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Put-in-Bay’s Tax on Rental Vehicles Constitutional

Image of two women in a golf cart (iStock/Remanz)

Court rules Put-in-Bay can charge a fee for rental vehicles including bicycles and golf carts.

Image of two women in a golf cart (iStock/Remanz)

Court rules Put-in-Bay can charge a fee for rental vehicles including bicycles and golf carts.

The island village of Put-in-Bay’s fee on rental vehicles ranging from bicycles to trolleys does not violate the Ohio Constitution, and businesses that offer vehicle rentals must pay the city fee, the Ohio Supreme Court ruled today.

The Supreme Court unanimously affirmed the Sixth District Court of Appeals, which found the Islander Inn and rental company owner Mark Mathys had to pay the village license fees for renting golf carts for use on the village roads. The businesses had challenged the village fee, arguing it violated the Ohio Constitution and was an impermissible tax that duplicated the state fees paid for licensing and registering vehicles.

The Court’s justices were not unanimous in the reasoning for backing the village’s position. Writing for the Court majority, Justice Melody J. Stewart stated the city’s fee is imposed on the business of renting vehicles, and is not a tax on vehicles used on the road. She wrote that neither the inn, nor  Mathys, nor anyone else, would have to pay the fee if they used the vehicles themselves or lent them for free to others to use.

Chief Justice Maureen O’Connor and Justice Michael P. Donnelly joined Justice Stewart’s position. Twelfth District Court of Appeals Judge Robin Piper, sitting for Justice Judith L. French, who did not participate in the case, also joined Justice Stewart’s opinion.

In a concurring opinion, Justice Patrick F. Fischer wrote the majority’s explanation of why the village law did not violate Article XII, Section 5a of the Ohio Constitution was “too simplistic.” He wrote separately to explain in more detail why the village ordinance did not conflict with that constitutional provision. Justices Sharon L. Kennedy and R. Patrick DeWine joined the concurring opinion.

Rental Fee Challenged
Under Section 858.01 of the Put-in-Bay village code, the owners of vehicles available for hire or use within the municipality must pay a license fee, ranging from $300 for buses and trolleys to $15 for bicycles. Each vehicle must display documentation that the annual fee has been paid.

The ordinance requires that all funds derived from the payment of the fees and enforcement of the ordinance must be placed in a separate “public service street repair fund,” and used exclusively for street repair in the village. Failure to pay the fee is a misdemeanor.

In early 2015, Mathys and the Islander Inn were criminally charged for failure to pay the fee for the motorized golf carts they were making available to rent. The two challenged the law’s validity, asking the Ottawa County Common Pleas Court to rule that the fee violated two provisions of the Ohio Constitution. The trial court sided with the vehicle owners and dismissed the  charges. The village appealed the decision to the Sixth District, which reversed the trial court.

The inn and Mathys appealed to the Supreme Court, which agreed to hear the case.

Court Analyzes Constitution’s Limits on Local Taxes
Article XVIII, Section 3 of the Ohio Constitution, also known as the Home Rule Amendment, grants local municipalities all powers of local self-government. The amendment includes the right to levy taxes, Justice Stewart explained, but Section 3 and Section 6 of the article also give the General Assembly the right to limit municipal taxing authority.

The vehicle owners argued the Court’s 1925 Firestone v. Cambridge decision found that a municipality cannot enact its own tax for the right of motorists to use vehicles on the municipality’s streets. The Court found that since the state already had enacted a statewide tax on all motorists to pay a fee to operate on public highways, a municipality could not levy its own tax. Justice Stewart explained that the Court in 1925 followed the idea that state law could “imply” it was preempting a local government from enacting a tax.

The majority opinion stated that in the Court’s 1998 Cincinnati Bell Tel. Co. v. Cincinnati decision it abandoned the concept that a state law could imply the blockage of a local tax. The Court ruled the state constitution considers a local tax to be valid unless the General Assembly expressly forbids it.

The vehicle owners also argued that R.C. 4503.02, which imposed the annual state vehicle licensing tax, and two other provisions of state law that allow for $5 “piggyback” taxes by county and municipal governments is a singular statewide motor-vehicle licensing framework that prevents municipalities from enacting additional taxes.

The majority opinion noted that the laws do not expressly limit all local taxes on motor vehicles. The Court stated that even if the statewide licensing scheme is the only permissible way to tax the operation of vehicles on public roads and highways, the law would not apply to the village ordinance, because the village ordinance imposes a business tax on rental vehicles, not a license tax on the operation of motor vehicles on public highways.

“The ‘license fee’ referred to in Section 585.01 does nothing to authorize or prohibit a motor vehicle, including the rental vehicles at issue here, from being operated on a public roadway within the village. And nothing in the ordinance requires that the license fee be paid for vehicles that are not rented out by the owner,” the opinion stated.

Constitutional Limit on Vehicle Fees Explained
The vehicle owners also argued that the ordinance violated Article XII, Section 5a of the Ohio Constitution, which states that fees or taxes related to vehicles using public highways can only be spent on implementing and enforcing state transportation and infrastructure construction laws. Because a local ordinance is not a state law, the village has no legal right to raise and use the money from the license fee, they asserted.

The majority opinion stated the owners make the “faulty assumption” that the tax is imposed on the use of vehicles, rather than on the business of renting vehicles. Because the ordinance does not concern the operation of vehicles on public highways, Section 5a does not prohibit the village tax, the Court concluded.

Concurrence Addresses Fee-Use Ruling 
In his concurring opinion, Justice Fischer explained that Ohio voters in 1947 added Article XII, Section 5a to the state constitution by referendum because of concerns that money raised through vehicle licensing was not being spent on the repair and maintenance of state roads and bridges. The village argued the constitutional provision did not apply to the local tax by noting the Ohio Supreme Court’s 1956 Garrett v. Cincinnati decision limited the section to “state-imposed” fees and taxes.

The concurring opinion affirmed the Court’s position in Garrett, finding it only applies to state fees. However, even if it applied to local fees, as the inn and Mathys contended, then the ordinance would still be valid, the concurrence stated.  The concurring opinion noted that all funds raised under the village ordinance must be spent on the repair of “streets, avenues, alleys, and lanes” within the village.


“This purpose appears to be in line with the purpose indicated in Article XII, Section 5a,” the opinion stated.

2019-0324. Put-in-Bay v. Mathys, Slip Opinion No. 2020-Ohio-4421.

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