Marcus Hughes, Associate Member, University of Cincinnati Law Review
The Supreme Court of Ohio recently heard arguments in a case that asks whether a municipal tax on rental vehicles is preempted by a state law that imposes a license fee on all motor vehicles used on public roadways. The defendant has invoked the doctrines of implied and express preemption. This article explores the defendant’s arguments. Section A of Part II discusses provisions of the Ohio Constitution authorizing and limiting the imposition of taxes by municipal governments. Sections B and C of Part II review Ohio’s jurisprudence on the doctrines of implied and express preemption respectively. Part III surveys the lower-court decisions in State /Village of Put-in-Bay v. Mathys. This exploration seeks to understand how the Court might resolve this issue.
A. The Home Rule Amendment
The Home Rule Amendment authorizes municipalities to “exercise all powers of local self-government.” This broad grant of authority to exercise all powers of local government includes the power of taxation. However, the Ohio Constitution also requires the General Assembly to “restrict [a municipal’s] power of taxation…so as to prevent the abuse of such power.” The General Assembly is also empowered to pass laws that “limit the power of municipalities to levy taxes and incur debts for local purposes.” The tension between the Home Rule Amendment and the General Assembly’s power to limit municipal taxing authority is central to the dispute in Mathys. The issue is whether municipal taxes can be preempted only directly by an act of the state legislature under the doctrine of express preemption or also by application of the doctrine of implied preemption.
B. Implied Preemption
The doctrine of implied preemption is set forth in Firestone v. Cambridge. In Firestone, an action was brought to enjoin the enforcement of a city ordinance that required drivers to obtain a license before using city streets. The fee was equal to 25 percent of the amount paid to the state of Ohio and licenses had to be renewed annually. Moneys paid into the treasury were first applied to the expense of issuing licenses and furnishing tickets or checks. Remaining amounts were used for cleaning, and maintaining the city’s streets and avenues.
The ordinance stated that the city streets were filthy and unsanitary because of increased traffic. Additionally, the streets and avenues in many places were worn, out of repair, and in a dangerous condition for public travel. These conditions were caused not only by increased use, but also by the reckless driving and disregard of the traffic laws, rules, and regulations. As a result, a large expenditure of money was needed to both service the city streets and increase the city police force. However, the funds then available were inadequate because the City’s coffers were exhausted and it had no source of additional income.
To the city’s dismay, the court held that the municipality’s taxing power could be limited by the state either expressly or by implication. At the time, the state legislature levied an excise on owners of motor vehicles to pay for the maintenance and repair of public roads, highways, and streets. Fifty percent of moneys collected were returned to the municipality where they originated for local street repair. Cambridge received about $11,000 from that source each year. The court held the doctrine of implied preemption invalidated the municipal tax because a state tax was already imposed for similar purposes.
C. Express Preemption
The doctrine of express preemption is well described in Cincinnati Bell Tel. Co. v. Cincinnati. The cities of Cincinnati and Blue Ash and the village of Fairfax enacted laws providing for the taxation of corporate profits derived from business activities conducted within each municipality. Corporations were taxed regardless of whether the corporation maintained an office or place of business in the municipality. Between 1991 and 1993, the Cincinnati Bell Telephone Company paid a total of $935,942.28 to the city of Cincinnati, $17,402.59 to the city of Blue Ash, and $2,015.64 to the village of Fairfax in corporate profit taxes. The company requested refunds from each, and asserted that a tax levied by the state of Ohio on the company preempted the authority of each municipality to assess its corporate profits tax. The state tax applied to public utilities, including Cincinnati Bell, and imposed an excise of 4.75 percent of nonexempt gross receipts for the privilege of owning property or doing business in the state. The municipalities asserted their corporate profits taxes were valid because the General Assembly had not expressly preempted them, and argued that the doctrine of implied preemption, on which Cincinnati Bell relied, was unsupported by the Constitution.
