Gulf Oil Corp. v. Kosydar
| Decision Date | 31 December 1975 |
| Docket Number | No. 75-497,75-497 |
| Citation | 339 N.E.2d 820,73 O.O.2d 507,44 Ohio St.2d 208 |
| Parties | , 73 O.O.2d 507 GULF OIL CORPORATION, Appellant, v. KOSYDAR, Tax Commr., Appellee. |
| Court | Ohio Supreme Court |
Syllabus by the Court
1. Strict construction of taxing statutes is required, and any doubt must be resolved in favor of the citizen upon whom or the property upon which the burden is sought to be imposed. (Paragraph one of the syllabus in Davis v. Willoughby, 173 Ohio St. 338, 182 N.E.2d 552, approved and followed.)
2. If the construction and interpretation of statutory language reveals the statute to be facially ambiguous, it is the function of the courts to construe the statutory language to effect a just and reasonable result.
Appellant, Gulf Oil Corporation (herein referred to as Gulf), engages in a multi-national business with interests in numerous diversified fields such as natural gas, petroleum products and chemicals. As required by R.C. 5733.02, Gulf timely filed its corporation franchise tax reports for the years at issue herein, 1970 and 1971. 1
These reports included the following apportionment fractions: 2
In preparing the above figures, Gulf included in the 'business done' fraction both its income from sales of tangible personal property and its income from other sources such as rentals, royalties, and dividends.
The following table illustrates the breakdown of the various elements comprising the 'business done' fraction, as reported by Gulf on its Ohio franchise tax returns for 1970 and 1971.
As a result of these changes, the Tax Commissioner, on April 13, 1974, issued a franchise tax assessment in the amount of $130,758.94 for the years 1970 and 1971.
Pursuant to R.C. 5733.11, Gulf filed a timely application for review and redetermination with the Tax Commissioner. On October 29, 1974, the Tax Commissioner issued his final order, which affirmed his prior assessment in its entirety.
Gulf paid this assessment, and then sought a refund from the Board of Tax Appeals. On February 25, 1975, the parties filed with the Board of Tax Appeals a stipulation in which it was agreed, inter alia, that: (1) The issue presented to the Board of Tax Appeals was solely one of law; and (2) none of Gulf's reported 'other income' was derived from the sale of securities or capital assets. Gulf also conceded that part of the Tax Commissioner's assessment, relating to the change made by him in the 'property' portion of the apportionment fraction for the year 1970, was correct, leaving for consideration by the Board of Tax Appeals only the question of whether the Tax Commissioner's recomputation of the 'business done' fraction, by excluding all income except that emanating from the sale of tangible personal property, was in accordance with law. The amount of tax at issue before the Board of Tax Appeals was $118,150.88.
The Board of Tax Appeals rendered its decision affirming the Tax Commissioner's assessment on May 8, 1975, and then issued a correcting entry 4 on May 29, 1975.
The cause is now before this court pursuant to an appeal as of right.
Glander, Brant, Ledman & Newman, James H. Ledman, and C. Emory Glander, Columbus, for appellant.
William J. Brown, Atty. Gen., and John C. Duffy, Jr., Columbus, for appellee.
The issue before the court, as it was before the Tax Commissioner and the Board of Tax Appeals, concerns construction of the 'business done' apportionement formula contained in R.C. 5733.05 as it applied to tax years 1970 and 1971.
At that time, R.C. 5733.05 provided, in pertinent part:
'* * * take the other part and multiply by a fraction whose numerator is the value of the business done, measured by sales of tangible personal property, by the corporation in this state during the year preceding the date of the commencement of its current annual accounting period, and whose denominator is the total value of its business, measured by sales of tangible personal property, during said year wherever transacted.
'* * *
'Corporations, whose business does not consist in the making of sales of tangible personal property and to which the sales numerator and denominator cannot apply, but which business consists in such activities as receiving commissions, rents, interests, dividends, and fees, the fraction shall be determined by allocating such business activities in and out of (Ohio) according to their situs.' (Emphasis added.)
Appellant argues that since its 'business done' is derived both from making 'sales of tangible personal property' and from 'such activities as receiving * * * rents * * * dividends and fees,' the totality of its corporate business should be considered in computing the 'business done' fraction of Ohio's franchise tax apportionment formula. Stated another way, appellant contends that the two sections of R.C. 5733.05 set forth above are not mutually exclusive.
However, the Board of Tax Appeals maintains that 'the legislature of this state has specifically provided that 'business done' is to be 'measured by sales of tangible personal property' where a corporation, in fact, makes sales of tangible property.'
Appellant relies upon Westinghouse v. Porterfield (1970), 23 Ohio St.2d 50, 261 N.E.2d 272, and maintains that the decision in that case controls the disposition of the present cause. We disagree.
At that time, during the tax years in question (1960-1964), R.C. 5733.05 provided, in pertinent part:
'* * * take the other part and multiply by a fraction whose numerator is the value of the business done by the corporation in this state during the year preceding the date of the commencement of its current annual accounting period, and whose denominator is the total value of its business during said year wherever transacted.'
The phrase 'value of the business done,' then appearing in R.C. 5733.05, was not defined anywhere in R.C. 5733.01 et seq. Accordingly, the Tax Commissioner had adopted Rules 275 and 276 to provide the missing definition. Those rules provided:
'Rule 275. 'Business done' in and out of Ohio by corporations subject to the payment of franchise taxes shall be determined under Section 5733.05, Revised Code, by allocating to the business fraction, therein provided, sales in and out of Ohio. (Emphasis added.)
'All sales of goods from warehouses in Ohio, wherever manufactured, shall be considered as Ohio sales.
'In the case of manufacturing companies, all sales of goods manufactured in Ohio, wherever sold, shall be considered as Ohio sales, except sales of such products as are sold from warehouses outside of this state.
'The denominator of such business fraction shall in all cases be the total sales wherever made. (Emphasis added.)
Appellant argues that Westinghouse stands for the proposition that former Rules 275 and 276 were not mutually exclusive, and since the substnace of said rules has been incorporated into R.C. 5733.05 as it applied to the tax years at issue herein, 5 Westinghouse must be held dispositive of the present appeal.
Although comparison of the franchise tax reports filed in Westinghouse with those filed in the instant cause does indeed indicate similarily between the two, a closer reading of the decision in Westinghouse reveals that it was based upon a much narrower ground that appellant suggests.
In Westinghouse, Justice Schneider set forth the following table as exhibted in the record therein, and expressed the court's holding in the subsequent four paragraphs:
Westinghouse Electric Corporation
Ohio Franchise Tax
Business Done In and Out of Ohio
1960 through 1964
Ohio Franchise Tax Year 1962
Calendar Year 1961
Receipts From: Ohio Total
-------------- ---- -----
1. Sales of Goods
and Services $187,014,125 $1,830,990,049
2. Dividends ............ 5,093,944
3. Interest ............ 10,774,818
4. Rents 10,760 66,631
5. Royalties ............ 10,245,612
6. Sales & Dispositions
of Tangible Property 53,955 1,915,245
7.
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