American Handling Equipment Co. v. Kosydar, 74-545

• Citation: 42 Ohio St.2d 150,71 O.O.2d 120,326 N.E.2d 660
• Decision Date: 23 April 1975
• Docket Number: No. 74-545,74-545
• Parties: , 71 O.O.2d 120 AMERICAN HANDLING EQUIPMENT CO., Appellant, v. KOSYDAR, Tax Commr., Appellee.
• Court: Ohio Supreme Court

Page 150

42 Ohio St.2d 150

326 N.E.2d 660, 71 O.O.2d 120

AMERICAN HANDLING EQUIPMENT CO., Appellant, v. KOSYDAR, Tax Commr., Appellee.

No. 74-545.

Supreme Court of Ohio.

April 23, 1975.

McDonald, Hopkins & Hardy Co., L. P. A., and H. Guy Hardy, Cleveland, for appellant.

William J. Brown, Atty. Gen., and Michael J. Loughman, Columbus, for appellee.

PER CURIAM.

Appellant contends the the Tax Commissioner's letter, given before an audit and without specification of claimed deficiencies, is not proper notice to start the running of the 60-day period within R.C. 5739.03. That section, in pertinent part, provides:

'If any sale is claimed to be exempt * * * the consumer must furnish to the vendor, and the vendor must obtain from the consumer, a certificate specifying the reason that the sale is not legally subject to the tax. * * * If no certificate is furnished or obtained within the period for filing This court has often stated that statutory exemptions from a tax must be strictly construed, and one claiming an exemption must affirmatively establish his right thereto. National Tube Co. v. Glander (1952), 157 Ohio St. 407, 105 N.E.2d 648; Goldman v. Robert E. Bentley Post No. 50 (1952),158 Ohio St. 205, 107 N.E.2d 528; Canton Malleable Iron Co. v. Porterfield (1972), 30 Ohio St.2d 163, 283 N.E.2d 434. It is evident from a literal reading of R.C. 5739.03, that the notice of an intention to levy an assessment may be given before an audit has been completed.

the return for the period in which such sale is consummated, it shall be presumed that the tax applies. The failure to have so furnished, or to have so obtained, a certificate shall not prevent a vendor or consumer from establishing that the sale is not subject to the tax within sixty days of the giving of notice by the commissioner of intention to levy an assessment, in which event the tax shall not apply.'

Appellant also urges that the letter in the present case was not proper notice because it did not specifically state what the deficiencies were. It is argued that the company could not, from the notice, ascertain what exemption certificates the agent found to be missing. In Union Metal Mfg. Co. v. Kosydar (1974), 38 Ohio St.2d 53, 310 N.E.2d 249, it is noted that a taxpayer has the burden of affirmatively establishing sales tax exemption by obtaining the necessary exemption certificates. Once such certificates are not timely furnished or obtained, it is presumed that the sales are taxable. R.C. 5739.03. If the taxpayer fails to meet the statutory obligations concerning the certificates, he is allowed the 60-day period to obtain 'letters of usage' establishing exception from the tax. In that context, it is the taxpayer who is in a position to know from which customers he has failed to obtain the proper exemption certificates. Furthermore, the record reflects the fact that appellant did procure many 'letters of usage' from other customers before the end of the 60-day period.

We are aware of the erroneous statements alleged to have been made by appellee's agent, which may have played The duty imposed upon a taxpayer who neglects to obtain exemption certificates is clear; 60 days is provided, from the notice of intention to levy an assessment, to overcome the presumption that the tax applies. This was unambiguously expressed in the letter of March 3, 1972, and apellant's failure to obtain the 'letters of usage' within the 60-day period stems from its disregard of the specific mandates of that letter and R.C. 5739.03.

a part in appellant's failure to get all of the 'letters of usage' within the time prescribed by R.C. 5739.03. As a general rule, however, the principle of estoppel does not apply against the state with regard to a taxing statute. Recording Devices v. Bowers (1963), 174 Ohio St. 518, 190 N.E.2d 258; Interstate Motor Freight System v. Donahue (1966), 8 Ohio St.2d 19, 221 N.E.2d 711.

The decision of the Board of Tax Appeals is affirmed.

Decision affirmed.

C. WILLIAM O'NEILL, C. J., and HERBERT, STERN, CELEBREZZE, WILLIAM B. BROWN, and PAUL W. BROWN, JJ., concur.

CORRIGAN, Justice (dissenting).

This is a case in which the Tax Commissioner levied an assessment for sales taxes of an amount in excess of $6,000 against the taxpayer, when, in truth and in fact, in the first instance no such tax was rightfully due to the state under the sales tax laws.

