Ace Steel Baling, Inc. v. Porterfield

• Citation: 48 O.O.2d 169,249 N.E.2d 892,19 Ohio St.2d 137
• Decision Date: 23 July 1969
• Docket Number: No. 68-486,68-486
• Parties: , 48 O.O.2d 169 ACE STEEL BALING, INC., Appellant, v. PORTERFIELD, Tax Commr., Appellee.
• Court: United States State Supreme Court of Ohio

Page 137

19 Ohio St.2d 137

249 N.E.2d 892, 48 O.O.2d 169

ACE STEEL BALING, INC., Appellant, v. PORTERFIELD, Tax Commr., Appellee.

No. 68-486.

Supreme Court of Ohio.

July 23, 1969.

Syllabus by the Court

1. Where it is claimed that a decision of the Board of Tax Appeals is against the weight of the evidence, the Court of Appeals is the appropriate court to consider that question, which involves a review of the whole record.

2. The 'primary use' of an item of equipment, for the purposes of taxing, or excepting from tax, its sale or use under Sections 5739.02 and 5741.02, Revised Code, is not to be determined solely from a measure of the relative time it is utilized in a taxable and a nontaxable capacity but also from the value of its direct contribution to the product which is processed.

The facts are stated in the opinion.

Power, Griffith, Jones & Bell, Gerald A. Donahue and Andrew T. Jones, Columbus, for appellant.

Paul W. Brown, Atty. Gen., R. A. Malrick and Edgar L. Lindley, Columbus, for appellee.

SCHNEIDER, Judge.

The issue before the Board of Tax Appeals was whether the primary use of appellant taxpayer's self-propelled railway cranes in its scrap steel plant was in the processing phase of that operation. See Mead Corp. v. Glander (1950), 153 Ohio St. 539, 93 N.E.2d 19. If it was, admittedly the one crane purchased in the taxable years in question would be exempt from the Ohio Sales and Use Tax, as would be the supplies necessary to maintain and fuel three other such cranes. See Sections 5739.02 and 5741.02, Revised Code.

If, on the other hand, the primary use of the cranes was found to be the unloading of the raw materials (mainly wrecked automobile bodies), the loading of 'bales' of scrap, the movement of railway hopper cars about the taxpayer's yard and the transfer of bales to and from storage piles, then the disputed items were concededly taxable.

The evidence adduced before the board consisted solely of the testimony of appellant's chief operating officer, who described in lengthy and meticulous detail the entire operation and produced numerous photographs and other data to support his testimony. The Tax Commissioner's assessment file, which was also before the board and in which it was conceded that the cranes were employed for both taxable and nontaxable purposes, contributed nothing to the solution of the issue as to primary use.

If, in denying exempt status to the items in dispute, the board had limited itself to a finding, in effect, that the evidence before it was insufficient to support the claim for exemption, the question before us would necessarily be limited to the weight of the evidence. Compare Lakeside Truck Rental, Inc., v. Bowers (1962), 173 Ohio St. 108, 180 N.E.2d 140. The board was not required to accept the testimony of the sole witness simply because it was uncontradicted, unimpeached and unchallenged. The trier of facts always has the duty, in the first instance, to weigh the evidence presented and has the right to accept or reject it. ¹ See Goldman v. Commissioner of Internal Revenue (6 Cir. 1967), 388 F.2d 476; 30 American Jurisprudence 2d 225 and 236 et seq., Evidence, Sections 1080 and 1084 et seq. But compare Bloch v. Glander (1949), 151 Ohio St. 381, 86 N.E.2d 318.

If a question as to the weight of the evidence was indeed involved here, we would in all probability defer to the judgment of the board. This court is no longer the sole tribunal available for the review of decisions of the Board of Tax Appeals. Therefore, where it is claimed that a decision of such board is against the weight of the evidence, the Court of Appeals is the appropriate court to consider the question, which involves a review of the whole record. ²

In the instant case, however, the board fully accepted all the competent testimony of the sole witness. In reporting its decision, it recited the following:

'Old automobiles are brought in the south gate of appellant's yard by tow trucks, dump trucks, or semi-trailers. If they are brought in by semi-trailers, they are unloaded by appellant's cranes. They are taken to an adjacent area where torchmen start to remove all nonferous metal that they can reach, such as door handles, trim, grille, etc. The torchmen notch the car at each door post so that the car can be torn apart by the crane and the baler. The crane is used to turn the car over so that the torch job can be completed, and torchmen remove the rear end, the front end, and the frame bolts. The crane is used to pull the motor out of the body of the car. The crane also rips the frame from the car. When the torching job is completed, the crane places the body of the car in the baler, which grabs it while the crane pulls the body apart at the notch points. the crane then reverses the auto body in the baling box so it can receive the most amount of pressure from the bailer. Finally, the crane removes three or four of the bales at a time to a railroad car, where they are gone over by the torchmen prior to being shipped to appellant's customers.

'When automobiles are to be burned and sheared, the crane places the car in the incinerator, and after the car is removed from the incinerator, the crane takes the car to a place where additional torchmen go over it and remove nonferous metals, and other contaminates. The crane removes frames from the cars, and then takes them to the shear, where the crane loads the shear in a particular manner so that the shear can operate effectively. In addition, the crane is used to blend various types of material, such as bumpers, into the mix being sent into the shear.' (Emphasis supplied.)

While the foregoing recitation is not designated a 'finding,' that it is the equivalent, in substance, to a special finding by the trier of the facts is evident from the nub of the board's decision, which is, simply, that the taxpayer had not produced a time 'study' of the taxable and nontaxable uses of its crane, and for that reason had not proved its claim for exemption.

Consequently, the board jumped the rail on a question of law. This court did not elaborate upon the term 'primary use' which was the basis of this court's decision in the Mead case, supra (153 Ohio St. 539, 93 N.E.2d 19). Necessarily, we are here and now moved to say that 'primary use' is not merely the quotient of the time that a device is utilized in a taxable, vis-a-vis a nontaxable, activity. 'Primary use' connotes primacy in utility or essentiality, in quality as well as quantity. The value of the tool to the product is as important as the time the tool is engaged in fashioning the product.

It is entirely conceivable for a tool to contribute substantially to the manufacture of a product in a relatively brief portion of a working day. To avoid 'dead time,' and to defray a part of its cost, a taxpayer may be able to employ the same tool for a greater period of time in an incidental task which only indirectly contributes to the finished product-loading and unloading, for example, as in this case. If acquired for and devoted to the latter purpose alone, its purchase would admittedly be taxable. On the other hand, in the first example we would be hard pressed to say that the primary use of the device was for a taxable purpose,...