Court Opinion

ID: 3718465
Source: CourtListenerOpinion
Date Created: 2016-07-06 06:50:25.704039+00
Date Added: 2024-06-11T18:01:06.379960
License: Public Domain

The facts in this case, as stated by the appellant in its brief, are as follows: In rendering its statements or invoices to its patients the appellant combined the cost of the nurses, administration costs, the charges for staff doctors, and the drugs all into one charge for drugs or medicines. No separate charge was stated on the invoices for the doctors' fees or the nursing fees or for any of the services rendered by the hospital, there being two items only, drugs and room. Handling the invoices in this manner made the room charge unusually low and the medicine and drug charge unusually high, and appellant claims the reason for doing so was the competition with the Good Samaritan Hospital in Zanesville, Ohio. Good Samaritan was operated by the Catholic Church. The Sisters at Good Samaritan donated their services, thus enabling such hospital to make an unusually low room charge. In order to make their room charge compare favorably with the Good Samaritan Hospital room charges, the appellant, St. Francis, tacked its charges for nurses and doctors and administrative costs onto the medicine and drug charge, and rendered the invoice to the patient with the medical charge actually including everything except the room charge, and in that manner made the medical charge on the invoice many times higher than it actually was. The average markup by hospitals on drugs is around 100 per cent. However, St. Francis marked its up around 800 per cent by including these extra charges. *Page 137 
It is clear that the appellant does not deny that it makes sales of medicines to its patients, nor does it deny that no charge for service is separately stated on its invoices to the patients or on the records it keeps of those invoices. It only contends that by consulting other records, which we do not know about and which were not introduced at the hearing, a proper breakdown could be made.
As to the law of this case, I cite Wilson v. Glander, TaxCommr., 151 Ohio St. 479, 86 N.E.2d 761, the syllabus of which is as follows:
"Where a person sells material to another and in connection therewith furnishes labor or service in applying such material to his customer's property, the entire transaction shall be considered a sale and subject to tax, unless there is a clear separation, in the making or billing of a charge therefor, of the material furnished and the labor or service performed."
Also, on page 482:
"Section 1464-3, General Code, provides for the adopting and promulgating of rules by the commissioner, and rule 73 of the commissioner, as amended, reads:
"`Repairmen are making sales of all tangible personal property which is transferred by them to their customers in connection with regular repair work.
"`Where the charges for material and labor or service are not separately stated, the tax base for the application of the tax is the full amount charged with no deductions.
"`Where the charges for material and labor or service are separately stated, the tax shall be computed on the charge for material and no tax shall apply on the charge for labor and service.
"`* * *
"`This rule is applicable to all repairmen, including * * * tire retreaders, as well as those engaged in recapping tires * * *.'
"Section 5546-9a, General Code, provides that in case any vendor fails to collect the tax imposed by Section 5546-2 he shall be personally liable for the amount he failed to collect or for an amount of prepaid tax receipts which he failed to cancel.
"The commissioner has the power to make an assessment *Page 138 
against any vendor, based on any information which shall come into the commissioner's possession, for any taxes which the vendor failed to collect or for which he failed to cancel prepaid tax receipts, and any such assessment carries with it a penalty of 15 per cent."
The Wilson case is approved in the case of Rose v.Glander, Tax Commr., 153 Ohio St. 363, at page 365,91 N.E.2d 685.
It is claimed in the majority opinion that the case ofRoberts v. Glander, Tax Commr., 156 Ohio St. 247,102 N.E.2d 242, in some respects is distinguished from the Wilsoncase.
The syllabus in the Roberts case is as follows:
"By virtue of the provisions of Sections 5546-1 and 5546-3, General Code, a sales tax is determined by the consideration for both services rendered and the materials furnished in an upholstery repair job unless the consideration for services is separately stated from the consideration for materials furnished, and a vendor who separately states such consideration on his books of account available to the Tax Commissioner and who collects the proper tax from his customer is entitled to have excepted as a predicate for the sales tax the consideration for services rendered even though he fails to make such separate statement on an invoice delivered to his customer-vendee for such repair job."
And on page 250:
"In the opinion in that case, Judge Stewart said:
"`We do not mean to hold that there must be any particular or scientific method of bookkeeping or invoicing to show a separation of material from labor or service performed, in order for a transaction to be exempt from the sales tax so far as the labor or service is concerned, but we hold that the separation must be such as to clearly show in the invoice or charge what the sale price is for the material and what the charge is for labor or service.'
"It must be observed that in that case the court and the writer of the opinion were dealing with a case where no books were kept showing separate charges, the only record of the transaction being an invoice upon which no separate charges were made. In the instant case, the vendor made a complete separation of the charges for labor and materials on his books *Page 139 
so as to reflect all the information required for the commissioner to determine and assess the tax."
Also, on page 253:
"As to preparing and making such return and establishing its correctness Section 5546-12, General Code, provides:
"`Each vendor shall keep complete and accurate records of sales of taxable property, together with a record of the tax collected thereon, which shall in every instance be the amount due under the provisions of this act, and shall keep all invoices, bills of lading, retained parts of cancelled prepaid tax receipts and such other pertinent documents, in such form as the commission may by regulation require. Such records and other documents shall be open at any time, during business hours, to the inspection of the commission * * *.'"
I am of the opinion, after a careful reading of both these cases, that the Roberts case does not modify or overrule in any way the Wilson case.
The Roberts case says that the books of account may show a breakdown, even though the invoices do not. In the case now under consideration neither the appellant's books of account, nor its invoices, nor any other part of its records carried a breakdown of charges made to a patient.
For the reasons herein stated, I am of the opinion that the decision of the Board of Tax Appeals was not unreasonable or unlawful in finding that the Tax Commissioner did not err in assessing appellant for sales tax it failed to collect or return on the price it charged for medicines.