated, “Anybody could * * * find our Web site, and they
could book a shipment,” after which “we would dispatch a courier, and we go pick
up a shipment, bring it to the airport, put it on the airplane, get it out there, and then
we would take it to the end point and then we would have couriers on the other end
that would deliver the shipment.”
        {¶ 8} AirNet’s delivery services are comprised of two primary segments—
bank services and express services. The former include the immediate delivery of
canceled checks, which has long been a core part of AirNet’s business. Express
services (described by Schaner as “everything that wasn’t bank” service) include
transporting time-sensitive radiopharmaceuticals (pharmaceuticals used in medical
imaging and treatment that must often be used within hours of creation, before they
break down), human tissue and organs for transplant, and blood for the American
Red Cross.      Schaner testified that AirNet received special approval and
encouragement from the federal government after the terrorist attacks of September
11, 2001, to permit it to have access to air space to transport checks to maintain the
operation of the country’s banking system. AirNet also played a vital role in
transporting emergency blood supplies immediately after those attacks.
  A. AirNet’s FAA certification is under Part 135 of Title 14 of the Code of
                                 Federal Regulations
        {¶ 9} Kent Jackson, an active pilot and aviation lawyer and the author of a
number of books explaining federal aviation regulations and other aviation-law
matters, was qualified as an expert at the BTA hearing and testified on behalf of
Epic. Jackson testified that the federal government’s regulation of the aviation
industry in this country can be generally divided into two broad categories: (1)
economic regulation, which is administered by the United States Department of
Transportation (“DOT”), through the Office of the Secretary of Transportation, as
the successor to the former Civil Aeronautics Board and (2) safety regulation,




                                            4
                                January Term, 2016




which is administered by the Federal Aviation Administration (“FAA”), an agency
of the DOT. He stated that obtaining a certificate of public convenience and
necessity from the DOT is usually associated with obtaining safety certification
under Part 121 of Title 14 of the Code of Federal Regulations (“Part 121”) and that
Part 298 of Title 14 of the Code of Federal Regulations (“Part 298”) provides an
exemption from the need for the certificate. As an “air taxi operator,” 14 C.F.R.
298.3, AirNet was not required to obtain a certificate of public convenience and
necessity.
       {¶ 10} Exemption from the requirement of a certificate of public
convenience and necessity is associated with safety regulation occurring under Part
135 of Title 14 of the Code of Federal Regulations (“Part 135”) rather than under
Part 121. Pursuant to its status as an “air taxi operator” under Part 298, AirNet
operates as a Part 135 carrier. Part 135 regulations, like Part 121 regulations,
impose numerous safety requirements, including limits on how long a pilot can be
at the controls. In some respects, safety regulation under Part 135 involves more
direct agency oversight than regulation under Part 121, because compliance
measures for Part 121 regulations are often performed by the air carrier’s own
employees, as designated by the FAA.
       {¶ 11} To obtain a certificate of public convenience and necessity, an
applicant must prove its financial viability. Jackson (admittedly oversimplifying)
testified that Part 121 regulation is “for Boeings”—i.e., for larger aircraft and
passenger service—and that passenger airlines typically obtain the certificate and
fall under the Part 121 regulations. Jackson testified that AirNet probably could
not obtain such a certificate even if it applied, because the certificate of public
convenience and necessity is not required for the cargo-transport services that
AirNet provides and is not appropriate for the types of aircraft that AirNet uses.
       {¶ 12} Jackson testified that at one time, economic aspects of airline-
passenger service were heavily regulated as to matters such as routes flown and




