Title: Midwest Found. Indep. Physicians Assn. v. Tracy

State: ohio

Issuer: Ohio Supreme Court

Document:

Midwest Foundation Independent Physicians Association, d.b.a. 
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ChoiceCare, Appellant, v. Tracy, Tax Commr., Appellee. 
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[Cite as Midwest Found. Indep. Physicians Assn. v. Tracy (1996), _____ 
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Ohio St. 3d _____.] 
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Taxation -- Use tax on quarterly magazine published and mailed from 
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Boston, Massachusetts, to Ohio residents by Ohio health mainteance 
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organization -- R.C. 5741.02(A), applied -- Taxable “use,” when. 
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(No. 94-2058--Submitted September 14, 1995--Decided January 10, 
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1996.) 
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Appeal from the Board of Tax Appeals, No. 92-Z-435. 
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Midwest Foundation Independent Physicians Association, d.b.a. 
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ChoiceCare, appellant, operates a Cincinnati-based health maintenance 
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organization.  ChoiceCare’s members reside in Ohio, Kentucky, and 
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Indiana.  Approximately eighty-five percent of its members lived in Ohio 
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during the audit period, January 1, 1988 through December 31, 1990. 
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ChoiceCare purchases the Health Journal Magazine, a quarterly 
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magazine published by a company in Boston, Massachusetts.  ChoiceCare 
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directs the publisher to mail the magazines from Boston directly to 
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ChoiceCare’s members.  The magazine keeps the members abreast of 
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changes at ChoiceCare and in the health care industry.  It usually contains a 
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letter from ChoiceCare’s president, ideas for the health-conscious member, 
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and other health-related articles. 
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The Tax Commissioner, appellee, assessed use tax against those 
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magazines sent to Ohio residents.  On appeal, the Board of Tax Appeals 
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(“BTA”) affirmed the commissioner’s assessment.  The BTA ruled that 
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ChoiceCare exercised a right or power incidental to ownership in Ohio by, 
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from its Ohio office, ordering, paying for, and supplying a mailing list to 
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direct delivery of, the magazine. 
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The cause is now before this court on ChoiceCare’s appeal as of right. 
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Frost & Jacobs and Larry H. McMillin, for appellant. 
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Betty D. Montgomery, Attorney General, and James C. Sauer, 
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Assistant Attorney General, for appellee. 
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Per Curiam.  We affirm the BTA’s decision. 
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R.C. 5741.02(A) imposes a use tax on the “storage, use, or other 
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consumption in this state of tangible personal property ***.”  R.C. 
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5741.01(C) defines “use” to mean “the exercise of any right or power 
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incidental to the ownership of the thing used.” 
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ChoiceCare, from its Ohio office, ordered the Boston publisher to 
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print the magazines and mail them to ChoiceCare’s members in Ohio.  
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Apparently, ChoiceCare also issued payment for the magazines from Ohio.  
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ChoiceCare, thus, orchestrated the purchase and distribution of the 
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magazine to Ohio recipients. By these acts, ChoiceCare exercised rights or 
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powers incidental to the ownership of the magazines.  Since ChoiceCare 
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exercised these rights or powers in Ohio, ChoiceCare owes Ohio use tax on 
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these activities.  Norandex, Inc. v. Limbach (1994), 69 Ohio St. 3d 26, 630 
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N.E. 2d 329. 
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We distinguish Hoffmann-LaRoche, Inc. v. Porterfield (1968), 16 
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Ohio St. 2d 158, 45 O.O. 2d 486, 243 N.E. 2d 72, cited for support by 
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ChoiceCare.  In that case, Hoffmann-LaRoche, a pharmaceutical 
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manufacturer that maintained its principal office in New Jersey and had 
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warehouses in states other than Ohio, mailed samples and promotional 
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materials to Ohio doctors and hospitals.  We affirmed a BTA decision 
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reversing that assessment because Hoffmann-LaRoche divested itself of 
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ownership, possession, and control outside Ohio.  Thus, Hoffmann-LaRoche 
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did not exercise any right or power incidental to ownership in Ohio. 
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ChoiceCare also argues that Am. S. B. No. 303, 143 Ohio Laws, Part 
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I, 1602 (effective July 18, 1990), which expanded the definition of “use” to 
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include distribution by the consumer, without charge, to recipients in this 
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state, prevents the commissioner from assessing ChoiceCare on purchases 
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occurring prior to its enactment.  ChoiceCare contends that the instant 
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purchases were not taxable until this amendment became effective.  This 
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argument has no merit.  We have held above that the definition of “use” 
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existing during the audit period covers the instant situation without 
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bolstering from this amendment.  Indeed, the amended definition appears 
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aimed at taxpayers like Hoffmann-LaRoche, which distribute items from 
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outside Ohio. 
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Accordingly, we affirm the decision of the BTA because it is 
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reasonable and lawful. 
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Decision affirmed. 
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MOYER, C.J., DOUGLAS, WRIGHT, RESNICK, F.E. SWEENEY, PFEIFER 
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and COOK, JJ., concur. 
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