Court Opinion

ID: 6767222
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:38:48.61225+00
Date Added: 2024-06-11T16:02:41.848920
License: Public Domain

Pfeifer, J.,
concurring in part and dissenting in part.
“[T]he power to tax is the power to destroy.” McCray v. United States (1904), 195 U.S. 27, 56, 24 S.Ct. 769, 776, 49 L.E. 78, 96. These words should always be kept in mind when this court considers taxation matters.
The majority has used an overly technical interpretation of the state Tax Code to unwisely penalize vertically integrated operations, as well as to narrowly define “manufacturing” and “adjuncts” to manufacturing in a manner unintended by the General Assembly. Accordingly, I respectfully dissent.
The crane, heaters, boilers, and lumber forms and beds at the precast plant should be exempt from sales and use taxes because they are used to manufacture items which are “for sale,” pursuant to R.C. 5739.01(E)(2). The majority has propounded an unjust result in this case: the manufacturer who sells his manufactured products to an independent contractor will be eligible for the direct use exemption, but a manufacturer, who is also an independent *260contractor that uses the manufactured products, is somehow not exempt. This construction of R.C. 5739.01(E)(2) unfairly penalizes the vertically integrated operation. Ohio’s sales and use taxes were not intended to be antitrust taxes as the majority has permitted by its decision.
In addition to the items in the precast plant being exempt from sales and use taxes, the appellant’s silica manufacturing structure and foundation should also be exempt because they are personal property used in manufacturing. The plant is one hundred eight feet high and thirty-five to forty feet wide. These dimensions are necessary to provide enough energy, through gravity, to separate the silica into various grades. Because of these dimensions, the plant is a unique structure designed for one purpose: manufacturing silica. It is highly unlikely that the building could be utilized for any purpose other than as a silica plant. The manufacturing structure is personal property and not real property.
When there is such a high correlation between the unique design of the structure and the structure’s role in the manufacturing process, the building is either directly used in manufacturing or processing, or serves as an adjunct. Thus, the BTA’s determination that the silica plant is not used directly in the manufacturing process is unreasonable.
Finally, this court should hold the aggregate handling system, the mixer, and the towmotors used in appellant’s block plant exempt from sales and use taxes because these items are used in manufacturing. The majority has too narrowly defined when the manufacturing process begins. The application of the direct use exemption for personal property used in manufacturing or as an adjunct to manufacturing should begin when raw materials are first handled and moved into the manufacturing process and should continue until the finished products are readied for shipment. When this common-sense test is applied to the contested items located in the block plant, all items fall within the direct use exemption. The sales or use tax should not be levied upon them.
Thus, with the exception of imposing a use or sales tax upon the storage bins located in appellant’s silica plant, I reject the BTA’s decision, and dissent from the majority’s opinion.
Wright, J., concurs in the foregoing Opinion.