The court agreed with the local governments and held that a municipality’s taxing authority could be preempted or otherwise prohibited only by an express act of the General Assembly. The court reasoned that the General Assembly’s authority to limit municipal taxing power should be interpreted consistently with the general grant of local governance to municipalities. The intention of the Home Rule Amendment, said the court, was to eliminate statutory control over municipalities by the General Assembly. Its passage granted “municipalities sovereignty in matters of local self-government, limited only by other constitutional provisions.”
The Ohio Constitution also delegated power to the General Assembly to limit exercise of the municipal taxing power, but when these provisions were interpreted in relation to the purpose and scope of the Home Rule Amendment, the court deemed it evident that a proper exercise of this limiting power required an express act of restriction by the General Assembly. The mere enactment of a state statute imposing a similar tax was not itself sufficient to constitute an exercise of the General Assembly’s constitutional power to limit municipal taxation. According to the court, to construe the enactment of such legislation to impliedly preempt municipal taxing powers would contravene the principle underlying the home rule—that municipal powers are derived from the Constitution and not from the General Assembly. In the absence of an express statutory limitation demonstrating the exercise by the General Assembly of its constitutional power, acts of municipal taxation were held to be valid.
III. State /Village of Put-in-Bay v. Mathys
The scope and applicability of both implied and express preemption are at issue in State /Village of Put-in-Bay v. Mathys. Mark Mathys operates the Islander Inn, a resort hotel that rents vehicles for use in the village. The Village of Put-in-Bay issued a citation to Mathys and the Islander Inn for violating a village ordinance that imposes a “license fee” on “owners of vehicles used for the transportation of persons or property, for hire and for use in the Village.” The village filed complaints against Mathys and Islander Inn in the village’s Mayor’s Court pursuant to Mathys’ alleged violation of the ordinance. Mathys filed to dismiss the complaints.
A. Trial Court Decision
The Ottawa County Court of Common Pleas used the doctrine of implied preemption to hold the ordinance unconstitutional. Mathys argued that the ordinance was unconstitutional because it violated the General Assembly’s power to limit municipal taxing authority. The village filed a memorandum opposing the motions to dismiss. Following a hearing, the trial court granted Mathys’ motions to dismiss. The trial court concluded that the ordinance “[was] for [a] similar purpose” as two state statutes, one which levies an annual license tax on the operation of motor vehicles, and another which enables counties to enact a tax of five dollars per motor vehicle. The trial court determined that because the municipal ordinance was for a similar purpose as laws already enacted by the state, it was impermissible pursuant to Firestone v. Cambridge.
B. Appellate Court Decision
The Sixth District Court of Appeals recognized express preemption as the more applicable theory to hold the ordinance constitutional. While the trial court relied on the court’s decision in Firestone for the proposition that “[n]o municipality in th[e] state has power to levy [a] tax in addition to that levied by the state for similar purposes,” the appellate court acknowledged that it had been more than sixty years since the court’s decision in Firestone. Since then, the Supreme Court of Ohio had decided Cincinnati Bell Tel. Co. v. Cincinnati, holding that “[t]he taxing authority of a municipality may be preempted or otherwise prohibited only by an express act of the General Assembly.” This decision expressly overruled a line of cases applying the doctrine of implied preemption that originated in Firestone. Cincinnati Bell clarified that the appropriate inquiry was one of express preemption. While Cincinnati Bell did not expressly overrule Firestone, the court agreed with the village that Firestone did not contain an accurate recitation of the current law in Ohio. Instead, the court relied on Cincinnati Bell and the doctrine of express preemption. The court’s inquiry was whether the General Assembly had acted to expressly preempt or prohibit the ability of a municipality to impose a tax on a business that operates vehicles for hire.
Following Cincinnati Bell, the General Assembly enacted a state statute prohibiting a municipality from levying a tax that is the same as or similar to a tax levied under a number of enumerated statutes except when expressly authorized by other state law. Mathys did not argue that the municipal ordinance was the same as or similar to any of the statutes enumerated in the state statute. Moreover, the court examined these provisions of the Revised Code and found no express statutory prohibitions of the tax imposed by the municipal ordinance.
