National Distillers Products Corp. v. Glander

• Decision Date: 04 August 1948
• Docket Number: 31079-31081.,31038,31037
• Citation: 80 N.E.2d 863,150 Ohio St. 229
• Parties: NATIONAL DISTILLERS PRODUCTS CORPORATION v. GLANDER. NATIONAL DISTILLERS PRODUCTS CORPORATION v. EVATT. WHEELING STEEL CORPORATION v. GLANDER. UNITED STATES GYPSUM CO. v. EVATT (two cases).
• Court: Ohio Supreme Court

80 N.E.2d 863

150 Ohio St. 229

NATIONAL DISTILLERS PRODUCTS CORPORATION v. GLANDER.

NATIONAL DISTILLERS PRODUCTS CORPORATION v. EVATT.

WHEELING STEEL CORPORATION v. GLANDER.

UNITED STATES GYPSUM CO. v. EVATT (two cases).

Nos. 31037, 31038, 31079-31081.

Supreme Court of Ohio

August 4, 1948

Appeals from Board of Tax Appeals.

Isadore Topper, of Toledo, for appellant National Distillers Products Corporation.

Dargusch Caren, Greek & King, of Columbus, for appellant Wheeling Steel Corporation.

Scott MacLeish & Falk, of Chicago, Ill., Clarence D. Laylin, of Columbus, Charles M. Price, Clifford C. Pratt and Joseph A Dubbs, all of Chicago, Ill., for appellant United States Gypsum Company.

Hugh S. Jenkins, Atty. Gen., and Daronne R. Tate, of Columbus, for appellee.

PER CURIAM.

These cases were presented together for the reason that all five of them involve similar questions of situs under the provisions of Sections 5328-1 and 5328-2, General Code.

These and cognate provisions have been discussed and applied in many recent decisions by this court. Aluminum Co. of America v. Evatt, Tax Comm'r., 140 Ohio St. 385, 45 N.E.2d 118; Procter & Gamble Co. v. Evatt; Tax Comm'r., 142 Ohio St. 369, 52 N.E.2d 517; Ransom &amp Randolph Co. v. Evatt, Tax Comm'r., 142 Ohio St. 398, 52 N.E.2d 738; Haverfield Co. v. Evatt, Tax Comm'r., 143 Ohio St. 58, 54 N.E.2d 149; C. F. Kettering, Inc., v. Evatt, Tax Comm'r., 144 Ohio St. 419, 59 N.E.2d 370; National Cash Register Co. v. Evatt, Tax Comm'r., 145 Ohio St. 597, 62 N.E.2d 327; American Rolling Mill Co. v. Evatt, Tax Comm'r., 147 Ohio St. 207, 70 N.E.2d 651.

Section 5325-1, General Code, reads 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.'

Section 5328-1, General Code, reads in part as follows:

'* * * Property of the kinds and classes mentioned in section 5328-2 of the General Code, used in and arising out of business transacted in this state by, for or on behalf of a non-resident person, other than a foreign insurance company as defined in Section 5414-8 of the General Code * * * shall be subject to taxation * * *.' Section 5328-2, General Code, contains the following provisions:

'Property of the kinds and classes herein mentioned, when used in business, shall be considered to arise out of business transacted in a state other than that in which the owner thereof resides in the cases and under the circumstances following:

'In the case of accounts receivable, when resulting from the sale of property sold by an agent having an office in such other state or from a stock of goods maintained therein, or from services performed by an officer, agent or employe connected with, sent from, or reporting to any officer or at any office located in such other state. * * *

'The provisions of this section shall be reciprocally applied, to the end that all property of the kinds and classes mentioned in this section having a business situs in this state shall be taxed herein and no property of such kinds and classes belonging to a person residing in this state and having a business situs outside of this state shall be taxed. It is hereby declared that the assignment of a business situs outside of this state to property of a person residing in this state in any case and under any circumstances mentioned in this section is inseparable from the assignment of such situs in this state to property of a person residing outside of this state in a like case and under similar circumstances. If any provision of this section shall be held invalid as applied to property of a nonresident person, such decision shall be deemed also to affect such provision as applied to property of a resident, but shall not affect any other provision hereof.'

The facts relating to two of the companies here involved are not in dispute and are supplied by stipulations. The two concerning the National Distillers Products Corporation are ten and nine pages respectively in length and need not be quoted in full for the purposes of this discussion. As above indicated, this company is a Virginia corporation. Its shareholders' meetings are held in that state. Its principal business office is located in the city of New York where the meetings of its directors are held and where all its business activities are controlled. All its accounts payable are paid from funds on deposit there. It has distilling and refining plants in seven states, including a large plant at Carthage, Hamilton county, Ohio. It sells its products in every state where such products may be sold legally. Pay-roll checks for employees of these several plants and checks for federal excise taxes due from these plants are paid with funds on deposit in banks in those localities. The funds are obtained through checks drawn at the New York office on banks in that city. All accounts receivable are posted in the books of the company in the New York office where the accounts are payable. All the receipts are deposited in New York banks. The accounts receivable, the allocation of which resulted in the additional assessments of intangible property tax and corporation franchise tax, arose from the sale of products manufactured by the company at its Carthage plant. The products were shipped from a stock of goods maintained by the company at that plant to points in Ohio and other states. All orders for the sale of these products were solicited by agents outside of Ohio. The orders were forwarded to New York and were subject to acceptance or rejection at the New York office. When orders were accepted, shipping instructions were forwarded to the Ohio plant from which the products were then shipped to the designated points in Ohio and elsewhere. The moneys received from the accounts receivable were used by the company in its business generally wherever needed. In filing its annual report and tax return the company allocated none of its accounts receivable to Ohio.

In its opinion the Board of Tax Appeals correctly summarized the matter as follows:

'The appellant, as a corporation organized and existing under the laws of the state of Virginia, is a legal resident of that state; and as to the appellant corporation the state of Ohio is 'a state other than that in which the owner thereof resides' and such other state within the provisions of Section 5328-2, General Code, fixing the situs of accounts receivable and of other intangible property for purposes of taxation. In this situation, and applying the statutory provisions here in question as the same have been construed by the Supreme Court of this state, it follows that since the accounts receivable of the appellant corporation involved in this case arose--as this board hereby finds--in the conduct of its business in the state of Ohio by the sale of its products from a stock of goods located in this state, and since, further, such accounts receivable or the avails thereof were used or were intended to be used by the appellant in its business, whether in this state or elsewhere, such accounts receivable have a business and taxable situs in the state of Ohio, as found and determined by the Tax Commissioner.'

The company contends further that this interpretation of Section 5328-2, General Code,...