Court Opinion

ID: 6755549
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:26:42.245265+00
Date Added: 2024-06-11T16:02:25.211980
License: Public Domain

Paul W. Brown, J.,
dissenting in part. In my opinion, R. C. 5739.01(E) is dispositive of the issues in case No. 74-938. It requires a tax to be paid on that part of the coal with respect to which the purpose of the consumer at the time of the sale was not “to use or consume the thing transferred directly in the production of tangible personal property for sale by manufacturing.” The quoted portion of the statute makes the purpose at the time of sale dispositive of the question of taxability. The admitted purpose of the taxpayer herein at the time of the sale was to use part of the *38coal for the excepted purpose of producing steam to run productive manufacturing machinery, and to use part of the coal for the nonexcepted purpose of heating its building. Not only was this the taxpayer’s purpose at the time of the sale, but that was its actual use of the coal thereafter. Additionally, the taxpayer monitored its coal use in a sophisticated way, so that excellent records of the amount of coal used for each purpose were available and used by the Tax Commissioner in making the assessment. One claiming that a purchase is excepted from sales taxation must assert and prove the applicability of the exception to its particular transaction.
Merchants Cold Storage Co. v. Glander (1948), 150 Ohio St. 524, which the Tax Commissioner argues is dis-positive of this case, states that where the purpose of the taxpayer at the time of purchase is to use part of the purchase for a tax-excepted purpose, and part for a taxable purpose, and the taxpayer has failed to introduce evidence by. which taxable and nontaxable purchases could be separated in a satisfactory manner, an assessment of the total purchases as taxable will not be disturbed. To so hold is to also hold that clear evidence permitting separation in. a satisfactory manner authorizes a tax only upon the nonexcepted portion.
The so-called primary-use test can have no applicability in such a case. The statute does not say that where the purpose at the time of purchase is mixed, i. e., excepted and nonexcepted purposes, the consumer may fail to separate and thereafter rely upon his primary use of the items for tax exception thereafter. But this is the effect of the holding of the majority opinion, which cites United States Shoe Corp. v. Kosydar (1975), 41 Ohio St. 2d 68, and Richardson-Merrell v. Porterfield (1972), 32 Ohio St. 2d 281, as its authority.
It must be admitted that there are generalizations in each of those cases which so hold. In Richardson, the syllabus states:
$‘Jn determining whether a manufacturer’s purchases *39of raw materials and packaging items are excepted from sales and use taxes [under 5739.01 (E) ], the primary use which the manufacturer makes of such materials and items is the controlling factor.”
Although one can agree with the judgment in Richardson, the syllabus is so apparently erroneous that it should be overruled. The real holding of the case, in light of the court’s statement in the body of the opinion that it is in agreement with a finding of the Board of Tax Appeals that * * Merrell’s objective [purpose] in purchasing fungible raw materials and packaging items is to manufacture products for salé,” is that evidence of an incidental use of fungible goods for a nonexcepted purpose, after the date of the sale, is not, standing alone, destructive of the exception, nor does such evidence impose upon the taxpayer the necessity of presenting evidence by which the materials used for taxable and tax excepted purposes can be separated. Merchants Cold Storage Co. v. Glander, supra (150 Ohio St. 524).
To say this is also not to say, as was stated in United States Shoe Corp. v. Kosydar (41 Ohio St. 2d 71), that in de-' termining whether a manufacturer’s purchases of raw materials and other items are excepted from sales taxes by R. C. 5739.01(E), the primary use which the purchaser makes of such materials and items is the controlling factor. That this statement is not true is demonstrated by the fact that the statutory exception turns upon purpose at the time of sale, and by the fact that if it were true, Emery Industries' could by this principle clearly avoid a tax required by the statute to be paid under the admitted facts of case No. 74-938.
The decision of the Board of Tax Appeals should be affirmed, and the syllabus in Richardson-Merrell v. Porterfield, supra (32 Ohio St. 2d 281), overruled.
Corrigan, J., concurs in the foregoing dissenting opinion.