In Stingray Pressure Pumping, LLC v. Harris, the Ohio Supreme Court recently interred a principle of statutory construction requiring courts to strictly construe tax exemptions against the taxpayer.[1] Writing for the majority, Justice Patrick DeWine observed that such a principle was “in tension with our often-expressed commitment to apply the plain and ordinary meaning of statutory text.”[2] The court emphasized its duty to give a fair reading of the tax laws, instead of interpreting them in a way that was slanted toward one side or the other. On that ground, the court announced that, henceforth, it would “apply the same rules of construction to tax statutes that we apply to all other statutes.”[3]

A brief historical background illuminates Stingray’s significance. Decision-making bodies had historically applied a principle, often without reflection, that a taxpayer seeking a tax exemption “has the burden of proof and in all doubtful cases, the exemption is denied.”[4] So taxpayers in Ohio generally faced a “stringent burden of proof” in showing that they qualified for tax exemptions.[5] They had to show that a statute clearly provided for the exemption on the facts of the taxpayer’s claim.[6] The principle invoked to justify this burden had to do with the “rule of uniformity and equality in matters of taxation.”[7] Anyone who “enjoys the privileges, benefits and protection [of a democracy],” it was said, “should bear his proportionate share of the expense.”[8] And since taxes form “the very lifeblood of government,”[9] laws providing for tax exemptions were considered to be “in derogation of equal rights.”[10] Thus, courts considering tax exemption laws strictly construed them against the exemption.[11]

That was the state of the law in Ohio when Stingray Pressure Pumping, LLC, a fracking business, bought several pieces of equipment to use in its fracking operations. Ohio imposes a sales tax for items sold in the state and a use tax for items bought outside the state. Exemptions sometimes apply, however, and one of them covers equipment used in the production of crude oil and natural gas.[12] Specifically, the use tax does not apply when the buyer’s intention is to “use or consume the thing transferred directly” in producing property for sale by mining, including the production of crude oil and natural gas.[13] Stingray claimed its equipment satisfied that condition and that it was thus entitled to a tax exemption. The tax commissioner disagreed and issued tax-assessments for each piece of Stingray’s equipment. After appeals—during which time the General Assembly amended the relevant statute, adding non-exhaustive lists of equipment that did and did not constitute “a thing transferred”—the case ended up at the Ohio Supreme Court.[14] There, Stingray argued that the court should follow its own “normal rules of construction without a construction tilted toward taxation.”[15]

The court agreed. Justice DeWine’s majority opinion recognized that the court’s cases had sometimes construed tax exemptions against the taxpayer. Such an approach, however, created tension with the court’s commitment to apply a statute’s plain and ordinary meaning.[16] The court observed that the notion that special rules apply to tax exemptions appeared to be “a carryover from 19th-century federal caselaw dealing with the Contracts Clause of the United States Constitution and limitations on intrusions into state sovereignty.”[17] The problem was that the strict-construction rule was not grounded in the statutory language of the tax exemption at issue. Instead, prior decisions had justified the rule on “notions about what constitutes good tax policy.”[18] But the wisdom of tax policy was the domain of the legislature, not the courts.[19]

Finding no text-based reason to retain the strict-construction rule, the court brought an end to it: “Tax statutes must be read through a clear lens, not one favoring tax collection.”[20] Moving forward, tax statutes enjoy the same rules of construction that all other statutes do.[21]

Having articulated the new rule, the court examined the claimed exemptions. The amended statute categorized “tangible personal property directly used” in fracking as a “thing transferred” and therefore potentially tax-exempt.[22] Things used primarily for storing, holding, or delivering solutions or chemicals, on the other hand, were not a “thing transferred,” and therefore were taxable.[23] Applying the primary-use test—the standard that applies when an item could be exempt if used one way but not exempt if used another—the court determined that almost all the equipment was tax-exempt. Even though much of the equipment stored materials as part of its function (potentially making them taxable under the amended statute), most of it was primarily used directly in fracking—meaning, under the statute, those items qualified for the exemption.[24] The court also rejected the tax commissioner’s argument that items used “preliminary and preparatory” to production could not be exempt.[25]

