Ohio Administrative Code › Title 5703 - Department of Taxation › Chapter 5703-29 - Commercial Activity Tax › Section 5703-29-13 - Commercial activity tax definition of "agent"

Current through all regulations passed and filed through July 1, 2024
(A) An "agent" is defined in division (P) of
			 section 5751.01 of the Revised Code to
			 include a person authorized by another to act on its behalf to undertake a
			 transaction for the other. In certain circumstances, portions of the amounts
			 received by a person defined as an "agent" are excluded from the definition of
			 "gross receipts" under division (F) of section
			 5751.01 of the Revised Code. The
			 agent is only required to report as a "gross receipt" the portion of the amount
			 received that it retains as a commission or fee rather than the entire
			 amount.
(B)
(1) The supreme court of Ohio has held that
			 an agency relationship "exists only when one party exercises the right of
			 control over the actions of another, and those actions are directed toward the
			 attainment of an objective which the former seeks." See Hanson v. Kynast
			 (1986), 24 Ohio St.3d 171, 173, citing Baird v. Sickler (1982), 69 Ohio St.2d
			 652, 654, Councell v. Douglas (1955), 163 Ohio St. 292, and Bobik v. Indus.
			 Comm. (1946), 146 Ohio St. 187, 191-192. Also see Memorial Park Golf Club, Inc.
			 v. Lawrence, 2000 Ohio Tax LEXIS 471 (BTA No. 99-K-633). An agency relationship
			 is defined as a "consensual fiduciary relationship between two persons where
			 the agent has the power to bind the principal by his actions, and the principal
			 has the right to control the actions of the agent." See Evans v. Ohio State
			 Univ. (1996), 112 Ohio App.3d 724, 744, citing Funk v. Hancock (1985), 26 Ohio
			 App. 3d 107, 110, in turn citing Haluka v. Baker (1941), 66 Ohio App. 308, 312.
			 In a principal-agent relationship, the agent has the legal authority to act on
			 behalf of the principal, and generally the principal is bound by and is liable
			 for those actions. See N&G Construction, Inc. v. Lindley (1978), 56 Ohio
			 St.2d 415, 418, citing Gulf Oil Corp. v. Kosydar (1975), 44 Ohio St.2d 208
			 (paragraph two of the syllabus) and Canton v. Imperial Bowling Lanes, Inc.
			 (1968), 16 Ohio St.2d 47 (paragraph four of the syllabus). The party asserting
			 the existence of an agency relationship bears the burden of proof in that
			 regard. See Gardner Plumbing, Inc. v. Cottrill (1975), 44 Ohio St.2d 111, 115,
			 citing Union Mutual Life Ins. Co. v. McMillen (1873), 24 Ohio St. 67. Also see
			 Memorial Park Golf Club, Inc, supra. In determining whether an agency
			 relationship exists, the rules of statutory construction applicable to
			 exemptions from taxation must be followed. Ohio law in this regard is
			 well-established; exemptions from taxation are strictly construed against the
			 claim of exemption and in favor of the taxing authorities. See Natl. Tube Co.
			 v. Glander (1952), 157 Ohio St. 407, 409; Beckwith & Assoc. v. Kosydar
			 (1977), 49 Ohio St.2d 277, 279, and Canton Malleable Iron Co. v. Porterfield
			 (1972), 30 Ohio St. 2d 163, 166. Also see Memorial Park Golf Club, Inc., supra.
			 Thus, in determining whether an agency relationship exists, the facts must be
			 determined under a strict, narrow reading of the definition. Absent proof of an
			 agency relationship, the entire gross receipt must be reported by the person
			 receiving the gross receipt for purposes of the commercial activity
			 tax.
(2) The commissioner will look
			 beyond the wording of the contract to the actual facts and circumstances of the
			 situation to determine whether an agency relationship actually exists. See H.R.
			 Options, Inc. v. Zaino (2004), 100 Ohio St.3d 373.