Court Opinion

ID: 6760336
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:30:46.89708+00
Date Added: 2024-06-11T16:02:34.982329
License: Public Domain

Wright, J.,
dissenting. I believe the majority has misapplied R.C. 5739.02(B)(26) to the facts of this case and, therefore, I respectfully dissent.
R.C. 5739.02(B)(26) excludes certain sales from the sale tax. The exclusion encompasses sales made to manufacturers of tangible property for use directly in the production of tangible property, which will in turn be used in the production of inventory to be sold by the manufacturer. This is known more commonly in the trade as the “use-on-use” exception.
The evidence is clear that the engineering drawings at issue were used by appellant not only in the installation and maintenance of equipment but also to manufacture components of production equipment. The production equipment was indisputably used directly by appellant in the production of material and parts, i.e., automotive parts, for incorporation into tangible personal property for sale, i.e., finished automobiles. Therefore, the sale of the drawings should have been excluded from Ohio’s sales tax based on the “use-on-use” exception.
In support of its conclusion, the majority relies on White Motor Corp. v. Kosydar (1977), 50 Ohio St. 2d 290, 4 O.O. 3d 451, 364 N.E. 2d 252. Indeed, the majority claims White Motor is *275“dispositive” of the claim. I find the majority’s reliance on White Motor to be very curious since the case does not discuss R.C. 5739.02(B)(26). Indeed, the case deals with the application of R.C. 5739.02(B)(16) which excludes sales of handling and transportation equipment. Moreover, the “use-on-use’ ’ exception did not exist at the time White Motor was decided. The majority’s reliance on White Motor as dispositive of the claim is obviously misplaced.
Finally, I believe the sale of engineering drawings falls under the personal service exclusion found in R.C. 5739.01(B)(5). For this proposition, I believe White Motor directly supports appellant’s view. Indeed, in White Motor we said that personal service means an act done personally by an individual; it is, in effect, an economic service involving either the intellectual or manual personal effort of an individual, and is not the saleable end-product of his skill. Applying this proposition to the facts before us, I conclude that the engineering drawings were economic services and hence not taxable.
For the reasons stated above, I would reverse the BTA.