Jones Apparel: Rejecting a Shipping-Date Rule Still Left the Refund Amount Unproved

Winning the legal sourcing argument did not establish the refund amount in Jones Apparel Group/Nine West Holdings v. Harris, 182 Ohio St.3d 22, 2026-Ohio-74. The Ohio Supreme Court rejected a requirement that a seller know the ultimate destination at the time of shipment, yet affirmed denial of the commercial activity tax refund because the evidence failed to quantify the qualifying gross receipts.

The January 14, 2026 decision governs an Ohio CAT dispute, not California income or sales tax. It provides a useful distinction for businesses with Ohio distribution activity: The rule identifying the destination and the evidence establishing the dollar amount are separate requirements.

The goods first went to an Ohio distribution center

Jones Apparel sold merchandise to DSW during 2010 through 2016. The goods initially went to a Columbus distribution center and were then sent to retail stores around the country. Jones Apparel sought an $854,627 refund, asserting that approximately 80 percent of the merchandise ultimately went outside Ohio.

The tax commissioner denied the claim based on the initial Ohio delivery and the seller’s lack of contemporaneous knowledge of the later destinations. The Board of Tax Appeals rejected that legal requirement but found the proof of the refund amount insufficient. Both sides brought the issues to the Ohio Supreme Court.

The statute looks through the transportation chain

Ohio Revised Code section 5751.033(E) addresses receipts from tangible personal property. Its delivery rule looks to where the purchaser ultimately receives the property after all transportation has been completed.

The court found no statutory requirement that the seller know that ultimate destination when the property is initially shipped. The commissioner’s additional contemporaneous-knowledge condition could not be read into the statute. Initial delivery to the Ohio warehouse therefore did not, by itself, resolve the final destination question.

The statutory discussion appears in Jones Apparel. The court nevertheless required proof supporting the amount claimed under the refund statute, section 5751.08.

Evidence that some goods left Ohio did not quantify the receipts

A company witness, Neeman, estimated that about 80 percent of the goods went outside Ohio. He discussed the distribution model, observations of merchandise in other states, the number of Ohio stores and the scale of DSW’s business. He also reasoned that the Ohio stores could not have absorbed the volume: In 2013, Jones Apparel’s $108 million in sales to DSW exceeded DSW’s roughly $100 million in total Ohio retail sales.

The majority considered that evidence sufficient to suggest that some merchandise left Ohio, but insufficient to establish the portion of gross receipts attributable to those goods. The claimed percentage remained an educated estimate without the needed quantitative connection to the transactions and tax periods.

An expert, Oeler, separately analyzed online merchandise availability for August through October 2018 and found an Ohio offering percentage of 3.85 percent. The majority questioned using later data and a three-month sample to establish a seven-year refund. Product availability also needed a quantitative connection to the gross receipts from the actual sales. Annual-report material also failed to fill that quantitative gap.

The majority’s examination of the evidence appears in Jones Apparel. The distinction was between proof of a distribution pattern and proof of the amount refundable.

The dissent would have credited the inferential proof

Chief Justice Kennedy, joined by Justice Fischer, dissented. She agreed that the statute did not impose the commissioner’s contemporaneous-knowledge requirement, but viewed the evidence supporting the refund differently.

The dissent considered Neeman’s knowledge, the scale of the Ohio retail operation and the broader distribution evidence sufficient to establish entitlement. It would have accepted the inference about the out-of-state portion rather than demanding the quantitative proof the majority found missing. She emphasized Neeman’s responsibility for multistate tax filings and the business knowledge that work required. She also criticized VVF Intervest, L.L.C. v. Harris, 2025-Ohio-5680, for treating a second sale to a retailer as breaking the transportation chain; in her view, the statute turned on when transportation ended, regardless of that resale. Those were the dissent’s positions. The disagreement over this refund focused on evidentiary sufficiency, as the Jones Apparel dissent explains.

The board’s denial remained in place

The majority affirmed the Board of Tax Appeals. The majority evaluated the evidence supporting this refund and found it insufficient. It also noted that the alternative methods in R.C. 5751.033(G), (I) and (J) were not applicable here. Section (J) permits requests for an alternative method within its own statutory time periods when ordinary situsing fails to fairly represent Ohio activity.

For a business preparing a CAT refund, the practical question is whether the evidence connects ultimate destinations to receipts for the actual tax periods. Shipping records, purchaser records and a supported reconciliation may perform different parts of that work. A nationwide sales footprint alone leaves the calculation exposed.

The companion Insight explains how to connect an Ohio warehouse refund theory to receipts and destinations while keeping the legal rule separate from the calculation.