                                         5
                                SUPREME COURT OF OHIO




rates charged. Pursuant to federal deregulation legislation that was fully phased in
by 1985, this type of economic regulation was substantially relaxed. By contrast,
according to Jackson, “[t]he FAA and the DOT simply don’t care if you create a
schedule for cargo. They don’t regulate that. They never have.” But Jackson
testified that the air-carrier certificate issued by the FAA nonetheless authorizes
“common carrier” service by a cargo-service provider such as AirNet, and that
means that “you earn the right to hold out to the public” that you are willing to
furnish air-carrier services, “and part of the responsibility of earning that right is
the responsibility to do so.”
       {¶ 13} The record contains AirNet’s air-carrier certificate, which expressly
authorizes AirNet “to operate as an air carrier and conduct common carriage
operations” in accordance with applicable laws and regulations. AirNet’s vice
president testified that as a common carrier, AirNet must accept packages tendered
to it that AirNet has legal authorization to carry and that it operates “without
discrimination or any kind of preferential treatment.”
                   B. The tax commissioner’s determination
       {¶ 14} The tax commissioner determined that AirNet’s purchases of jet fuel
did not qualify for exemption. The tax commissioner, relying on Castle Aviation,
Inc. v. Wilkins, 109 Ohio St.3d 290, 2006-Ohio-2420, 847 N.E.2d 420, found that
AirNet’s lack of a certificate of public convenience and necessity, along with other
similarities to the carrier seeking the exemption in that case, were critical reasons
supporting the denial of the exemption. Although Epic attempted to distinguish
AirNet from Castle Aviation by pointing to AirNet’s regularly scheduled cargo-
delivery services, the tax commissioner rejected the point by referring to an FAA
order that defines the phrase “scheduled operations” in terms of an operator’s
provision of passenger services; under the FAA order, an all-cargo operation—such
as AirNet—is defined as a “nonscheduled operation.” On this basis, the tax
commissioner concluded that AirNet’s de facto scheduled service was not a factor




                                          6
                                January Term, 2016




indicating that it had provided a public-utility service.         Although the tax
commissioner argues before this court that holding a certificate of public
convenience and necessity is a statutory prerequisite for exemption, the tax
commissioner never specifically stated that view in his determination.
                              C. The BTA’s decision
       {¶ 15} The BTA affirmed the denial of the exemption.              Although it
recognized that R.C. 5739.01(P) does not make a certificate of public convenience
and necessity a prerequisite for AirNet to qualify as a provider of a public-utility
service, the BTA nonetheless found that Castle Aviation, which was decided before
the General Assembly amended R.C. 5739.01(P) by adding the final sentence,
essentially controls the present case. The BTA found that “AirNet is not subject to
the great degree of ‘special regulation and control’ ” that must exist for it to be a
public utility under the analysis in Castle Aviation. BTA No. 2012-1557, 2014 WL
5406457, *4 (Sept. 3, 2014), quoting Castle Aviation, 109 Ohio St.3d 290, 2006-
Ohio-2420, 847 N.E.2d 420, at ¶ 27. The BTA devoted little attention to Epic’s
argument that AirNet was a common carrier in a manner different from the charter
service whose attempt to obtain exemption in Castle Aviation was denied.
                                   III. Analysis
  A. R.C. 5739.01(P) does not condition the exemption on the holding of a
                 certificate of public convenience and necessity
    1. The plain language of R.C. 5739.01(P) does not make the certificate a
                         necessary condition for exemption
       {¶ 16} The tax commissioner asserts in his brief to this court (as he did
before the BTA) that the holding of a certificate of public convenience and
necessity is a prerequisite to public-utility-service exemption from the sales tax. To
the extent that that position is based on the wording of the statute, it is clearly
unfounded. The plain language of R.C. 5739.01(P) now “includes” the holder of
such a certificate among those who qualify for exemption—it does not purport to




                                          7
                             SUPREME COURT OF OHIO




exclude those who do not hold a certificate. Epic asserts that the language of the
statute makes the holding of a certificate a sufficient condition for exemption,
meaning that passenger airlines and cargo carriers that are regulated under Part 121
and hold a certificate will routinely qualify as rendering a “public utility service”
under Ohio sales-tax law. We agree with Epic and reject the tax commissioner’s
view that R.C. 5739.01(P) makes the holding of the certificate a necessary
condition for the exemption, a position that is inconsistent with the wording of R.C.
5739.01(P) and our precedents.
2. Castle Aviation should not be construed to broadly preclude application of the
                              exemption to air carriers
       {¶ 17} There is a second element to the tax commissioner’s argument that
holding a certificate of public convenience and necessity is a required condition for
an air carrier to qualify for the public-utility-service exemption: the scope of our
decision in Castle Aviation, 109 Ohio St.3d 290, 2006-Ohio-2420, 847 N.E.2d 420.
In Castle Aviation, the claimant was admittedly an air-charter service, but it
nonetheless claimed entitlement to the public-utility-service exemption on the
grounds that broad-based federal airline deregulation had erased the regulatory
distinctions that previously justified denying the exemption to charter services. See
Castle Aviation, Inc. v. Zaino, BTA No. 2003-M-146, 2005 WL 176679, *8 (Jan.
14, 2005), in which the BTA stated that “Castle argues that * * * the regulations
placed upon Part 121 carriers such as Federal Express are now so similar to the
regulations placed on Part 135 carriers such as itself that no distinction is
warranted.” The BTA considered and rejected this claim “in reliance upon the
earlier case law,” concluding that “Castle does not meet the definition of a public
utility,” with the result that “its purchases are not excepted from taxation.” Id.
       {¶ 18} In affirming the BTA’s decision, this court narrowed the inquiry to
focus on what we identified as the most important criterion for public-utility status,
which we stated to be “special regulation and control by a governmental regulatory




