Baptist Gen. Convention v. Okla. Tax Comm'n

• Decision Date: 30 October 1945
• Docket Number: Case Number: 30613
• Parties: BAPTIST GENERAL CONVENTION v. OKLAHOMA TAX COMMISSION
• Court: Oklahoma Supreme Court

1945 OK 277

162 P.2d 1012

196 Okla. 96

BAPTIST GENERAL CONVENTION v. OKLAHOMA TAX COMMISSION

Case Number: 30613

Supreme Court of Oklahoma

Decided: October 30, 1945

Syllabus

¶0 1. LICENSES - Charitable organizations not operating for profit or savings are exempt from payment of use tax though competing with others engaged in similar business.

Subdivision (e) of section 5 of the Use Tax Act (ch. 66, art. 11, pg. 456, S.L. 1937) and subdivision (i) of section 6 of the Sales Tax Act (ch. 66, art. 10, pg. 445, S. L. 1937) operate to exempt from the payment of the use tax, charitable organizations not engaged in business for profit or savings, competing with other persons engaged in the same or similar business.

2. SAME - Oklahoma Baptist Hospital held exempt from payment of use tax.

Record examined, and held that the Oklahoma Baptist Hospital at Muskogee, Okla., under the facts in the present case is not engaged in business for profit, savings and is exempt from payment of the use tax.

Appeal from order of the Oklahoma Tax Commission by the Baptist General Convention of the State of Oklahoma Order reversed.

Billups & Billups, of Oklahoma City and Julian B. Fite, of Muskogee, for plaintiff in error.

A. Francis Porta, of El Reno, and A. L. Herr and A. D. Howell, both of Oklahoma City, for defendant in error Oklahoma Tax Commission.

DAVISON, J.

¶1 This cause is presented on appeal from an order of the Oklahoma Tax Commission assessing a use tax in the sum of $94.01, plus inter. and penalties in the sum of $37.81, by reason of goods purchased outside the state for use and consumption within the state by the Oklahoma Baptist Hospital at Muskogee, Okla.

¶2 The Baptists of this state operate hospital at Muskogee, Okla., known a the Oklahoma Baptist Hospital. In the year from October 1, 1937, to September 30, 1938, that hospital purchased sufficient amount of tangible personal property to render it possibly liable for use tax in the sum of $94.01. The Oklahoma Tax Commission ascertained the fact that the tangible personal property had been acquired and the value there of. It then notified the Baptist Genera Convention of the State of Oklahoma, and advised that the amount due for tax, penalty, and interest was $131.82.

¶3 On November 25, 1940, the Baptist General Convention filed its proses against the tax and asked that the tax be canceled. The protest was heard on March 3, 1941, and the decision thereof delayed until September 15, 1941, a which time the Tax Commission decided that the tax protestant, Baptist Genera Convention, in the maintenance of the Oklahoma Baptist Hospital was engaged in a business for profit or savings and was competing with other persons engaged in the same or similar business.

¶4 The Tax Commission decided that the tax protestant was legally indebted to the state in the sum of $131.82 and that its protest against payment of the tax I should be denied.

¶5 The Baptist General Convention of the State of Oklahoma has appealed to this court.

¶6 This brings us to a consideration of the provision of the Use Tax Act, S. L. 1937, ch. 66, art. 11, pg. 456, which is said to exempt the tax protestant from taxation. Subdivision (e) of section 5 of the act reads:

"The provisions of this act shall not apply: . . .

"(e) In respect to the use of tangible personal property now specifically exempted from taxation under the law of Oklahoma assessing a sales' or consumers' tax upon the sale of tangible personal property."

¶7 Section 6, subdivision (i), of the Sales Tax Act, S. L. 1937, ch. 66, art. 10, pg. 445, is as follows:

"There is hereby specifically exempted from the tax imposed by this act the following:

"(i) The gross receipts or gross proceeds derived from the sale of tangible personal property, or service to charitable organizations, except where such organizations may be engaged in business for profit or savings, competing with other persons engaged in the same or similar business."

¶8 Under the foregoing statutory provisions the Baptist General Convention states that "it is not engaged in business for profit or savings." In support of this position our attention is called to the fact that during the year involved in this action the Baptist General Convention sustained a net loss of $8,485.56 through operation of the Oklahoma Baptist Hospital. It appears from the record that during the year involved, 1,871 patients were treated in the hospital, of which number 1,212 were full pay patients; 145 were partial pay patients; and 394 were public charges which came from public or private health groups who were received and treated at still lower rates; and 120 were full charity patients who paid nothing. The record further reveals that the hospital does not refuse patients because of inability to pay. The record further shows that over a nine-year period, including the year involved herein, the sum of $106,647.70 had been donated toward the upkeep of the hospital by the Baptist General Convention and other direct contributors.

¶9 In calculating the amount of loss, two items were considered which the Tax Commission contends should not be used in determining whether or not the hospital made a profit over and above its operating expenses. These items were bond interest and bond expense in the amount of $6,973.45 and agreed depreciation in the amount of $4,449.10. If the Tax Commission is correct in its contention that these items are not deductible from the gross income in determining the amount of profit, then the hospital made a profit during the year involved of $2,849.32 On the other hand, if both or either of these items is deductible, then the hospital sustained a loss. After advancing the argument that these items cannot properly be considered, the Tax Commission then contends that whether or not a profit was made is not material to determining if the hospital was operating "for profit or savings". With this last contention we do not agree. The intent of the Legislature was clearly expressed when it said that charitable organizations were exempt if not engaged in business for profit or savings. It is thus important to determine if a profit is being realized. Of course, a loss for one year would not prove the an organization was not engaged in business for profit, and would only prove that a loss was sustained during the one year. But if such an organization continues to operate for a period of years, and year after year sustains a loss, then the only reasonable and logical conclusion to reach would be the profit or savings was not the objective of the organization, but that...