Columbus Coated Fabrics Division v. Porterfield

• Decision Date: 28 June 1972
• Docket Number: No. 71-806,71-806
• Citation: 285 N.E.2d 50,30 Ohio St.2d 307
• Parties: , 59 O.O.2d 376 COLUMBUS COATED FABRICS DIVISION, The Borden Chemical Company, Borden, Inc., Appellant, v. PORTERFIELD, Tax Commr., Appellee.
• Court: Ohio Supreme Court

Page 307

30 Ohio St.2d 307

285 N.E.2d 50, 59 O.O.2d 376

COLUMBUS COATED FABRICS DIVISION, The Borden Chemical Company, Borden, Inc., Appellant, v. PORTERFIELD, Tax Commr., Appellee.

No. 71-806.

Supreme Court of Ohio.

June 28, 1972.

Syllabus by the Court

Sales and use taxes are to be assessed by the Tax Commissioner on purchases of artistic designs which represent the saleable product of individual artist's skill, where the design, which is suitable for uses other than those intended by the purchaser, is neither prepared at the request of, nor for a specific purchaser.

This matter is before this court upon appeal by the Columbus Coated Fabrics Division, The Borden Chemical Company, Borden, Inc., from a decision of the Board of Tax Appeals which modified and affirmed an assessment of sales and use taxes issued by the Tax Commissioner. The transactions involved are purchases of certain art work, murals, layouts, panels, photo designs, or prints, which can be generally described as 'designs.'

The essential facts, as revealed by testimony and evidence presented at the hearing before the Board of Tax Appeals, are not in dispute. Appellant manufactures a variety of decorative vinyl coated wall coverings, incorporating multicolor designs.

The designs which are the subject matter of this appeal are acquired from independent artists and design studios. Appellant's head designer and staff select 'elements' from the acquired designs that can be translated into a wall covering design. The acquired design is discussed altered, and subjected to relaying or reworking so that the finished design can be adopted and used in appellant's manufacturing process.

Appellant has no specific source for these designs, but generally seeks designs from fabric design studios which are the source for designs in the clothing industry. Such designs were not created for appellant's use, but must be reworked so that they can be produced in quantity by appellant.

The acquired designs normally are presented on paper, but may be taken from woven fabrics or other sources. Neither the color nor size of the original designs has significance, because the designs acquired are seldom used in their original form. The final designs prepared by appellant's staff are on paper, and the acquired designs are then destroyed.

The design studios from which appellant purchases designs do not own the designs. They merely display and sell the works of individual artists or designers. Invoices from the design studios to appellant identify the artist by name or number, and designate the design. The price of each design is principally determined by the value the seller places upon it, and there is no relationship between the cost of the paper and paint used by the artist and the price paid by appellant for the design.

The cause is before this court upon an appeal from the decision.

The Board of Tax Appeals.

George, Greek, King, McMahon & McConnaughey and Kiehner Johnson, Columbus, for appellant.

William J. Brown, Atty. Gen., and Peter A. Stratigos, Asst. Atty. Gen., Columbus, for appellee.

STERN, Justice.

Appellant contends that the acquisition of the contested designs constitutes a 'personal service transaction and involves only the transfer of tangible personal property as an inconsequential element for which no separate charges are made' (R.C. § 5739.01(B)); that therefore such acquisition is excepted from sales and use taxes pursuant to R.C. §§ 5739.01(B) and 5741.02(C)(2).

A sale cannot qualify for an exception from the use tax unless it involves 'tangible personal property, the acquisition of which, if made in Ohio, would be a sale not subject to the tax imposed by Sections 5739.01 to 5739.31, inclusive, of the Revised Code' (R.C. § 5741.02(C)(2)). We therefore focus our attention on that portion of R.C. § 5739.01(B) which provides an exception from taxation for personal service transactions.

This court, in Recording Devices v. Porterfield (1972), 30 Ohio St.2d 208, 283 N.E.2d 626, defined personal service as 'an act done personally by a particular individual; it is in effect, an economic service involving either the intellectual or manual personal effort of an individual, not the saleable product of his skill.' (Emphasis added.) It is within this framework that the instant case must be viewed.

The designs in issue here were selected by appellant from various design studios and represent the artistic efforts of individual artists or designers. The designs are not specifically created for appellant's use. Each is reworked for quantity production. The designs are not the result of a special request of appellant; they are not made to fit a particular need of appellant; and they presumably have significant intrinsic value other than for the purpose for which appellant purchases them. Such facts do not lend themselves to the conclusion that their acquisition represents personal service transactions.

Appellant places great weight upon two arguments-that the purchased design is the product of an artist's talent and skill, and that the value of the design is determined by its quality and merit and not by the inconsequential cost of the paper and paint used to convey the design. However, those facts, alone, do not qualify the sale as a personal service transaction, for 'there is no article, fabricated by a machine or fashioned by the human hand, that is not the fruit of the exercise and application of individual ability and skill. And few, indeed, are the instances where the greater part of the cost thereof is not chargeable, to personal service directly or remotely applied. * * *' Voss v. Gray (1941), 70 N.D. 727, 734, 298 N.W. 1.

Appellant relies upon Machinery Moving v. Porterfield (1971), 26 Ohio St.2d 99, 269 N.E.2d 418, and American District Telegraph Co. v. Porterfield (1968), 15 Ohio St.2d 92, 238 N.E.2d 782. Although it is true that in each of those cases this court found the tangible personal property...