                                          8
                                 January Term, 2016




agency.” 109 Ohio St.3d 290, 2006-Ohio-2420, 847 N.E.2d 420, at ¶ 27-28. But
in light of the general federal deregulation of air carriers’ business operations, this
approach engendered the possibility that no air carriers could qualify for exemption.
This potential implication underlies the tax commissioner’s current argument:
because it is conceivable (and perhaps even probable) that no air carriers can qualify
under the Castle Aviation regulatory standard, only those air carriers that enjoy the
specific benefit conferred by the 2006 amendment to R.C. 5739.01(P) can be
exempted.
        {¶ 19} We reject this aspect of the tax commissioner’s argument. Doing so
requires us to revisit our decision in Castle Aviation and to clarify that the ultimate
ground for denying the exemption in that case was, as the BTA had stated, that the
air-charter service seeking the exemption could not qualify for it under the
common-carrier test developed by the earlier case law.
  B. Determining public-utility status calls for determining whether AirNet
                      actually operated as a common carrier
       1. The case law equates public-utility service with common carriage
        {¶ 20} In R.K.E. Trucking, Inc. v. Zaino, 98 Ohio St.3d 495, 2003-Ohio-
2149, 787 N.E.2d 638, ¶ 18-19, we summed up the longstanding test for public-
utility status for motor carriers in a way that is fully applicable to the air carrier in
this case. Construing the highway-transportation-for-hire exemption in light of
earlier cases involving the public-utility-service exemption, we identified the three
criteria for exemption developed by the case law: “(1) the purchaser must be a
common carrier, (2) the purchaser must actually be operating as a common carrier,
and (3) the primary-use test is to be applied if the property is used both in a way
that would make it eligible for the [exemption] and in a way that would make it not
eligible.” Id. at ¶ 22.
        {¶ 21} The R.K.E. test raises a further question: what is the definition of
common carrier as that term is specifically used in the taxation context? As it




                                           9
                              SUPREME COURT OF OHIO




happens, the air-carriage cases supply an answer. In affirming the denial of an
exemption from sales and use tax to a helicopter-airlift service, the First District
Court of Appeals stated that the principal characteristic of a public utility “ ‘is that
of service to, or readiness to serve, an indefinite public, which has a legal right to
demand and receive its services.’ ” (Emphasis sic.) Ohio Valley Air Ways, Inc. v.
Bowers, 114 Ohio App. 427, 428, 177 N.E.2d 303 (1st Dist.1961), quoting 45 Ohio
Jurisprudence 2d, Public Utilities, Section 2, at 166 (1960). Accord Midwest
Haulers, Inc. v. Glander, 150 Ohio St. 402, 405, 83 N.E.2d 53 (1948) (“the
principal determinative characteristic of a public utility is that of service to, or
readiness to serve, an indefinite public which has a legal right to demand and
receive the utility’s services or commodities”).
        {¶ 22} This line of reasoning was applied in subsequent BTA decisions
involving air carriers. See, e.g., Marion Air Serv., Inc. v. Bowers, BTA No. 49695,
1962 Ohio Tax LEXIS 1 (Dec. 20, 1962); Dade Leasing, Inc. v. Kosydar, BTA No.
C-93, 1974 Ohio Tax LEXIS 1 (Sept. 16, 1974). Among those BTA decisions is
one that we affirmed on review: Castle Aviation, Inc. v. Zaino, 2005 WL 176679,
aff’d, 109 Ohio St.3d 290, 2006-Ohio-2420, 847 N.E.2d 420.
                  2. The common-carrier test and Castle Aviation
        {¶ 23} In Castle Aviation, we reviewed a decision of the BTA that affirmed
the tax commissioner’s denial of the public-utility-service exemption, and we
affirmed the BTA’s decision. A review of the BTA’s decision in that case shows
that the record clearly established Castle Aviation’s characterization that its entire
business involved “charter” service, both as to cargo and as to passengers. 2005
WL 176679 at *2; see also 109 Ohio St.3d 290, 2006-Ohio-2420, 847 N.E.2d 420,
at ¶ 5-7. Castle Aviation’s aircraft and crews were “chartered” in the sense of the
“leasing or hiring of an airplane,” Black’s Law Dictionary 284 (10th Ed.2014), or
the “hir[ing] or rent[ing]” of an airplane “for temporary use,” id. at 285. Instead of
holding itself out as furnishing a regular cargo-delivery service with announced




