Midwest Transfer Co. v. Porterfield, s. 41206

• Decision Date: 20 March 1968
• Docket Number: Nos. 41206,41207,s. 41206
• Citation: 13 Ohio St.2d 138,235 N.E.2d 511
• Parties: , 42 O.O.2d 365 MIDWEST TRANSFER CO., d. b. a. Midwest Emery Freight System, Inc., Appellee, v. PORTERFIELD, Tax Commr., Appellant. EMERY TRANSPORTATION CO., d. b. a. Midwest Emery Freight System, Inc., Appellee, v. PORTERFIELD, Tax Commr., Appellant.
• Court: Ohio Supreme Court

Page 138

13 Ohio St.2d 138

235 N.E.2d 511, 42 O.O.2d 365

MIDWEST TRANSFER CO., d. b. a. Midwest Emery Freight System, Inc., Appellee, v. PORTERFIELD, Tax Commr., Appellant.

EMERY TRANSPORTATION CO., d. b. a. Midwest Emery Freight System, Inc., Appellee, v. PORTERFIELD, Tax Commr., Appellant.

Nos. 41206, 41207.

Supreme Court of Ohio.

March 20, 1968.

Syllabus by the Court

Where motor transportation companies amenable to the Ohio highway use tax law make concededly faulty returns to the Tax Commissioner over a period of years, which returns do not reflect the true and correct taxable mileage traveled by their motor vehicles over Ohio highways, and where an admittedly correct audit of the companies' records by the Tax Commissioner over a representative period of time shows the percentage-of-error factors present in the returns as made, the Tax Commissioner, under the provisions of Section 5728.10, Revised Code, and by inherent authority may make assessments against the companies covering the entire periods involved, based upon the percentage-of-error factors disclosed by the audit, and if the companies contest such assessments, it is incumbent on them to show in what manner and to what extent the Tax Commissioner was wrong.

These two cases, consolidated for hearing and decision by the Board of Tax Appeals and involving highway use tax assessments, are in this court on an appeal by the Tax Commissioner from the decision of the board which decision reversed the final determinations of the Tax Commissioner in substantial part.

In the first case, the Tax Commissioner issued a highway use tax assessment against Midwest Transfer Company, covering the period from October 1, 1959, to March 1, 1962. Acting upon the petition for reassessment, the commissioner confirmed the assessment as originally made but conditionally canceled the penalty as provided by Section 5728.10, Revised Code. From such final determination, an appeal was taken to the Board of Tax Appeals under Section 5717.02, Revised Code.

In the second case, the Tax Commissioner issued a highway use tax assessment against Emery Transportation Company, covering the period from October 1, 1959, to March 31, 1963. Upon entertaining the petition for reassessment, the commissioner modified his original assessment by reducing the amount thereof and by conditionally removing the penalty a authorized by statute. From such final determination, a statutory appeal was perfected to the Board of Tax Appeals.

Stipulations of fact were entered into by and between the attorneys for Midwest Emery Freight System, Inc., successor in interest to both Midwest Transfer Company and Emery Transportation Company, and the Tax Commissioner. Important parts thereof are that during the assessment periods involved the two corporations against which the assessments were made were separate entities but operated on a co-operative basis; that the records of the two corporations were kept at Chicago, Illinois, and were intermingled; that, by the method used in keeping the records, errors occurred in computing the mileage covered by the vehicles of the two corporations in traveling over Ohio highways; that the audit of the two companies' records, conducted by the commissioner's representatives, extended from April 16 to August 15, 1962, and covered the second quarter of 1960; and that the commissioner's representatives were informed that they would be required to vacate the space set aside on the companies' premises for the audit by September 1, 1962.

During the audit, errors were found, and the amount which each company actually owed the state of Ohio for the second quarter of 1960 was determined. This amount was in excess of that which the companies had reported to the Tax Commissioner. The amount determined and the percentage of error found by the audit for the second quarter of 1960 were conceded to be correct by the companies. It was proposed that the companies amend their returns for all other quarters involved by the application of the percentage-of-error factors determined by the audit for the second quarter of 1960. The commissioner's representatives prepared amended returns on the basis proposed and submitted them to the companies for signature and filing. This was refused on advice of counsel. This conduct resulted in the commissioner's final determinations for the entire periods involved, calculated on the basis of the audit of the companies' records for the second quarter of 1960. As noted above, appeals were taken from such determinations to the Board of Tax Appeals. It was agreed that the...