Further, the statutes cited by the trial court did not expressly preempt or prohibit the municipal ordinance. Although the state levied an annual license tax upon the operation of motor vehicles and enabled counties to enact a tax of five dollars per motor vehicle, these statutes made no mention of a tax imposed on a business operating a car rental company. By the plain language of the municipal ordinance, the court found it applied to businesses based on the size of their “vehicle-for-hire” fleets. It therefore was not an annual license tax of the type contemplated in the state statutes. Thus, the court concluded that the municipal ordinance was a valid exercise of the village’s taxing power. The General Assembly had not expressly preempted the municipality’s power to tax businesses operating rental vehicles.
The Supreme Court of Ohio heard oral arguments on March 10, 2020 and is currently taking the case under consideration. Whether the municipal ordinance violates state law or not may depend on whether the court finds the reasoning in Firestone or Cincinnati Bell more compelling. If a tax enacted by a municipality pursuant to its taxing power is valid in the absence of an express statutory prohibition, the municipal tax is likely to be found constitutional. It appears that the General Assembly has not expressly preempted the municipality’s power to tax businesses operating rental vehicles. But even if the General Assembly can impliedly preempt municipal taxing power, the municipal tax should still be lawful. The appellate court reasoning suggests that the municipal tax is not, in fact, for a similar purpose as laws already enacted by the state. The distinguishing characteristic of this ordinance is that it applies to businesses based on the size of their rental fleets. In either case, the constitutionality of municipal ordinance could signal to other municipalities a valuable and viable revenue stream to be used for “repairing streets, avenues, alleys and lanes.”
 Section 3, Article XVIII of the Ohio Constitution provides, in full: “Municipalities shall have authority to exercise all powers of local self-government and to adopt and enforce within their limits such local police, sanitary and other similar regulations, as are not in conflict with general laws.”
 State ex rel. Zielonka v. Carrel, 99 Ohio St. 220 (1919).
 Section 6, Article XIII of the Ohio Constitution provides, in full: “The General Assembly shall provide for the organization of cities, and incorporated villages, by general laws, and restrict their power of taxation, assessment, borrowing money, contracting debts and loaning their credit, so as to prevent the abuse of such power.”
 Section 13, Article XVIII of the Ohio Constitution provides, in full: “Laws may be passed to limit the power of municipalities to levy taxes and incur debts for local purposes, and may require reports from municipalities as to their financial condition and transactions, in such form as may be provided by law, and may provide for the examination of the vouchers, books and accounts of all municipal authorities, or of public undertakings conducted by such authorities.”
 148 N.E. 470 (Ohio 1925).
 Firestone, at 471.
 The ordinance in question was determined to create an excise tax as opposed a license fee because the sum demanded was used as a means of supplying the public treasury.
 Firestone, at 471.
 Id. at 473.
 Black’s Law Dictionary: excise tax. (1863) A tax imposed on the manufacture, sale, or use of goods (such as a cigarette tax), or on an occupation or activity (such as a license tax or an attorney occupation fee). — Also termed excise. Cf. income tax; property tax.
 Firestone, at 473 (citing Section 6299).
 81 Ohio St.3d 599 (1998).
 Id. at 600.
 Id. (citing R.C. 5727.30).
 Id. at 602.
 Id. at 608.
 Pursuant to Section 13, Article XVIII, and Section 6, Article XIII.
 Cincinnati Bell, at 605.
 Id. (citing Canton v. Whitman, 44 Ohio St.2d 62 (1975)).
 Section 13, Article XVIII, and Section 6, Article XIII.
 Cincinnati Bell, at 605.
 Id. at 605-06.
 131 N.E.3d 343 (Ohio App. 6th Dist. 2019).
 Id. at 345.