                                          10
                                January Term, 2016




times and a hub-and-spoke system, Castle Aviation entered into customer-by-
customer or job-by-job contracts. See 2005 WL 176679 at *3-5. As the BTA
explained in its decision in Castle Aviation, “the distinctive characteristic of a
common carrier [is] that it undertook to carry for all people, indifferently, as
opposed to private carriers, who were not obligated to carry unless the obligation
was ‘voluntarily assumed by virtue of a special contract.’ ” Id. at *8, quoting
Sundorph Aeronautical Corp. v. Lindley, BTA No. 82-D-842, 1986 WL 28027, *5
(Jan. 10, 1986). Thus, Castle Aviation was not providing a public-utility service
under the parameters set forth in Ohio Valley Air Ways and in Midwest Haulers.
       {¶ 24} In affirming the BTA’s decision in Castle Aviation, we essentially
narrowed the focus to a single criterion, which was “special regulation and control
by a governmental agency.” Castle Aviation at ¶ 27. In doing so, we ignored the
common-carrier standard that had previously been established, both for motor
carriers and for air carriers, that the BTA had applied in its decision. Moreover, in
Castle Aviation, we indicated that for an air carrier, the important question is
whether there is governmental regulation of the carrier’s “business operations.” Id.
at ¶ 28. In light of the general federal deregulation of the economic aspects of the
aviation industry, the emphasis on regulatory control articulated in Castle Aviation
threatened to make it impossible for any air carriers to qualify for the exemption.
       {¶ 25} The General Assembly responded to our Castle Aviation decision in
2006 by enacting the final sentence of R.C. 5739.01(P) to ensure that Part 121
carriers, i.e., the passenger airlines and cargo carriers that generally use large
aircraft, would retain their exemptions. In the final bill analysis for Am.Sub.H.B.
No. 699, the Ohio Legislative Service Commission explained that the effect of that
amendment to R.C. 5739.01(P) was to provide that the public-utility exemption
from sales and use tax applies to “sales of property, fuel, or power used in, or used
in the repair and maintenance of, foreign or interstate air transportation of




                                         11
                               SUPREME COURT OF OHIO




passengers or property by aircraft as a common carrier for compensation, or in
furtherance of the transportation of mail by aircraft.”
 3. The common-carrier test should be applied to the jet fuel at issue here, on an
                                    apportioned basis
          {¶ 26} At oral argument, the tax commissioner’s counsel stated that in order
to satisfy the economic-regulation test articulated by this court in Castle Aviation,
Epic would have to show governmental regulation of rates and routes. But
uncontroverted expert testimony in this case, along with other evidence, indicates
that that type of regulation of air transportation of cargo does not exist. Instead,
federal regulations authorize “common carrier” service by a cargo service such as
AirNet. According to Jackson, the expert who testified on behalf of Epic, that
means that “you earn the right to hold [yourself] out to the public, and part of the
responsibility of earning that right is the responsibility to do so.”
          {¶ 27} This testimony is consistent with Ohio’s common law. We have
stated:


          [T]he tendency and undoubted weight of authority is in favor of the
          doctrine that a common carrier is charged with a quasi public duty
          to transport merchandise on equal terms for all parties, where the
          carrying for some shippers at a lower price than for others will create
          monopoly by injuring or destroying the business of those less
          favored.


Scofield v. Lake Shore & Michigan S. Ry. Co., 43 Ohio St. 571, 600, 3 N.E. 907
(1885). See also Morgan Run Ry. Co. v. Pub. Util. Comm., 98 Ohio St. 218, 120
N.E. 295 (1918), paragraph one of the syllabus (a railroad organized and operated
under the laws of Ohio “is a common carrier under obligation to serve the public
without discrimination”).




