Update as of September 22, 2026
On September 22, 2026, the Ohio Supreme Court issued a 7-0 opinion affirming the Board of Tax Appeals’ reversal of an Ohio Commercial Activity Tax (“CAT”) assessment by the Tax Commissioner. The issue in the case was whether a pharmaceutical company’s list price before the application of chargebacks (price reductions) was the amount includible in the company’s gross receipts. The Court held: “the amount realized by Perrigo is not the list price amount invoiced to distributors but rather the amount Perrigo receives from the sale of its prescription drugs to retailers.” Perrigo Sales Corp. v. Harris, Slip Opinion No. 2026-Ohio-3648, at ¶ 13. The Court explained, “[b]ecause Perrigo receives only the amount agreed upon with the retailer––rather than the list price invoiced to the distributor––it is the retailer price that is the ‘amount realized’ for the calculation of Perrigo’s ‘gross receipt.’” Id. at ¶ 14. The Court held that the price after chargebacks was the amount subject to the CAT. Id. The Court rejected the Tax Commissioner’s other six propositions of law as unpersuasive, noting that the Tax Commissioner didn’t “seriously engage” with the statutory definition of “gross receipts.” Id. at ¶ 15.
The opinion in Perrigo has wide-ranging implications for pending Ohio CAT cases and audits. ZHF authored an amicus brief in favor of Perrigo on behalf of the Ohio Chamber of Commerce.
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Update as of November 7, 2025
The Ohio Tax Commissioner filed its Notice of Appeal in the Perrigo Sales Corporation v. Harris on November 7, 2025. We will be following the status of this case closely, so please continue to check our website for updates.
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Originally posted on October 13, 2025
The Ohio BTA’s decision in Perrigo Sales Corporation v. Harris, Case No. 2024-485, October 9, 2025, resolves the debate on whether the list price is a gross receipt or only the actual sales price, after price reductions. The decision holds that the tax base (gross receipts) included only the actual sales price, the amount that the vendor receives.
The core issue in the case is whether Perrigo’s list price of generic pharmaceutical drugs or the actual sales price of the drugs paid by Perrigo’s customers should be used as the tax base for CAT purposes. The BTA determined that the actual sales price is the appropriate amount.
Perrigo Sales Process
As part of Perrigo’s sales process, Perrigo sells drugs to drug wholesalers at a list price (wholesale acquisition cost – WAC). The wholesalers then sell the drugs to retail customers, which have negotiated a lower price. Perrigo has agreed to allow the wholesaler a price reduction from WAC (referred to as a chargeback) to the extent the wholesaler sells at these lower prices to retail customers. All parties (Perrigo, wholesalers, and retailers) are aware of this arrangement. At the time of the sale to the wholesaler, neither Perrigo nor the wholesaler expects the WAC to be the actual price. The chargeback process typically occurs within 48 hours and the wholesaler remits the net sales price to Perrigo.
Arguments
The Commissioner attempted to include the WAC price in Perrigo’s gross receipt. Perrigo argued that the net sales price (price after chargeback) was the gross receipt.
The Board agreed with Perrigo based on:
- Economic reality of the sales shows that the end customer paid a lower contract price to the wholesaler – “To treat the WAC as a “receipt” under the CAT ignores the commercial reality of how these transactions are structured and executed”;
- Perrigo received only the adjusted sales price (price after chargeback), not the full WAC (wholesaler provides no consideration in exchange for the chargeback) – “The fact that Perrigo issues an invoice at WAC does not transform that figure into a realized receipt”
- The CAT is a tax based on receipts realized by the taxpayer, not the WAC, not a theoretical invoice amount – “Because the WAC is, in substance, an accounting placeholder, the chargeback reduction is not an expense but rather the accounting mechanism to establish the actual purchase price, i.e., the gross amount realized”
- The chargebacks are not gross receipts under the definition found in 5751.01(F) – “The parties discuss various exclusions in their analysis, but because the actual sale price should have been used in the base (not the WAC), we need not delve into possible exclusions”
Potential Impact on All Taxpayers
The BTA’s decision has an impact not just on chargebacks, but on all reductions of sales price – no need to establish an exclusion if it is not a receipt in the first place. Businesses that provide various reductions to sales prices could have a position that such reductions to price reduce the CAT base.
If you would like to discuss the impacts of Perrigo on your business, please contact John Trippier, Thomas Zaino or any of our state and local tax professionals.