 Section 858.01 provides, in pertinent part, as follows:
(a) Owners of vehicles used for the transportation of persons or property, for hire and for use within the Village, shall pay by June 15 of each year, an annual, nontransferable vehicle license fee for each vehicle as follows:
(1) Buses and/or trolleys and/or self-powered trams: $300.00
(2) Tour train cars and/or towed tram car/unit: $225.00
A. Motor-driven: $225.00
B. Horse-driven: $225.00
C. Pedicab bicycles: $50.00
(4) Bicycles: $15.00
(5) Motorized bicycle/mopeds: $37.50
(6) Golf carts/under-speed vehicles/low-speed vehicles: $50.00
(7) Rental motor vehicles/vehicles: $50.00
(b) All moneys and receipts which are derived from the enforcement of this section shall be credited and paid into a separate fund, which fund shall be known as the Public Service Street Repair Fund. All moneys and receipts credited to such Fund shall be used for the sole purpose of repairing streets, avenues, alleys and lanes within the Village of Put-in-Bay.
 Village of Put-in-Bay, at 345.
 Pursuant to Article XVIII, Section 13 of the Ohio Constitution.
 Village of Put-in-Bay, at 345. Mathys also argued that the ordinance violates Article XII, Section 5a of the Ohio Constitution. See footnote 1.
 Village of Put-in-Bay, at 345.
 Id. at 347-48.
 Id. at 348 (quoting Cincinnati Bell).
 R.C. 715.013 provides: “(A) Except as otherwise expressly authorized by the Revised Code, no municipal corporation shall levy a tax that is the same as or similar to a tax levied under Chapter 322, 3734, 3769, 4123, 4141, 4301, 4303, 4305, 4307, 4309, 5707, 5725, 5726, 5727, 5728, 5729, 5731, 5735, 5736, 5737, 5739, 5741, 5743, 5747, 5749, or 5751 of the Revised Code.”
 Village of Put-in-Bay, at 348.
 R.C. 4503.02.
 R.C. 4504.02.
 Village of Put-in-Bay, at 348.
 Id. at 349.
 Supreme Court of Ohio, Oral Arguments for State of Ohio/Village of Put-in-Bay v. Mark Mathys and Islander Inn, Case No. 2019-0234, The Ohio Channel (Mar. 10, 2020), http://www.ohiochannel.org/video/supreme-court-of-ohio-case-no-2019-0324-put-in-bay-v-mathys.
 Village of Put-in-Bay, at 349 (The Court was also asked a second question: whether a municipal tax on vehicles-for-hire violates the Ohio Constitution when the funds collected from the tax are not expended solely for a statutory purpose. Appellees argued that even if the court were to find Section 858.01 to be a valid exercise of the village’s taxing power under the Home Rule Amendment, the ordinance is nonetheless unconstitutional under Article XII, Section 5a of the Ohio Constitution, which provides: “No moneys derived from fees, excises, or license taxes relating to registration, operation, or use of vehicles on public highways, or to fuels used for propelling such vehicles, shall be expended for other than costs of administering such laws, statutory refunds and adjustments provided therein, payment of highway obligations, costs for construction, reconstruction, maintenance and repair of public highways and bridges and other statutory highway purposes, expense of state enforcement of traffic laws, and expenditures authorized for hospitalization of indigent persons injured in motor vehicle accidents on the public highways.” Appellees asserted that because no Ohio statute authorizes the village to assess the tax under Section 858.01, it is therefore invalid under Section 5a. However, in Garrett v. Cincinnati, the Supreme Court of Ohio explained that Section 5a “is a limitation only on the use of state-imposed fees, excise and license taxes and is not applicable to fees imposed by municipal corporations.” Thus, because Section 858.01 is tax imposed by a municipality, Section 5a does not operate to limit it. Accordingly, the court rejected appellees’ argument that Section 5a provides an alternate ground of affirmance of the trial court’s decision.).