Court Opinion

ID: 6784208
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:59:44.410983+00
Date Added: 2024-06-11T16:02:55.127333
License: Public Domain

Lundberg Stratton, J.,
dissenting. The majority holds that Sarcom’s use of technicians supplied by Corporate Staffing Resources Inc. (“CSR”) to satisfy maintenance and repair contracts was not subject to the resale exception in R.C. 5739.01(E)(1) and thus was subject to use tax. I disagree.
As the majority recognizes, Ohio law imposes a use tax on a “benefit realized in this state of any service provided,” R.C. 5741.02(A), but exempts services that would not qualify as a sale in Ohio as defined in R.C. 5739.01 to 5739.31 of the Revised Code. R.C. 5741.02(C)(2).
A “sale” includes “[a]ll transactions by which * * * [ejmployment service is or is to be provided.” R.C. 5739.01(B)(3)(k). “ ‘Employment service’ means providing or supplying personnel, on a temporary or long-term basis, to perform work or labor under the supervision or control of another, when the personnel so supplied receive their wages, salary, or other compensation from the provider of the service.” R.C. 5739.01(JJ).
R.C. 5739.01(E) defines the resale exception. It excludes from the definition of a sale sales in which the purpose of the purchaser is to resell the benefit of a service in the same form in which it was received. R.C. 5739.01(E)(1).
The majority dismisses CSR’s contention that Sarcom resold the benefit of the CSR technicians in the same form that it received the benefit from CSR, based primarily on two conclusions. First, the majority finds that the actual benefit of CSR technicians that Sarcom received was “a temporary and flexible work force of sufficient size and expertise.” Second, the majority finds that the benefit of *6the CSR technicians to Sarcom’s customers “was not the labor of CSR technicians, but the end product of that labor: consistently operating computers.” (Emphasis sic.)
A. No Actual Benefit to Sarcom
The resale exception, R.C. 5739.01(E)(1), reads:
“(E) ‘Retail sale’ and ‘sales at retail’ include all sales except those in which the purpose of the consumer is:
“(1) To resell the * * * benefit of the service provided * * * in the form in which the same is* * * received by the person.” (Emphasis added.)
“Purpose” means “something that one sets before himself as an object to be attained: an end or aim to be kept in view in any plan, measure, exertion, or operation.” Webster’s Third New International Dictionary (1986) 1847. I believe that evidence before the BTA indicated that the purpose of Sarcom’s purchase of the temporary use of the CSR technicians was to resell the benefit of the technicians’ labor to Sarcom’s customers.
The decision to acquire technicians from CSR was made out of necessity. Because of its success in selling computer hardware, the demand for Sarcom’s repair services also increased. Because of this increased demand for service and a tight labor market, Sarcom had to resort to filling its staffing needs through CSR, a temporary employment service. Despite this, Sarcom’s service account manager testified that Sarcom preferred to use its in-house technicians for repair service. This position was reiterated by Sarcom’s field service supervisor, who testified, “The advantage of using the Sarcom employee, they knew the Sarcom way.” In fact, at least three of Sarcom’s customers prohibited Sarcom from contracting out their repair services. Further, Sarcom paid a higher hourly rate for CSR technicians than for its own technicians. To quote from Justice Pfeifer’s dissent in Bellemar Parts Industries, Inc. v. Tracy (2000), 88 Ohio St.3d 351, 357, 725 N.E.2d 1132, I would find that any benefit received by Sarcom from hiring the CSR technicians was “ephemeral at best.”
B. The Benefit to Sarcom’s Customers Was the Labor of the CSR Technicians
I disagree with the majority’s characterization of the benefit of the CSR technicians received by Sarcom’s customers as “the end product of [the technicians’] labor: consistently operating computers.” (Emphasis sic.) Sarcom purchased the service of temporary employees from CSR. The benefit of that service was the labor of the CSR technicians. Sarcom did not use the technicians’ labor, but rather resold it to its customers to repair the customers’ computers. *7Therefore, I believe that Sarcom resold the benefit of the CSR technicians in the same form in which Sarcom received it.
Even accepting the majority’s characterization of the benefit of the labor of CSR technicians to Sarcom’s customers as “the end product of that labor: consistently operating computers,” such a benefit is consistent with an example set out in Bellemar that defined a situation where the resale exception applied. In Bellemar the court recognized that its holding did not eliminate the resale exception where the benefit of a purchased service is sold. In characterizing the nature of the benefit that fit within the resale exception, the court in Bellemar gave the following example: “[I]f a service such as landscaping is purchased, the taxpayer need not resell landscaping services to meet the exception, but need only resell the benefit of those services, ie., cared-for grounds.” Id., 88 Ohio St.3d at 354, 725 N.E.2d 1132.
In this case, the majority holds that the benefit of the CSR technicians to Sarcom’s customers “was not the labor of the CSR technicians, but the end product of that labor: consistently operating computers.” (Emphasis sic.) I fail to see how that benefit differs from the cared-for grounds, which would also appear to be the end product of the landscaping services. Therefore, pursuant to the example in Bellemar, the benefit of the CSR technicians, even if characterized as the end product of their labor, should be subject to the resale exception.
C. The Majority’s Holding Leads to an Unreasonable Result
This court has a duty to construe legislation to avoid unreasonable results. State ex rel. Commt. for the Referendum of Ordinance No. 3543-00 v. White (2000), 90 Ohio St.3d 212, 218, 736 N.E.2d 873. As the dissenting member of the Board of Tax Appeals stated, “If Sarcom had sufficient personnel to provide the same service, no tax would have been levied.” Sarcom hired the CSR technicians to do work that Sarcom employees would have done had Sarcom been able to foresee the demand for computer repair. Sarcom did not receive anything more from the CSR technicians than it would have from its own employees. Sarcom should not be penalized from a tax standpoint for being unable to foresee staffing needs.
Further, I believe that the majority’s holding results in double taxation. Not only was a use tax imposed on the labor of the CSR technicians, but Sarcom also collects a sales tax from customers for the repair services. Thus, the labor of the CSR technicians was taxed twice. Accordingly, I believe that the majority’s holding leads to an unreasonable result.
D. Conclusion
Because I believe that (1) Sarcom did not receive a benefit from its hiring of the CSR technicians and (2) Sarcom resold the benefit of the CSR technicians, *8i.e., the technicians’ labor, to its customers in the same form in which it was received, I believe that the resale exception set out in R.C. 5739.01(E)(1) applied. As a result, I do not believe that Sarcom should be taxed on its purchase of the labor of the CSR technicians. Accordingly, I dissent.
Vorys, Sater, Seymour & Pease, L.L.P., Anthony L. Ehler and Renee C. Khoury, for appellant.
Betty D. Montgomery, Attorney General, and Robert C. Maier, Assistant Attorney General, for appellee.
Pfeifer, J., concurs in the foregoing dissenting opinion.