Akron Trading Co. v. Bowers
| Decision Date | 06 March 1963 |
| Docket Number | No. 37567,37567 |
| Parties | , 22 O.O.2d 285 The AKRON TRADING CO., Appellant, v. BOWERS, Tax Com'r, Appellee. |
| Court | Ohio Supreme Court |
Syllabus by the Court
1. A corporate dealer in intangibles is not entitled to allocate its capital between Ohio and other states for the purpose of the dealer-in-intangibles tax imposed under Section 5725.13 et seq., Revised Code, unless it maintains separate business offices within and without the state.
2. A corporate dealer in intangibles who finances out-fo-state franchise dealers of refrigeration equipment manufactured out of state, by discounting their commercial paper or by a 'floor-plan financing' arrangement, which business is transacted in this state in the only office which such dealer maintains, does not thereby have or maintain 'separate business offices' within and without Ohio as required by Sections 5725.14 and 5725.15, Revised Code, for the allocation of capital employed within and without this state.
3. A corporate dealer in intangibles who is found not to maintain separate business offices within and without the state and therefore subject to the tax imposed by Section 5725.13 et seq., Revised Code, on all of its capital is not thereby deprived of its property without due process or the equal protection of law, nor is such a tax an unreasonable burden on interstate commerce within the purview of the Constitution of the United States.
On December 31, 1957, the appellant here, on Ohio corporation, was engaged principally in the business of financing refrigeration equipment manufactured by Uniflow Manufacturing Company of Erie, Pennsylvania. The financing was predominately of sales of such refrigeration equipment to tavern owners by franchised dealers of Uniflow. This type of financing accounted for approximately 75 per cent of appellant's business. The remaining 25 per cent of its business consisted of financing the inventories of such refrigeration equipment for the same franchised Uniflow dealers.
The eight franchised Uniflow dealers were located in Columbus, Ohio; Chicago, Illinois; St. Louis, Missouri; Harrisburg, Pennsylvania; Indianapolis, Indiana; and Covington, Kentucky.
Appellant was a party to an agreement with each of the Uniflow franchised dealers, which in pertinent part provided:
(1) The dealer would submit to appellant for acceptance at Akron, Ohio, all conditional sales contracts, leases and notes, representing the balance due upon sales and leases made in the state of the dealer's domicile and covering Uniflow products, together with a current credit report on each purchaser or lessee of such equipment who would be designated as buyer upon 'said paper which is being submitted to Akron for discount'. The dealer also would submit to appellant its regular quarterly profit and loss statement and its balance sheet.
(2) Appellant would make 'floor-plan financing' loans upon refrigeration equipment up to specified amounts ($5,000 to $10,000 approximately). The equipment so floor planned was to be listed in a chattel mortgage to appellant from the dealer. Upon receipt in Akron of the mortgage and note appellant would make the loan.
(3) The dealer agreed to collect payments on account from purchasers of Uniflow equipment and to deposit same to the appellant's account. Should the dealer find it necessary to repossess the equipment, it was to notify appellant of the fact and at that time pay off the balance remaining due upon the account or contract.
The refrigeration equipment was shipped direct to the dealer. All invoices for equipment financed under the 'floor-plan financing' were paid in Akron. Appellant maintained no sales force to sell equipment nor did it ever receive any of the refrigeration equipment. Although the evidence is not clear whether the dealer contracts were entered into at Akron or in the various cities where the dealers were located, the commercial paper involved was discounted at Akron. All commercial paper discounted was with recourse to the franchised dealer.
In its dealer-in-intangibles return for 1958, appellant listed the Book value of its total shares or invested capital at $270,236.64 but allocated only 6.8 per cent of this amount, or $18,376.09, for taxation by Ohio. The Tax Commissioner, upon audit of the return, determined that all of appellant's capital, or $270,236.64, was taxable by Ohio because 'all of applicant's [appellant's] business originated and took place at its main and only office located in Akron, Ohio.'
The appellant appealed to the Board of Tax Appeals, which found that the proof as to the business dealings that appellant carried on with the out-of-state franchised dealers at out-of-state locations and the relationship between the appellant and such dealers was no proof that appellant maintained 'separate business offices' at the business locations of the out-of-state dealers, and therefore affirmed the Tax Commissioner's assessment.
Jacobs, Koplow, Vance & Paller and Jappe & Neuger, Cleveland, for appellant.
Mark McElroy, Atty. Gen., and John J. Lokos, Columbus, for appellee.
It being conceded that appellant on December 31, 1957, was a dealer in intangibles as defined in Section 5725.01(B), Revised Code, and therefore must pay the tax imposed by Section 5725.13 et seq., Revised Code, the first issue for determination here is whether the provisions of the law with respect to the allocation of Ohio and out-of-Ohio capital are applicable.
The statutory provisions for the allocation of Ohio and out-of-Ohio capital for the purpose of the dealer-in-intangibles tax are found in Sections 5725.15 and 5725.14, Revised Code, which read in pertinent part:
Section 5725.15. '* * * If a dealer has separate offices, whether within this state only or within and without this state, the [tax] commissioner shall find the amount of capital employed in each office in this state, which shall bear the same ratio to the entire capital of such dealer, whereever employed, as the gross receipts of such office bears to the entire gross receipts of such dealer, wherever arising. * * *' (Emphasis supplied.)
Section 5725.14. '* * * If a dealer in intangibles maintains separate business offices, whether within this state only or within and without this state, said report [tax return] shall also show the gross receipts from business done at each such office during the year ending on the thirty-first day of December next preceding.
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'As used in this section and Section 5725.15 of the Revised Code business is considered done at an office when it originates at such office, but the receipts from business originating at one office and consummated at another office shall be divided equitably between such offices.' (Emphasis supplied.)
Although the word 'business' was not consistently used in these statutory provisions, it is clear that the...
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