Case Name: Quotron Systems, Inc., Appellant, v. Limbach, Tax Commr., Appellee
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1992-02-05
Citations: 62 Ohio St. 3d 447
Docket Number: No. 90-2497
Parties: Quotron Systems, Inc., Appellant, v. Limbach, Tax Commr., Appellee.
Judges: Moyer, C.J., Sweeney, Holmes, Douglas, H. Brown and Resnick, JJ., concur.
Reporter: Ohio State Reports, Third Service
Volume: 62
Pages: 447–452

Head Matter:
Quotron Systems, Inc., Appellant, v. Limbach, Tax Commr., Appellee.
[Cite as Quotron Systems, Inc. v. Limbach (1992), 62 Ohio St.3d 447.]
(No. 90-2497
Submitted October 16, 1991
Decided February 5, 1992.)
Baker & Hostetler, Edward J. Bernert, George H. Boerger, Christopher J. Swift; O’Melveny & Myers, Ben E. Benjamin and David T. Beddow, for appellant.
Lee I. Fisher, Attorney General, and Barton A. Hubbard, for appellee.

Opinion:
Per Curiam.
R.C. 5739.01 and 5739.02 tax sales of automatic data processing ("adp") and computer services, and R.C. 5741.02 imposes a complementary use tax " on the storage, use, or other consumption in this state of tangible personal property or the benefit realized in this state of any service provided. " R.C. 5741.01(N) defines "other consumption" as " including] receiving the benefits of a service by the person who purchased the service." Thus, the purchase of adp and computer services is subject to the use tax.
R.C. 5739.01(Y) defined "automatic data processing and computer services," until January 10, 1985, to include " providing direct access to computer equipment by remote or proximate access for the purpose of processing data or examining or acquiring data stored in or accessible to such computer equipment ," Am.Sub.H.B. No. 291, 140 Ohio Laws, Part II, 2872, 3220, and, after this date, to include " providing access to computer equipment for the purpose of processing data or examining or acquiring data stored in or accessible to such computer equipment Sub.S.B. No. 112, 140 Ohio Laws, Part I, 225, 233.
Quotron first argues that the statute imposes the tax on the service only when the vendor rendering the service processes another's data or permits the customer to use the vendor's equipment to process the customer's data.
The statute's language does not support this reading. The statute includes as an adp or computer service the service that Quotron provides — access to Quotron's computer equipment to examine or acquire stock price data stored in or accessible to that computer equipment. Consequently, the statute taxes the service that Quotron sells.
Next, Quotron argues that this tax is a burden on interstate commerce. (To reiterate, the commissioner had assessed Quotron because Quotron had not collected the use tax.)
In Natl. Geographic Soc. v. California Bd. of Equalization (1977), 430 U.S. 551, 97 S.Ct. 1386, 51 L.Ed.2d 631, the United States Supreme Court allowed California to require a nonprofit corporation to collect California's use tax on items sold in the society's mail-order operation. The court searched for an adequate nexus between the society and the taxing state that would permit the state to impose the use-tax collection liability on the society. The court rejected the argument that the society's activity sought to be taxed must have a nexus with the taxing state. Instead, the court held that a nexus simply between the society and the state would be sufficient. It found this nexus in the existence of two society offices in the state that arranged for advertising in the society's magazine. Although those offices did not sell the magazines or items available in the mail-order operation, the court held that the society should have collected the tax because the two offices took advantage of municipal services such as fire and police protection. As in the instant case, the court held the society liable for the full amount of the tax because it had failed to collect it from its customers.
Here, a definite link exists. Quotron owns equipment that it delivers to subscribers in Ohio, constructed two communication concentrators in Ohio, and employs personnel in Ohio to install and maintain equipment. Under Natl. Geographic Soc., Ohio can require Quotron to collect the tax from its customers, and Quotron should have collected it. Having failed to do so, it is itself liable. R.C. 5741.11.
Nevertheless, Quotron argues that the tax is unconstitutional under Complete Auto Transit, Inc. v. Brady (1977), 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326. We doubt that Quotron has the requisite standing to raise this challenge because the tax is not levied on it. Yet, we address this argument because Quotron is personally liable for failing to collect it.
Under Complete Auto Transit, a tax is not a burden on interstate commerce and, thus, is constitutional, if the activity to be taxed is sufficiently connected to the state to justify the tax, the tax is fairly related to benefits provided the taxpayer, the tax does not discriminate against interstate commerce, and the tax is fairly apportioned. We conclude that this use tax passes these tests.
First, Ohio has a sufficient nexus with the taxed activity. The information travels on telephone lines in Ohio to equipment situated in Ohio to subscribers located in Ohio. This is a substantial nexus.
Furthermore, Ohio's use tax is fairly related to state-provided services because Quotron receives fire and police protection for its equipment and the availability of public roads to benefit its employees. The tax does not discriminate against interstate commerce because the tax compensates the state for sales tax imposed on similar in-state transactions. D.H. Holmes Co., Inc. v. McNamara (1988), 486 U.S. 24, 108 S.Ct. 1619, 100 L.Ed.2d 21. Finally, the tax is fairly apportioned because it provides a credit against use tax for transactions in which a sales tax was paid to other states. R.C. 5741.02(C)(5).
In further elaborating on the fair-apportionment criterion, the Supreme Court, in Goldberg v. Sweet (1989), 488 U.S. 252, 109 S.Ct. 582, 102 L.Ed.2d 607, stated that the tax must be internally and externally consistent. "To be internally consistent, a tax must be structured so that if every State were to impose an identical tax, no multiple taxation would result." Id. at 261, 109 S.Ct. at 589, 102 L.Ed.2d at 617. Here, if every state taxed the receipt of information via computer equipment, as Ohio does, only one state, the state of receipt, would tax each transaction.
To be externally consistent under Goldberg, a state may tax " only that portion of the revenues from the interstate activity which reasonably reflects the in-state component of the activity being taxed." Id. at 262, 109 S.Ct. at 589, 102 L.Ed.2d at 617. According to Goldberg, Ohio's use tax reasonably reflects the way that subscribers purchase this service. Subscribers receive the service in Ohio and pay the tax here. At bottom, however, is the credit Ohio allows for sales taxes paid to other states. Under Goldberg, this credit provision avoids actual multiple taxation, and, thus, the tax does not threaten interstate commerce. Consequently, the use tax satisfies Complete Auto Transit.
Finally, we also reject Quotron's contention that General Data Corp. v. Porterfield (1970), 21 Ohio St.2d 223, 50 O.O.2d 468, 257 N.E.2d 359, is dispositive. General Data is a vestige of the era in which any tax on interstate commerce was per se unconstitutional. Complete Auto Transit has laid to rest this rule; a state may now tax interstate commerce to require commerce to fairly pay its way.
Accordingly, we affirm the decision of the BTA.
Decision affirmed.
Moyer, C.J., Sweeney, Holmes, Douglas, H. Brown and Resnick, JJ., concur.
Wright, J., dissents.