Justice Michael Donnelly, joined by Justice Melody Stewart, concurred in part and dissented in part. He wrote that any equipment that holds materials for fracking will necessarily have some connection to the fracking process itself. A piece of equipment’s eventual connection to fracking, in his view, was not enough to make it eligible for the exemption.[26]

This was not the first time the strict-construction rule had come under scrutiny. Last year, in a concurrence in judgment only joined by now-Chief Justice Sharon Kennedy, Justice DeWine expressed concern over the rule.[27] He observed that the United States Supreme Court had “largely abandoned the notion that tax statutes should be treated differently than other legislative enactments” and argued that the Ohio Supreme Court should do the same.[28]

Stingray is significant for a couple reasons. First, it directly impacts how the tax commissioner, the Board of Tax Appeals, and courts will evaluate requests for exemptions. There is no longer a tie-breaker against the taxpayer’s interest. Second, it shows the Ohio Supreme Court is receptive to arguments that elevate the text of legislation over substantive canons that “advance values external to a statute.”[29] Relevant here is Justice Amy Coney Barrett’s concurrence in Nebraska v. Biden, decided this past term. She recognized that substantive canons, whether they act as tie-breakers or as the more aggressive, “strong-form” sort, are “‘in significant tension with textualism’ insofar as they instruct a court to adopt something other than the statute’s most natural meaning.”[30] Stingray suggests that the Ohio Supreme Court is willing to reject a substantive rule of construction if the rule lacks an anchor in the text of the applicable law. 

[1] Stingray Pressure Pumping, L.L.C. v. Harris, 2023-Ohio-2598, No. 2022-0304 (Ohio, Aug. 2, 2023), available at 

[2] Id. at ¶ 20.

[3] Id. at ¶ 22.

[4] Cincinnati Fed. Sav. & Loan Co. v. McClain, 196 N.E.3d 799, 805 (Ohio 2022).

[5] Veolia Water N. Am. Operating Servs., Inc. v. Testa, 51 N.E.3d 613, 617 (Ohio 2016).

[6] N.A.T. Transportation, Inc. v. McClain, 178 N.E.3d 454, 458 (Ohio 2021).

[7] Youngstown Metro. Hous. Auth. v. Evatt, 55 N.E.2d 122, 125 (Ohio 1944).

[8] Id. at 124.

[9] Id.

[10] Anderson/Maltbie P'ship v. Levin, 937 N.E.2d 547, 550 (Ohio 2010). See also Youngstown Metro., 55 N.E.2d at 125 (“The foundation upon which that policy rests is that statutes granting exemption of property from taxation are in derogation of the rule of uniformity and equality in matters of taxation.”).

[11] Anderson, 937 N.E.2d at 550.

[12] Stingray, 2023-Ohio-2598, ¶ 11.

[13] Id. at ¶ 13.

[14] Id. at ¶¶ 13-17.

[15] Id. at ¶ 19.

[16] Id. at ¶ 20.

[17] Id. at ¶ 21 (citing Antonin Scalia & Bryan Garner, Reading Law: The Interpretation of Legal Texts 359-63 (2012)).

[18] Id.

[19] Id.

[20] Id. at ¶ 22.

[21] Id.

[22] R.C. 5739.02(B)(42)(q)(i).

[23] R.C. 5739.02(B)(42)(q)(ii).

[24] Stingray, 2023-Ohio-2598, ¶¶ 38-54.

[25] Id. at ¶¶ 55-61.

[26] Id. at ¶¶ 63-64 (Donnelly, J., concurring in part and dissenting in part).

[27] Cincinnati Fed. Sav. & Loan, 196 N.E.3d at 810 (DeWine, J., concurring in judgment only).

[28] Id. at 811.

[29] Biden v. Nebraska, 143 S. Ct. 2355, 2376 (2023) (Barrett, J., concurring).

[30] Id. at 2377 (quoting Amy Coney Barrett, Substantive Canons and Faithful Agency, 90 B.U. L. Rev. 109, 117 (2010)). 

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