#### The Kroger Grocery & Baking Co., Appellant, *v.*Evatt, Tax Commr., Appellee.

*449(No. 30851

Decided April 28, 1948.)

*450*Messrs. Dargusch, Caren, Greek & King,*for appellant.

*Mr. Hugh S. Jenkins,*attorney general, and *Mr. Aubrey A. Wendt,*for appellee.

*451Sohngen, J.

The sole question in this case is whether the minimum balances maintained by appellant in the minor bank accounts outside Ohio had a situs in Ohio for the purpose of taxation.

The general rule is that intangibles have a tax situs at the domicile of the owner, and it is well established that the domicile of a corporation is the state of its organization. *McBride, Exrx.,*v. *City of Jersey City,*19 N. J. Misc., 637, 22 A. (2d), 567; *Commonwealth*v. *Mundy Corp.,*346 Pa., 482, 30 A. (2d), 878; *In re*Trus*con Steel Co.,*246 Mich., 174, 224 N. W., 653; *Fidelity & Columbia Trust Co., Exr.,*v. *City of Louisville,*245 U. S., 54, 62 L. Ed., 145, 38 S. Ct., 40; *Pacific Coast Savings Society*v. *City of San Francisco,*133 Cal., 14, 65 P., 16; *Hunt*v. *Turner,*54 Fla., 654, 45 So., 509; *People, ex rel. United Verde Copper Co.,*v. *Feitner et al., Tax Commrs.,*66 N. Y. Supp., 769, 54 App. Div., 217, affirmed, 165 N. Y., 645, 59 N. E., 1129.

Under certain circumstances, deposits of a corporation can, for tax purposes, acquire a situs different from that of the domicile of the owning company. The conditions which must be met under Ohio statutes to establish a situs for deposits of a company other than the domicile of the company are set forth in Sections 5328-1 and 5328-2, General Code, the pertinent parts of which are as follows:

Section 5328-1. “All * * * deposits * * * of persons residing in this state shall be subject to taxation, excepting as provided in this section or as otherwise pro' vided or exempted in this title; * * * and all such property of persons residing in this state used in and arising out of business transacted outside of this state by, for or on behalf of such persons, * * * shall not be subject to taxation. ** * *”*

Section 5328-2. “Property of the kinds and classes herein mentioned, when used in business, shall be considered to arise out of business transacted in a state *452other than that in which the owner thereof resides in the cases and under the circumstances following: * * *

> “In the case of deposits (other than such as are used in business outside of such other state), when with-drawable in the course of such business by an officer or agent having an office in such other state; but deposits representing general reserves or balances of the owner thereof, maintained for the purpose of his entire business, wherever transacted, shall be considered located in the state * * under whose laws it is organized, if a corporation, by whomsoever they may be withdrawable. * * *

> “The provisions of this section shall be reciprocally ■applied, to the end that all property of the kinds and classes mentioned in this section having a business ■situs in this state shall be taxed herein and no property of such kinds and classes belonging to a person residing in this state and having a business situs outside of this state shall be taxed. It is hereby declared that the assignment of a business situs outside of this state to property of a person residing in this state in any case and under any circumstances mentioned in this section is inseparable from the assignment of such situs in this state to property of a person residing' outside of this state in a like case'and under similar circumstances. If any provision of this section shall be held invalid as applied to property of a nonresident person, such decision shall be deemed also to affect such provision as applied to property of a resident, but shall not affect any other provision hereof.”

In order for a deposit to have a tax situs outside Ohio, all the conditions contained in Section 5328-2, General Code, must be complied with. One of the conditions is that the funds must be “withdrawable in the course of such business by an officer or agent having an office in such other state.”

*453The record shows that the minimum balances in the instant case were, by company policy and by arrangement with the banks, maintained at all times. One of the appellant’s officers stated that the appellant borrowed money when needed, rather than use the funds contained in these minimum balances. The minimum balances were maintained at all times until the stores using the accounts were permanently closed. Then and only then were these minimum balances withdrawn. It is true that branch managers could have, at any time, legally withdrawn these funds. However, under the policy established by the company, this was not done. Clearly, these funds, although withdraw-able, were not withdrawable in the course of business, and, therefore, did not meet the condition of Section 5328-2, General Code. Another condition of Sections 5328-1 and 5328-2, General Code, is that the deposits must be used in business in such other state.

In *C. F. Kettering, Inc.,*v. *Evatt, Tax Commr.,*144 Ohio St., 419, 425, 59 N. E. (2d), 370, this court said:

> “Reading Sections 5328-1 and 5328-2, General Code, as they are connected with Section 5498, they mean that Ohio bank deposits of a foreign corporation or other nonresident are to be accorded an Ohio situs for the imposition of franchise taxes where they are used *exclusively*in business transacted in Ohio and are withdrawable by an officer or agent having an Ohio office.” (Italics ours.)

The condition as held in the *Kettering case, supra,*is that the deposit be used *exclusively*for business transacted in such other state. It is clear from the record in the instant case that part of the money in these minor accounts was transferred to appellant’s Cincinnati office and was used in the general business of the company. The Tax Commissioner held, and it is not controverted, that «bout 71% of the funds in ex*454cess of the minimum balances was sent to the main office at Cincinnati and was so used.

The minimum balances here in question arose from the same sources as the funds in excess of the minimum balances. The funds were placed in the same accounts for the same company, and the minimum balances for which the appellant claims there is no Ohio situs were all a part of these accounts, and it is agreed that certain parts of the deposits made in these accounts were used in the general business of the appellant company.

