General Cigar Co. v. Peck, 33219
| Decision Date | 18 March 1953 |
| Docket Number | No. 33219,33219 |
| Citation | 111 N.E.2d 265,159 Ohio St. 152 |
| Parties | , 50 O.O. 120 GENERAL CIGAR CO., Inc. v. PECK, Tax Com'r. |
| Court | Ohio Supreme Court |
Syllabus by the Court
1. The exception in the definition of 'used in business,' contained in Section 5325-1, General Code, that 'merchandise or agricultural products belonging to a nonresident of this state shall not be considered to be used in business in this state if held in a storage warehouse therein for storage only,' is not applicable to products upon which essential steps in manufacturing or processing are carried on during the period of storage, but is applicable where nothing is done in connection with such storage except what is necessary for the preservation of the stored merchandise or agricultural products.
2. Where tobacco owned by a nonresident is stored in a warehouse in Ohio for future use in the manufacture of cigars, which tobacco upon arrival at the warehouse in bales or cases is subjected to heat to arrest plant disease, thereafter is removed from the bales or cases for the purpose of aeration to prevent deterioration, all of which preservation service is within a period of approximately 10 days, and the tobacco is thereupon repacked in cases which remain unopened until delivered to the place of manufacture, such tobacco is 'held in a storage warehouse therein for storage only,' within the meaning of Section 5325-1, General Code.
This is an appeal from a decision of the Board of Tax Appeals affirming a final order of the Tax Commissioner of Ohio, assessing a tax on tangible personal property of the General Cigar Company, Inc., for the years 1949, 1950, and 1951.
The General Cigar Company, Inc., hereinafter referred to as the company, is a corporation organized under the laws of the state of New York and authorized to do business in the state of Ohio. In the years in question the company maintained two storage warehouses in Ohio, one in Miamisburg and the other in Germantown, in which warehouses it stored tobacco until needed in the manufacture of its product.
The company contends that its tobacco was not taxable in this state as property used in business by reason of the following exception stated in Section 5325-1, General Code:
'* * * but merchandise or agricultural products belonging to a non-resident of this state shall not be considered to be used in business in this state if held in a storage warehouse therein for storage only.'
Both the Tax Commissioner and the Board of Tax Appeals held that by reason of the fact that certain operations in relation to the storage thereof were performed on the tobacco in this state, the tobacco was not being held 'for storage only', and assessed the tax as on property used in business.
This cause is before this court on appeal by the company from the decision of the Board of Tax Appeals.
Horace Andrews, Cleveland, for appellant.
C. William O'Neill, Atty. Gen., Everett H. Krueger, Jr., Cleveland, and Paul Tague, Jr., Columbus, for appellee.
Was the decision of the Board of Tax Appeals unreasonable or unlawful in that it held that the tobacco of the company in storage in Ohio in the years in question was 'used in business', as that term is defined in Section 5325-1, General Code?
That section is as follows:
'Within the meaning of the term 'used in business,' occurring in this title, personal property shall be considered to be 'used' when employed or utilized in connection with ordinary or special operations, when acquired or held as means or instruments for carrying on the business, when kept and maintained as a part of a plant capable of operation, whether actually in operation or not, or when stored or kept on hand as material, parts, products or merchandise; but merchandise or agricultural products belonging to a non-resident of this state shall not be considered to be used in business in this state if held in a storage warehouse therein for storage only. Moneys, deposits, investments, accounts receivable and prepaid items, and other taxable intangibles shall be considered to be 'used' when they or the avails thereof are being applied, or are intended to be applied in the conduct of the business, whether in this state or elsewhere. 'Business' includes all enterprises of whatsoever character conducted for gain, profit or income and extends to personal service occupations.'
It is the claim of the company that the tobacco so stored was 'held in a storage warehouse therein for storage only' and, therefore, could 'not be considered to be used in business in this state'. A recital of the salient facts disclosed by the record is necessary to present the basis of the controversy. As stated by the Board of Tax Appeals, 'essentially there is no real dispute about the facts, although the interpretation of those facts is in dispute.'
Two kinds of tobacco were stored by the company in its warehouses in Ohio; one kind called 'binder' tobacco, which was grown in Wisconsin and shipped to Ohio for storage, the other was so-called 'filler' tobacco, which was grown in Pennsylvania and stored in Ohio by reason of a particularly abundant crop in the year 1948. The record shows that cigars manufactured by the company contain three different kinds of tobacco: (1) Filler tobacco which forms the center core or bulk of the cigar, (2) binder tobacco, a single layer of which is around the filler to hold it in shape, and (3) the...
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