Miami Citizens Nat. Bank & Trust Co. v. Lindley

• Decision Date: 22 June 1977
• Docket Number: No. 76-1080,76-1080
• Citation: Miami Citizens Nat. Bank & Trust Co. v. Lindley, 364 N.E.2d 25, 50 Ohio St.2d 249, 4 O.O.3d 427 (Ohio 1977)
• Parties: , 4 O.O.3d 427 MIAMI CITIZENS NATIONAL BANK & TRUST COMPANY, Appellant, v. LINDLEY, Tax Commr., Appellee.
• Court: Ohio Supreme Court

Page 249

50 Ohio St.2d 249

364 N.E.2d 25, 4 O.O.3d 427

MIAMI CITIZENS NATIONAL BANK & TRUST COMPANY, Appellant, v. LINDLEY, Tax Commr., Appellee.

No. 76-1080.

Supreme Court of Ohio.

June 22, 1977.

Syllabus by the Court

Where a bank uses its management to analyze the business operations of its client correspondent banks and devises programs which organize information taken from clients' records and provide the client with the organized information in computer print-out report forms, which reports are necessary to make informed management, operational, auditing, marketing and other business decisions, the true object of the transactions as shown by the record is the receipt of the printed form which contains the computer-organized data and, therefore, such transactions constitute sales of tangible personal property pursuant to R.C. 5739.01(B). (Lindner Bros. v. Kosydar, 46 Ohio St.2d 162, 346 N.E.2d 690, approved and followed.)

This is an appeal by the Miami Citizens National Bank and Trust Company of Miami County from a decision of the Board of Tax Appeals which affirmed a sales tax assessment made by the Tax Commissioner. The bank claimed an exception from the sales tax assessment under the "personal service" provision of R.C. 5739.01(B).

The bank installed a data processing system in 1967 for the purpose of doing its own computer work. Eventually it began doing data processing for other banks and provided those banks with various programs which may be summarized as follows:

(1) A demand deposit program consisting of 20 reports;

(2) a savings account program consisting of 10 reports;

(3) an installment loan program consisting of 13 reports;

(4) a variety of other programs, including the special demand deposit balance analysis report, the F.D.I.C. summary of accounts and deposits report, the time certificate of deposit program, the shareholders accounting program, and the Christmas Club accounting program;

(5) a consulting program involving comparative studies, and special programs which include preparation of correspondence to customers of the correspondent banks; and

(6) payroll and sales analysis programs, offered primarily to customers other than correspondent banks.

Many of Miami Citizens' programs were provided to the correspondent banks on a daily basis. Each program customarily consisted of a series of "reports" which reveal considerable information for use by the correspondent bank in making informed management decisions for future operations.

The customer bank paid a set monthly fee per account, depending upon the type of account; e.g., saving accounts are 15 cents per account per month. Miami Citizens also billed separately for changes requested in a particular customer's program. The sales tax was assessed only on charges for "computer print-outs," and not for programming time.

The cause is before this court upon an appeal as of right.

Gaier, Pratt & Freed and Frederick D. Freed, Piqua, for appellant.

William J. Brown, Atty. Gen., and J. Elaine Bialczak, Columbus, for appellee.

C. WILLIAM O'NEILL, Chief Justice.

The decision of the Board of Tax Appeals is affirmed.

The issue presented to this court is whether Miami Citizens' transactions are excepted from the sales tax under the provisions of R.C. 5739.01(B). That statute provides, in pertinent part:

" 'Sale' and 'selling' include all transactions by which title or possession, or both, of tangible personal property, is or is to be transferred * * * for a consideration in any manner * * *. ^* Other than as provided in this section, 'sale' and 'selling' do not include professional, insurance, or personal service transactions which involve the transfer of tangible personal property as an inconsequential element for which no separate charges are made."

The controlling law is set forth in the syllabus of Accountant's Computer Services v. Kosydar (1973), 35 Ohio St.2d 120, 298 N.E.2d 519.

In applying the "real object" test as set forth in the syllabus of Computer Services, supra, the Board of Tax Appeals concluded that the true object sought by the taxpayer's customers was the property produced, i.e., the computer program data in printed form. The board consequently held the transactions taxable.

Both parties to the instant action contend that the principles of ...