Could a tax case ever make for interesting reading? To our surprise, the answer is Yes. In our end-of-year excavation of older cases we missed when they first came out, we unearthed Rowitz v. Tax Commissioner of Ohio, 2019 WL 7489061 (Ohio Ct. App. Dec. 31, 2019). The plaintiffs in that case applied for refunds of sales tax they had paid for feminine hygiene products, such as tampons and menstrual pads. The issues were .. wait for it … equal protection and federal preemption.
The plaintiffs contended that the sales tax violated the equal protection clauses of the United States and Ohio constitutions because it discriminated against women. As many of you will remember from your law school Con Law class, equal protection analysis centers on whether the challenged law should be subject to strict scrutiny, heightened scrutiny, or rational basis review. That threshold determination is more often than not outcome determinative. The Ohio court held that strict scrutiny did not apply, because no fundamental rights were curtailed and no suspect classes (race or national origin) were victimized. Heightened scrutiny has been applied to gender discrimination (thank you, RBG) and one could see how that level of review might extend to a tax specifically on women’s products. But the Ohio sales tax applied generally – it did not single out feminine hygiene products. Consequently, the Rowitz court engaged in rational basis review, and that almost always means that the challenge will fail. That was true here. Governments need to raise money and sales taxes are a valid means of doing so. So much for the equal protection issue.
What about preemption? The Rowitz plaintiffs argued that the Medical Device Amendments to the Food, Drug, and Cosmetic Act, specifically 21 USC 360k(a), and FDA labeling regulations preempted the Ohio sales tax because FDA regulations classify tampons and pads as medical devices. The Ohio sales tax does not apply to items dispensed pursuant to a prescription.
The preemption language for medical devices should be familiar to most of you: a state or subdivision may not impose a requirement on a medical device that is “different from, or in addition to,” any federal requirements relating to safety or effectiveness. But there are limitations to this preemption provision with which you might not be so familiar. For example, 21 CFR 808.1(d) calls off preemption for state provisions relating to products in addition to medical devices, and also calls off preemption for local requirements whose sole purpose is raising revenue.
The Rowitz court rambled through the SCOTUS Lohr decision, and emerged with some unfortunate language about the narrowness of preemption. But the actual holding is not so bad (though we could imagine how it could be abused). First, the Ohio sales tax did not relate to the safety or effectiveness of the feminine hygiene products. Second, the tax was clearly and solely aimed at raising revenue. Third, the federal regulations said nothing about taxation. Fourth, the Ohio sales tax law never mentioned medical devices. Fifth, the feminine hygiene products were not dispensed via prescriptions. The preemption argument might have been ingenious, but it was also unsuccessful.
The plaintiffs weren’t done yet. They also mounted an argument under Ohio law that there should have been an exemption for these products. Unfortunately for the plaintiffs, they tried to characterize the feminine hygiene products as drugs or prosthetic devices, neither of which fit.
As tax cases go, Rowitz is a breeze. The issues are juicy and relatively easy to follow. The decision is mostly free of the usual death march through the tax code. But Rowitz also illustrates the one thing we remember our law school tax professor telling us: the taxpayer almost always loses.