                                            12
                                 January Term, 2016




        {¶ 28} Today we revisit Castle Aviation and clarify that the proper test to
be applied to an air carrier is the common-carrier test that the BTA applied in that
case. By extension, that test should be applied in the present case as well. We
emphasize that applying that test does not necessarily lead to an all-or-nothing
conclusion.
        {¶ 29} Epic argues that AirNet’s entire business is common carriage and
thus that all of AirNet’s fuel purchases should be exempt from the sales tax, and
Epic’s counsel contended at oral argument that serving customers by specific
contract, or contract carriage, is part of AirNet’s common-carrier service, distinct
from “private carriage” service, which AirNet, according to Epic’s attorney, does
not conduct. The record contains an “advisory circular” issued by the FAA, dated
April 24, 1986, that addresses the distinction between “private carriage” and
“common carriage.” That circular defines a “common carrier” as a carrier that
“ ‘holds itself out’ to the public, or to a segment of the public, as willing to furnish
transportation within the limits of its facilities to any person who wants it.” The
circular defines “private carriage” narrowly as “[c]arriage for hire” that “does not
involve ‘holding out,’ ” and that in general involves “carriage for one or several
selected customers, generally on a long-term basis.”
        {¶ 30} We cannot, however, reconcile that distinction with our case law in
taxation cases, which uses somewhat different terms and definitions to determine
the type of carriage that is exempt from the sales tax for our purposes here. The
distinction drawn by our case law is between common carriage, which is exempt,
and chartered service, which is not. For example, in Castle Aviation, we affirmed
the denial of the exemption for an entity that held a certificate authorizing common
carriage but that conducted its business as a charter service engaged in contract
carriage. 109 Ohio St.3d 290, 2006-Ohio-2420, 847 N.E.2d 420, at ¶ 5-7.
        {¶ 31} Contrary to an all-or-nothing approach, the case law calls for
examining each item that might be taxed in light of the aspect of the taxpayer’s




                                          13
                              SUPREME COURT OF OHIO




business in which it is used. In Manfredi Motor Transit Co. v. Limbach, 35 Ohio
St.3d 73, 76, 518 N.E.2d 936 (1988), we held that the exemption in the case of a
dual-nature business must be applied on an item-by-item basis through “a review
of the entire operation” that questions whether a particular item was used in the
portion of the business that qualified as a public-utility service.
       {¶ 32} By contrast to the air carrier seeking the exemption in Castle
Aviation, Schaner, AirNet’s vice president, testified that about 60 percent of
AirNet’s express services during the time period at issue involved nonexclusive,
“noncontract” regular-delivery service from one point to another on AirNet’s
“spaghetti map.” Schaner estimated that AirNet conducted “less than half” of its
bank services during the time period pursuant to contracts, which means that he
believed that more than 50 percent of those deliveries was “noncontract.” As to
what Schaner described as noncontract regular delivery service, AirNet was clearly
providing the services of a common carrier within the meaning of the analysis in
Midwest Haulers to the extent that those services were made available to the public
at reasonable prices “without discrimination or any kind of preferential treatment,”
as Schaner put it.
       {¶ 33} At the other end of the spectrum, as to any services provided by
AirNet that constituted chartered service—of the type provided by Castle Aviation
in the case in which it sought exemption—AirNet was not providing the services
of a common carrier under the standards developed in the case law. Other services
provided by AirNet on a contract-by-contract basis would require additional review
to determine whether they constituted part of AirNet’s “actual operation” as a
common carrier. See Midwest Haulers, 150 Ohio St. at 406, 83 N.E.2d 53
(“authorization to act as a common carrier does not in and of itself conclusively
establish that there is such operation. The actual operation of a business determines
its legal status”). We hold that the criteria for common-carrier service that qualifies




