The Supreme Court of Ohio today ruled that a rugged Mercedes-Benz SUV was used by a Monroe County timber farm for farming and was not subject to the use tax imposed by the Ohio tax commissioner.

In a unanimous decision, the Supreme Court found the 2015 Geländewagen that the Claugus Family Farm purchased in 2018 for about $112,000 met the criteria for a tax exemption. The ruling reversed an Ohio Board of Tax Appeals (BTA) decision that approved a $9,461 tax assessment imposed by the Ohio tax commissioner.

Writing for the Court, Justice Megan E. Shanahan explained the timber farm disputed the tax commissioner’s conclusion that the vehicle had to be used “directly” in farming operations to qualify for the exemption. The Court noted the General Assembly changed a provision of state tax law in 2011 and no longer required equipment to be used directly in farming to qualify for the farming exemption.

Commissioner Rejected Tax Exemption
The Claugus Family Farm (CFF) has been in business since 1902, first operating as a fruit and dairy farm, and later as just a dairy farm. It is now a timber farm with 900 acres of timber covering the 1,100-acre farm. When CFF purchased the Mercedes, it claimed the vehicle was exempt from taxation and stated it would be used directly in farming. The tax commissioner disagreed. It issued the $9,461 assessment, which included pre-assessment interest and a penalty.

For the purposes of determining use taxes on business, the state applies sales tax exemption laws. The tax commissioner defines “farming” as an occupation that produces crops “as a business.” To determine if the Mercedes qualified for an exemption, the commissioner applied a three-part test.

CFF had to be engaged in the business of farming; the vehicle had to be used directly in farming activities, such as growing crops; and the farming activities had to account for the vehicle’s primary use.

The commissioner ruled CFF failed all three parts. The commissioner noted that while there was timber on the land that could be sold, CFF had not sold timber or reported income from timber sales since 2011. While CFF produced evidence that it was planning for future harvests and sales, the evidence was insufficient to prove the farm is “currently engaged in the business of farming,” the commissioner ruled.

CFF also failed to show the vehicle was used directly in farming activities, and the commissioner concluded it was used merely for maintaining property that contains a forest. The commissioner could not determine if the Mercedes was primarily used for farming because CFF did not quantify what percentage of the vehicle’s use was for farming activities.

CFF appealed to the BTA, which affirmed the tax commissioner’s assessment.

Supreme Court Analyzed Exemption Request
Justice Shanahan explained that the BTA applied the same three-part test as the commissioner, and both the tax commissioner and CFF focused on the test in their arguments before the Court.

CFF took issue with the BTA’s determination that the vehicle must be used directly in farming, and noted that under R.C. 5739.02(B)(42)(n), the exemption for farm equipment does not include the word “directly.” State tax laws used to include the word “directly” in connection with the farming exemption in two sections, but by September 2011, the word “directly” had been eliminated in both sections, the opinion noted.

Because the Court cannot create a requirement not prescribed by the legislature, the Court did not consider whether the vehicle was used directly in farming, the opinion stated.

During the BTA proceedings, CFF presented the testimony of Alex Kindler, a forester the farm hired in 2017. Kindler presented a forest management plan and noted that CFF produced 1.2 million board feet of timber between 2001 and 2008 and earned more than $490,000 in revenue. However, the plan used was not sustainable, and a different approach was necessary to prevent the forest from being overrun by non-native, invasive species of plants, Kindler maintained. Kindler presented a plan that focused on removing the non-native plants so that over a long period of time, the timber could be managed properly and produce years of annual returns. He also noted CFF hired contractors to traverse the property with chainsaws and herbicides to kill the undesirable plants to prevent the forest from being overrun.

Bruce Claugus, the managing partner who bought the Mercedes, agreed that the farm had not sold timber for years, but by using the new management plan, it would be selling timber soon. He explained he bought the vehicle because two previously purchased vehicles were not suitable for the farm. A Jeep Wrangler was able to traverse the rugged terrain, but it was too small to carry the heavy loads needed to help manage the forest. A Chevy Silverado did not handle the off-road driving well, he said.

He testified the Mercedes was originally designed for military use, had the ability to travel across the forest, and had space for the equipment. Claugus estimated that 95% of the use of the Mercedes was to travel through the forest to inspect the trees and carry chemicals, equipment, and workers to manage the land. Claugus argued the Mercedes is used in farming activities and qualifies for the exemption.

The Court wrote the change in state law establishes that property could qualify for the exemption if it was used to “perform an intermediate step in the process of producing crops.”

“Consider, for instance, a tractor pulling a plow in a cornfield. The tractor itself does not till the soil. Rather, it performs an intermediate step in the process by pulling the plow, which tills the soil,” the opinion stated.

For CFF, the Mercedes is the equivalent of a tractor; it provides the means for taking chainsaws, tools, herbicides, and workers through the forest so they can act to eliminate the invasive plants and facilitate the growth of timber to sell, the Court concluded.

The Court also found the vehicle met the third part of the test because Claugus presented the only evidence of its primary use, and the tax commissioner did not produce evidence to contradict his position.

As to the first part of the test, the Court noted the tax commissioner rejected the exemption because it found CFF was not actively engaged in business because it was not selling timber. The Court noted that it takes decades for trees to mature into marketable timber, and CFF presented a plan in which it was actively managing its forest to produce high-quality timber. The Court found CFF was engaged in the business of farming and met all three parts of the test to qualify for the exemption.

2024-0895. Claugus Family Farm, L.P. v. Harris, Slip Opinion No. 2025-Ohio-2807.

View oral argument video of this case.

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