Maintaining these minimum balances was evidently of advantage to the appellant in the conduct of its business, but since the funds in these minimum balances arose from the same source as the excess, the Board of Tax Appeals did not err in applying the percentage established by the Tax Commissioner and taxing them in the same manner as the excess.

Therefore, the decision of the Board of Tax Appeals is reasonable and lawful and is affirmed.

*Decision affirmed.*

Weygandt, C. J., Hart and Zimmerman, JJ., concur.

Turner, Matthias and Stewart, JJ., dissent.

Matthias, J.,

dissenting. The question for decision in this case, as stated in the majority opinion, is as follows: Do the minimum balances maintained in the minor bank accounts (of the appellant) outside Ohio have a situs in Ohio for the purpose of taxation?

Under the decision of the majority, if a company domiciled in Ohio maintains any daily balance in its bank deposits in another state the entire bank deposit in such other state becomes a reserve or balance maintained “for the purpose of its«entire business wherever transacted, ’ ’ regardless of the fact that such bank de*455posits are admittedly used in its business in such other state, and notwithstanding the fact that the funds deposited could legally be withdrawn “in the course of such business by an officer or agent having an office in such other state” as provided in Section 5328-2, General Code.

Appellant maintains in Ohio and other states bank accounts which do constitute reserves and balances used for the purpose of its entire business. But the taxability of these accounts is not in issue here. We have for consideration only the so-called minor bank accounts from which the expenses of the business of the depositing branch store are paid by the branch manager, and from which accounts funds are periodically withdrawn to be deposited in other general accounts for general use in appellant’s business.

To arrive at the conclusion that the minor bank accounts are taxable the majority disregards the definition of the phrase, “used in business,” as found in Section 5325-1, General Code. Then also to the language used in Sections 5328-1 and 5328-2, General Code, the majority has added a very significant word not found in any enactment of the General Assembly having application to the matter under consideration. That is the word “exclusively.” The decision seems in complete and direct conflict with the legislative purpose as clearly stated in Sections 5328-1 and 5328-2, General' Code, and with the definition of the phrase, “used in' business,” by Section 5325-1, General Code. The result is, as I view it, a head-on collision with the decisions of this court in the case of *Ransom & Randolph Co.*v. *Evatt, Tax Commr.,*142 Ohio St., 398, 52 N. E. (2d), 738, and *Haverfield Co.*v. *Evatt, Tax Commr.,*143 Ohio St., 58, 54 N. E. (2d), 149.

Section 5325-1, General Code, provides in part as follows:

> *456“Moneys, *deposits,*investments, accounts receivable and prepaid items, and other taxable intangibles shall be considered to be ‘used’ when *they*or the avails thereof *are being applied, or are intended to be applied in the conduct of the business, whether in this state or*elsewhere.”■ (Emphasis ours.)

The record shows that if a balance be not maintained on deposit by the branch stores in local banks, snch banks would refuse to render those stores banking services, and, in the absence of the service by local banks, the appellant would be required to suffer the inconvenience and incur the expense of remitting the daily receipts of the branch stores to its general depositories. This would seem clearly to be a business use of the minimum balances so on deposit, and such balances are therefore “used in business in such other state” within the purview of the statutory provisions above quoted.

As above stated there is no legislative employment of the word, “exclusively,” as adopted and applied by the majority. The phrase, “used in business,” is to be applied whether such use be in this state or elsewhere. There is no ambiguity in that language.

The decision of this court in the case of *C. F. Kettering, Inc.,*v. *Evatt, Tax Commr.,*144 Ohio St., 419, 59 N. E. (2d), 370, is likewise no authority for the use of the word “exclusively.” In that case the company had only one bank account and that was in Ohio. The corporation being domiciled in Delaware this court held that a bank account used for the purpose of'its business generally did not have an Ohio situs. That was the result of the application of the clear provisions of Section 5328-2, General Code. Under those provisions we likewise may tax deposits of an Ohio corporation, located in another state, if they constitute funds used in the business generally. That case, how*457ever, does not Hold that Ohio conld not tax funds of a Delaware corporation, on deposit in this state, without proving that every dollar of the account had been used in business in Ohio, which would be the result if the word “exclusively” as used and applied in the *Kettering case*was given the meaning ascribed to it by the majority opinion in this case.

The instant case results in taxing the deposits of an Ohio corporation used in business in another state and makes inapplicable the provisions of Section 5328-2, General Code, that “The provisions of this section [5328-2, General Code] shall be reciprocally applied, to the end that all property of the kinds and classes mentioned in this section having a business situs in this state shall be taxed herein and no property of such kinds and classes belonging to a person residing in this state and having a business situs outside of this state shall be taxed.”

As I view it, the decision of this case is in direct conflict with the decisions of this court in the *Ransom & Randolph*and *Haverfield cases*above cited. Those cases involve the taxation of accounts receivable originating in other states and owned by an Ohio corporation. In each instance the court applied the definition of the term “used in business” as found in Section 5325-1, General Code, and held the accounts nontaxable. The decision in the instant case disregards the definition clearly prescribed by Section 5325-1, General Code. The net result is the application of one rule to taxation of deposits and a different rule to the taxation of accounts receivable, notwithstanding they are required to be similarly taxed by the express language of the statute.

Turner and Stewart, JJ., concur in the foregoing dissenting opinion.