                                          14
                                    January Term, 2016




for exemption is the shipping of cargo at a time and to a place announced to the
public in advance and doing so at a reasonable and nondiscriminatory charge.
        {¶ 34} Finally, our case law makes special provision for a case that involves
jet fuel. Items that are “fungibles,” such as the jet fuel here, are subject to specific
apportionment, not to an all-or-nothing determination based on the application of a
primary-use test. In B.F. Goodrich Co. v. Lindley, 58 Ohio St.2d 364, 390 N.E.2d
330 (1979), the BTA had applied a primary-use test to determine that all the
taxpayer’s fuel purchases at issue were exempt from taxation, because the majority
of the fuel was used for an exempt purpose. See id. at 367. On appeal, we reversed,
holding that “[t]he primary use test does not apply to a sale of fungibles used for
both taxable and non-taxable purposes, where such use is apportionable before or
after sale.” Id. at the syllabus.
   4. On remand, the tax commissioner should audit Epic’s claim, applying the
                                    common-carrier test
        {¶ 35} Throughout this litigation, Epic has argued on behalf of AirNet for a
100 percent exemption from the sales tax and did not submit evidence to establish
the portion of the fuel purchases that was used “directly in the rendition of a public
utility service” under R.C. 5739.02(B)(42)(a) pursuant to the precedents we discuss
and apply in this opinion. Under the general rule applicable to this situation, Epic’s
failure to raise an apportionment claim normally would constitute a bar to the claim
being considered and would also prevent Epic from being afforded the opportunity
to present evidence on the point.
        {¶ 36} The present circumstances, however, take this case out of the
confines of the general rule and bring it within an established exception. The
exception applies in situations in which our review on appeal leads us to announce
a development or clarification of the law that the parties might reasonably not have
anticipated in light of previously existing case law. In Akron City School Dist. Bd.
of Edn. v. Summit Cty. Bd. of Revision, 139 Ohio St.3d 92, 2014-Ohio-1588, 9




                                            15
                             SUPREME COURT OF OHIO




N.E.3d 1004, we recognized for the first time a restriction on the presumption that
an arm’s-length sale was recent to the tax-lien date. Id. at ¶ 26. We noted that “the
parties might not have anticipated this innovation.” Id. at ¶ 28. We stated that
when we announce a decision that clarifies and corrects the legal standards that
apply in a way that may not have been readily anticipated, “we ordinarily remand
with the understanding that the BTA may hear additional evidence” and that the
shifting of the burden of production arising from our clarification of the law meant
that “the school board should have the opportunity to present evidence if it desires.”
Id. at ¶ 29. Accordingly, we remanded the cause to the BTA with instructions that
it permit the taking of new evidence and determine the value of the property in light
of the entire record. Id. at 30. See also Woda Ivy Glen Ltd. Partnership v. Fayette
Cty. Bd. of Revision, 121 Ohio St.3d 175, 2009-Ohio-762, 902 N.E.2d 984,
¶ 31-33 (finding that the BTA and the parties “misconstrued” our decision in a
previous case, clarifying the proper interpretation of the previous case, vacating the
BTA’s decision, and remanding to the BTA for it to take additional evidence and
hold a new hearing, if necessary); Cruz v. Testa, 144 Ohio St.3d 221, 2015-Ohio-
3292, 41 N.E.3d 1213, ¶ 50 (vacating the BTA’s decision in part and remanding to
the BTA to take additional evidence).
       {¶ 37} Moreover, we have had occasion to remand a case to the tax
commissioner instead of the BTA when our decision has either clarified a legal
standard or otherwise effected a change of circumstances in such a way that the
determination of a taxpayer’s claim should begin anew. See Timken Co. v. Lindley,
64 Ohio St.2d 224, 230, 416 N.E.2d 592 (1980); Hanna Mining Co. v. Limbach, 20
Ohio St.3d 3, 6, 484 N.E.2d 691 (1985); Crown Communication, Inc. v. Testa, 136
Ohio St.3d 209, 2013-Ohio-3126, 992 N.E.2d 1135, ¶ 41.
       {¶ 38} Similar reasoning applies here; Epic should have an opportunity to
present evidence to establish the portion of the jet fuel purchased by AirNet that is
exempt from taxation under the common-carrier standard as it is clarified in this




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opinion. Accordingly, we vacate the BTA’s decision to deny in its entirety the
claim for exemption, and we remand this cause to the tax commissioner with
instructions to conduct additional proceedings to determine the exempt portion of
the fuel sales pursuant to the common-carrier standard.
                                  IV. Conclusion
          {¶ 39} For the foregoing reasons, we vacate the decision of the BTA and
remand the cause to the tax commissioner for further proceedings as indicated in
this opinion.
                                                                  Decision vacated
                                                              and cause remanded.
          O’CONNOR, C.J., and LANZINGER, KENNEDY, FRENCH, and O’NEILL, JJ.,
concur.
          O’DONNELL, J., dissents and would affirm the decision of the Board of Tax
Appeals.
                                _________________
          Baker & Hostetler, L.L.P., Edward J. Bernert, Elizabeth A. McNellie, and
Trischa Snyder Chapman, for appellant.
          Michael DeWine, Attorney General, and Daniel G. Kim and Daniel W.
Fausey, Assistant Attorneys General, for appellee.
                                _________________




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