Recording Devices Co. v. Porterfield

• Decision Date: 31 May 1972
• Docket Number: No. 71-666,71-666
• Citation: 59 O.O.2d 225,283 N.E.2d 626,30 Ohio St.2d 208
• Parties: , 59 O.O.2d 225 The RECORDING DEVICES CO., Appellant, v. PORTERFIELD, Tax Commr., Appellee.
• Court: Ohio Supreme Court

Page 208

30 Ohio St.2d 208

283 N.E.2d 626, 59 O.O.2d 225

The RECORDING DEVICES CO., Appellant, v. PORTERFIELD, Tax Commr., Appellee.

No. 71-666.

Supreme Court of Ohio.

May 31, 1972.

Glander, Brant, Ledman & Newman, and C. Emory Glander, Columbus, for appellant.

William J. Brown, Atty. Gen., Dwight C. Pettay, Jr., and Maryann B. Gall, Columbus, for appellee.

PER CURIAM.

This is an appeal from a decision of the Board of Tax Appeals which affirmed an assessment of sales taxes by the Tax Commissioner against appellant.

Appellant is engaged in a business, whereby under contracts with its customers, appellant furnishes and installs time locks and recording devices on the doors of customer's premises. Each lock furnished and installed by appellant has several keys of variable lengths. The customer then furnishes to certain of its personnel individual keys, each of which, when used to lock or unlock the customer's door, causes a record of the time and identity of the particular key to be made on the tape embodied in the locking device. Usually once a week appellant's employee services the device and removes the tape contained therein. At appellant's office the tape is decoded and weekly reports are made to the customer of the time the door was locked and unlocked and by which employee. The customer cannot gain access to the interior of the device and he is responsible for damages to the device, excepting ordinary wear and tear.

In Recording Devices, Inc. v. Bowers (1963), 174 Ohio St. 518, 190 N.E.2d 258, this court held that appellant's receipt of monthly charges was subject to the Ohio Sales Tax under R.C. 5739.01(B) which states:

"Sale' and 'selling' include all transactions by which title or possession, or both, of tangible personal property, is or is to be transferred, or a license to use or consume tangible personal property is granted * * *.'

Although the lock and recording device involved in this case is substantially the same as it was in 1963, appellant asserts that, by virtue of a change in its contracts with customers, and by reason of this court's decision in American District Telegraph Co. v. Porterfield (1968), 15 Ohio St.2d 92, 238 N.E.2d 782, and Machinery Moving, Inc. v. Porterfield (1971), 26 Ohio St.2d 99, 269 N.E.2d 418, the decision of the Board of Tax Appeals in the instant case is unreasonable and unlawful and should be reversed. The contract change upon which appellant relies now reads:

'It is hereby agreed that The Recording Devices Co. neither sells nor leases the Dayton Time Lock equipment to the subcriber; that the subscriber is granted no right to possess or use said equipment; and that the entire consideration paid by the subscriber shall be for the right to receive the weekly reports prepared by The Recording Devices Co.'

Appellant contends that the sales tax should not be assessed because neither title nor possession is transferred, and no license to use or consume is granted its customers. Appellant's authority for this position is Federal Sign & Signal Corp. v. Bowers (1961), 172 Ohio St. 161, 174 N.E.2d 91. This court held, in American District Telegraph v. Porterfield, supra, that Federal Sign 'did not turn upon the inherent limits of the word, 'possession,' as used in Section 5739.01(B) Revised Code, but rather upon the applicability or nonapplicability of a then existing rule excluding taxability in a case involving outdoor advertising signs.' Under the fact situation in the case at bar, no such exclusionary rule exists, and we do not find the statement in the contract regarding 'possession' to be determinative of the issue presented herein.

An analysis of the record in this case reveals that the basic facts are identical to the facts presented in the previous case. (174 Ohio St. 518, 190 N.E.2d 258.) In that case, at page 521, 190 N.E.2d at page 261, it was said that:

'The taxpayer claims to be selling a service. It retains title to the time lock and rents it to the customer for a monthly consideration. * * * If the device was damaged by the taxpayer's customer, he was responsible, ordinary wear and tear excepted. It was attached to the customer's realty and was to be kept in working order by the taxpayer.'

In that case, this court concluded that the taxpayer was not essentially rendering a personal service; that it was engaged in the rental of the devices; and that such rentals were not excepted from sales taxes. The modification of the language of the contract since the 1963 decision has not altered the factual situation one iota. A fortiori, such modification would not justify reversing the previous decision involving this appellant.

We come now to consider whether what this court said in ADT, supra and Machinery Moving, supra, supports appellant's position that this court could reverse the decision of the Board of Tax Appeals without the necessity of overruling the court's previous decision in Recording Devices.

In ADT, we found that the tangible personal property installed, with respect to the central station contracts, was both economically and functionally inconsequential. Economically, the charge for the service was considerably larger than the value of the property, and, functionally, the manner in which this taxpayer received information of an abnormal situation at the subscriber's premises was inconsequential to the service it performed for its subscribers. However, ...