James F. Dearwester v. Joanne Limbach, 91-LW-3145
| Decision Date | 24 April 1991 |
| Docket Number | B.T.A. NO. 87-G-253,C-900051,91-LW-3145 |
| Parties | JAMES F. DEARWESTER, Appellant v. JOANNE LIMBACH, Appellee. APPEAL B.T.A. NO. 87-G-253 |
| Court | Ohio Court of Appeals |
Civil Appeal from: Ohio Board of Tax Appeals
Judgment Appealed from is: Reversed and Cause Remanded
Martin J. Horwitz, Esq., and Carlo R. Wessels, Esq., 226 Main Street, Florence, Kentucky 41042, for Appellant,
Anthony J. Celebrezze, Jr., Attorney General, and M. Linda Weigand Esq., State Office Tower, 16th Floor, 30 East Broad Street Columbus, Ohio 43266-0410, for Appellee.
This cause came on to be heard upon the appeal, the transcript of the docket, journal entries and original papers from the Ohio Board of Tax Appeals, the assignments of error, the briefs and the arguments of counsel.
The appellant, James Dearwester, appeals from the Board of Tax Appeals's affirmance of the Tax Commissioner's sales tax assessment of $189,461.33 and the penalty of $28,419.20 levied against him. The assessment was for sales of cocaine and quaaludes,(fn1) based on an average daily sales amount of $4,414.29, during a period extending from October 1, 1980, to December 31, 1982. In his two assignments of error Dearwester challenges the board's use of hearsay statements by police informants as evidence of his average daily sales and the board's holding that the test-check method used by the Tax Commissioner to determine his average daily sales was legally sufficient. We find both assignments of error to be well taken, reverse the decision of the board of tax appeals, and remand the case for further proceedings.
The sales tax assessment was levied against Dearwester following his plea of no contest to and subsequent conviction of two counts of trafficking under R.C. 2925.03(A) (6), for drug possession exceeding bulk amount, and one count of trafficking under R.C. 2915.03(A) (4), for simple possession. The investigaive report and remarks of the tax examiner supporting the assessment indicate that the amount of Dearwester's average daily sales was based on information supplied by Agent Robert Ruebusch of the Regional Enforcement Narcotics Unit ("RENU"). Reubusch disclosed that Dearwester had been identified as a major supplier of quaaludes by an informant who had been arrested for trafficking in October 1982. Reubusch relayed the informant's claim that Dearwester had previously sold him quantities of five thousand quaalude tablets for $7,500, and that "Dearwester was capable of 200,000 quaaludes." Ruebusch also stated that during October 1982, "an informant identified Dearwester as the supplier of a suspect on a weekly basis for 10,000 quaalude tablets and 1/4 to 1/2 pounds of cocaine," that the informant reported that the suspect owed Dearwester $36,000, and that RENU agents observed the suspect at Dearwester's residence.
Agent Ruebusch further reported that RENU arrested a subject leaving Dearwester's residence in January 1983 possessing one hundred grams of cocaine, and that the subject admitted purchasing the cocaine from Dearwester and having made several previous one-ounce purchases for $2,500. Ruebusch finally reported that RENU arrested Dearwester on January 18, 1983, and recovered $9,000 in currency, five hundred eighty-nine grams of marijuana worth approximately $2,000, street value, one thousand sixty-six grams of quaalude powder worth approximately $4,000, street value, and small quantities of other drugs worth approximately $50. Dearwester was also charged with possession of the one hundred grams of cocaine involved in the January 1983 arrest based on the presence of his fingerprint within the package and the co-defendant's testimony.
The tax examiner calculated Dearwester's total sales per week as $30,900, which included sales of: (a) ten thousand quaaludes worth $1.50 each, totalling $15,000, based on the informant's tip of October 1982, (b) one hundred twelve grams (approximately one-half pound) of cocaine worth $75 per gram, totalling $8,400, based on the same informant's tip, and (c) 100 grams of cocaine worth $75 per gram totalling $7,500, based on the amount seized in the January 1983 arrest. Dearwester's average daily sales amount was then calculated by dividing the weekly average by seven, yielding $4,414.29.
The daily average was then assessed over the period from October 1980, to December 31, 1982. October 1980 was the date of RENU's first contact with Dearwester when a search of his residence pursuant to a search warrant yielded two hundred seventy-one grams of marijuana worth approximately $200. Dearwester's girlfriend was convicted of possession of the marijuana but Dearwester, who was not present at the time of the search, was not charged. The conclusion of the audit period on December 31, 1982, preceded Dearwester's arrest and imprisonment in January 1983 on the trafficking charges mentioned above.
Dearwester filed a petition for reassessment with the Tax Commissioner on June 27, 1984, but failed to attend the hearing on the reassessment or to present evidence to refute the Tax Commissioner's assessment, and the petition was denied on September 24, 1986. Dearwester appealed to the Board of Tax Appeals, and a hearing was held on October 19, 1988, in which additional evidence was taken by the board. Dearwester testified at the hearing, and admitted, generally, that he had an increasing drug problem during the audit period but he denied making any sales of drugs.
In support of the Tax Commissioner's assessment, Agent Ruebusch and Detective Patrick Dilbert testified regarding Dearwester's activities and arrest. The officers testified that they conducted surveillance of Dearwester's residence from April 1982 until the time of his arrest in January 1983, and that they saw, over a six-month period, approximately seven people known to be involved with drugs and approximately forty others who were unknown to RENU, entering and leaving the residence. T.p. 129.
Agent Ruebusch testified concerning the arrest of John Foreman, in which the previously-mentioned bag containing 100 grams of cocaine and a slip of paper with Dearwester's fingerprint were seized. Agent Ruebusch also testified to the circumstances surrounding Dearwester's arrest, including the fact that in addition to the quantities of drugs seized as described above, the officers also found large bottles of inistoal, an agent commonly used to dilute concentrations of cocaine, scales, a Seal-A-Meal packaging machine and a safe, items commonly associated with the sale of drugs.
Sales tax agent Dave Stone testified at the hearing that, under departmental policy at the time the test-check audit of Dearwester was made, an arbitrary assessment would be imposed in the event there were no records to use in making an assessment, and that in audits involving drug trafficking, due to the typical lack of information, testimony of informants would be used. T.p. 138. Stone further testified that the audit in question was based upon the information supplied by Agent Ruebusch. T.p. 138-39.
In its decision and order of December 22, 1989, the board affirmed the Tax Commissioner's assessment. The board found that the informants' statements contained in the Tax Commissioner's transcript of proceeding were consistent with the physical evidence and testimony concerning Dearwester's surveillance, and held that the Tax Commissioner made a reasonable use of the meaningful information supplied by the police and that Dearwester presented no probative, credible evidence to meet his burden of showing that the assessment was in error.
In his first assignment of error, Dearwester claims that the "board of Tax Appeals erred when it admitted hearsay statements into evidence at the hearing. Dearwester argues that the assessment was based entirely upon the hearsay statements and, without those statements, the assessment is without basis in the record.
R.C 5739.13 imposes on vendors the burden to collect the tax levied under R.C. 5739.02 on each retail sale made in Ohio. Any vendor who fails to collect the tax may be held personally liable and an assessment against the vendor may be made...
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