Ormet Corp. v. Lindley

Decision Date17 February 1982
Docket NumberNo. 81-571,81-571
Citation69 Ohio St.2d 263,23 O.O.3d 257,431 N.E.2d 686
Parties, 23 O.O.3d 257 ORMET CORPORATION, Appellee, v. LINDLEY, Tax Commr., Appellant.
CourtOhio Supreme Court

Glander, Brant, Ledman & Newman, Charles F. Glander and James H. Ledman, Columbus, for appellee.

William J. Brown, Atty. Gen. and Mark A. Engel, Asst. Atty. Gen., for appellant.

PER CURIAM.

Appellant, the Tax Commissioner (hereinafter "commissioner"), contends that when a direct pay permit is issued exempting tangible personal property from taxation, and, subsequently, the statutory provision for the exemption is repealed, then the direct pay permit is automatically canceled.

In support of this contention, appellant relies on former R.C. 5739.02(B)(17). 2 This provision, commonly referred to as the "use on use" exemption, created "a tax exemption for machinery being used, not to transform raw materials into a part of the product produced for sale, but rather to produce still further 'machinery' to be used in manufacturing the ultimate product." Interlake v. Kosydar (1975), 42 Ohio St.2d 457 at page 468, 330 N.E.2d 444 (Paul W. Brown, J., dissenting).

The "use on use" exemption was enacted in 1962, repealed in 1967, and reenacted in 1978 as R.C. 5739.02(B)(25). The commissioner argues that appellee's 1965 direct pay permit was issued pursuant to former R.C. 5739.02(B) (17), and, that in 1967, when the "use on use" exemption was repealed, so too was appellee's permit. We disagree.

Appellee's direct pay permit, issued in 1960, and premised upon the direct use exemption provided in R.C. 5739.01(E)(2), predated the enactment of the "use on use" exemption. Further, the evidence adduced before the board unequivocally demonstrates that subsequent permit revisions, in 1962, and 1965, continued to exempt the carbon anode plant under the direct use exemption. Accordingly, we view the repeal of R.C. 5739.02(B)(17) as having no impact upon appellee's permit, since the permit was never predicated upon that statute.

Additionally, the commissioner contends that the board erred in its determination that the subject permit was canceled "without cause." We agree. R.C. 5739.031 provides, in pertinent part:

"A permit granted pursuant to this section shall continue to be valid until surrendered by the holder or canceled for cause by the commissioner."

We view this language as providing sufficient cause for cancellation where, as in the cause sub judice, the commissioner discovers that a taxpayer has been extended an exemption due to a mistake of law. Accordingly, the commissioner's letter, dated February 25, 1977, in which appellee was notified that the "1965 (permit) is no longer approved or accepted," operated as a cancellation of the permit for cause.

The question remains, however, whether the commissioner may retroactively assess appellee. The commissioner argues that to prohibit the subject assessment of sales and use taxes would, in effect, constitute estoppel. It is well-established that "the principle of estoppel does not apply against the state with regard to a taxing statute." American Handling Equipment Co. v. Kosydar (1975), 42 Ohio St.2d 150, 153, 326 N.E.2d 660; H. C. Albring Co. v. Kosydar (1976), 46 Ohio St.2d 343, 345, 348 N.E.2d 703; Switzer v. Kosydar (1973), 36 Ohio St.2d 65, 67, 303 N.E.2d 860. However, this court has recognized an exception to that general rule.

In Recording Devices v. Bowers (1963), 174 Ohio St. 518, 190 N.E.2d 258 the taxpayer relied upon a letter from the commissioner stating that it was not responsible for the collection of sales tax in conjunction with the installation of time lock systems. In affirming the denial of an assessment, this court stated, at page 520, 190 N.E.2d 258:

" * * * (A)lthough the equitable principle of estoppel cannot operate against the state of Ohio, and * * * the Tax Commissioner cannot be bound in all cases by acts or opinions of employees, yet where a long-established practice has been followed, such administrative practice does have much persuasive weight especially where the practice has gone on unchallenged for a quarter of a century."

We find this rationale both persuasive and controlling. The differences between the present cause and Recording Devices, supra, are minimal. In both instances an exemption was granted, in writing, by the commissioner. Further, the error continued for an extended period of time. In Recording Devices the practice continued for 25 years. In the instant case, appellee consulted with the commissioner's office during the construction of the plant to ascertain sales and use tax liability on each item of machinery acquired for use in the plant. Mr. Jack W. Winner, a tax agent,...

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  • Blocker Drilling Canada, Ltd. v. Conrad
    • United States
    • North Dakota Supreme Court
    • August 17, 1984
    ...1555 Boston Road Corp. v. Finance Administrator of the City of New York, 61 A.D.2d 187, 401 N.Y.S.2d 536 (1978); Ormet Corp. v. Lindley, 69 Ohio St.2d 263, 431 N.E.2d 686 (1982); Switzer v. Kosydar, 36 Ohio St.2d 65, 303 N.E.2d 860 (1973); Commonwealth Department of Revenue v. King Crown Co......
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    ...the court. {¶ 26} The other cases—NLO, Inc. v. Limbach (1993), 66 Ohio St.3d 389, 613 N.E.2d 193, and Ormet Corp. v. Lindley (1982), 69 Ohio St.2d 263, 23 O.O.3d 257, 431 N.E.2d 686—presented situations in which high-level tax officials repeatedly assured a taxpayer, in writing and over a p......
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    ...the new interpretation"), citing NLO, Inc. v. Limbach, 66 Ohio St.3d 389, 395, 613 N.E.2d 193 (1993), and Ormet Corp. v. Lindley, 69 Ohio St.2d 263, 266, 431 N.E.2d 686 (1982). Here the statute was enacted in 2005 and modified in early 2006 and the administrative practice is entirely recent......
  • Baltimore & Ohio R. Co. v. Public Utilities Com'n of Ohio, 85-476
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    ...the ambiguous order despite the evidentiary error. This is true especially in light of this court's decisions in Ormet Corp. v. Lindley (1982), 69 Ohio St.2d 263, 431 N.E.2d 686 , and Recording Devices, Inc. v. Bowers (1963), 174 Ohio St. 518, 190 N.E.2d 258 , allowing that reliance on info......
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