It is undisputed that the sales in question were exempt from the tax. However, in connection with such exemptions, the vendor should obtain from the consumer certain exemption certificates. If the vendor fails to obtain exemption certificates from the consumer, an additional opportunity is provided to establish the tax exempt nature of the sales under R.C. 5739.03. The pertinent subsection of that statute reads:

'(B) * * *

'If any sale is claimed to be exempt under division The single contention of the taxpayer in this appeal is that the notice given by the Tax Commissioner herein, prior to the conducting of an audit, of intention to levy an assessment is not a valid notice under the statute to start the running of the 60-day period.

(E) of Section 5739.01 of the Revised Code or under Section 5739.02 of the Revised Code, with the exception of divisions B(1) to B(11), inclusive, of Section 5739.02, the consumer must furnish to the vendor, and the vendor must obtain from the consumer, a certificate specifying the reason that the sale is not legally subject to the tax. * * * The certificate shall be in such form as the tax commissioner by regulation prescribes. If no certificate is furnished or obtained within the period for filing the return for the period in which such sale is consummated, it shall be presumed that the tax applies. The failure to have so furnished, or to have so obtained, a certificate shall not prevent a vendor or consumer from establishing that the sale is not subject to the tax within sixty days of the giving of notice by the commissioner of intention to levy an assessment, in which event the tax shall not apply.'

I.

It might be appropriate to observe at this point that simplicity has never been the dominant factor of tax legislation. No other branch of the law touches human activities at so many points. Of course, it cannot be made simple, but we can try to avoid making it needlessly complex. As Justice Cardozo said in his dissenting opinion in Stewart Dry Goods Co. v. Lewis (1935), 294 U.S. 550, 576, 55 S.Ct. 525, 79 L.Ed. 1054: '* * * Elaborate machinery, designed to bring about a perfect equilibrium between benefit and burden, may at times defeat its aim through its own elaboration.'

Too, the fact is perennially present that the executive branch of state government must continuously be appeased with more cash flow which can only come from taxes. The Tax Commissioner is the teaser under the sales tax laws. He must assess, pursuant to legislative enactment, and seemingly incite the taxpayer by persistent actions

of enlargement of scope of assessment. The behavior pattern is constant. The taxpayer is teased, the taxpayer is squeezed, and the taxspenders are appealed. But the appetite of the appeased is insatiable. Apart from the fact that solicitude for the revenue is a plausible but treacherous basis upon which to decide a particular tax assessment, auspiciously, such an appetite is subject to all constitutional restraints.

II.

Taxpayer argues forcefully, and with a degree of persuasion, that constitutional due process, rules of statutory construction and principles of fairness require that notice called for by R.C. 5739.03 include any claimed tax deficiencies so that the taxpayer may present its defense.

Upon analyzing R.C. Chapter 5739, it seems clear that the sales tax is imposed on individual sales transactions. R.C. 5739.02 provides that:

'* * * an excise tax is hereby levied on each retail sale made in this state.

'* * *

'The tax applies and is collectible when the sale is made * * *.' (Emphasis added.)

R.C. 5739.03 speaks of 'the full and exact amount of the tax payable on each taxable sale * * *.' R.C. 5739.03(A) refers to the price for 'the thing sold.' In subsection (B) thereof it is provided that '(s)uch sale shall be reported on and the amount of the tax applicable thereto shall be remitted with the return for the period in which the sale is made * * *.' The next paragraph begins: 'If any sale' and continues to 'the return for the period in which such sale is consummated * * *.' The sentence covering the 60-day notice again refers to 'the sale.' (Emphasis added.)

It seems apparent that the terminology of the chapter refers in each instance to the imposition of a tax on the individual transaction and not to some tax that may be asserted in gross.

This conclusion finds support in the provisions of Giving notice of intention to levy an assessment before the audit is made denies the taxpayer the right to know what the tax agent finds missing and the opportunity to establish that, in fact, no tax is due. Such 'notice' is not notice at all, but rather a meaningless administrative pretense The General Assembly intended the sales tax statute to be a taxing statute. As the commissioner is using it, it has become a penalty statute, and, as in this case, it is being used in a manner to exact money never rightfully owed, simply because the Tax Commissioner does not give the taxpayer a fair opportunity to defend against specific claims. Since the sales tax is based on specific sales, the claimed deficiency should be specific so that there can be a defense against claims on a specific basis. It is completely illogical to interpret the statute to permit the Tax Commissioner to give a notice of intent to levy an assessment when he does not have before him specific facts.

R.C. 5739.13, dealing with the making of an assessment. The last sentence in the first paragraph thereof provides that '(t)he tax commissioner may make an assessment against such vendor...