Recording Devices, Inc. v. Bowers

• Citation: 190 N.E.2d 258,23 O.O.2d 150,174 Ohio St. 518
• Decision Date: 08 May 1963
• Docket Number: Nos. 37756 and 37757,s. 37756 and 37757
• Parties: , 23 O.O.2d 150 The RECORDING DEVICES, INC., Appellee, v. BOWERS, Tax Com'r, Appellant. The RECORDING DEVICES, INC., Appellant. v. BOWERS, Tax Com'r, Appellee.
• Court: Ohio Supreme Court

Page 518

174 Ohio St. 518

190 N.E.2d 258, 23 O.O.2d 150

The RECORDING DEVICES, INC., Appellee, v. BOWERS, Tax Com'r, Appellant.

The RECORDING DEVICES, INC., Appellant. v. BOWERS, Tax Com'r, Appellee.

Nos. 37756 and 37757.

Supreme Court of Ohio.

May 8, 1963.

Syllabus by the Court

1. Estoppel does not apply against the state of Ohio as to a taxing statute.

2. Under the provisions of Section 5739.01(B), Revised Code, the sales tax is assessable on the rentals received by a company for furnishing, installing and maintaining lock devices to its customers for a monthly charge, even though the company retains title to same and alone is responsible for the maintenance thereof.

Wright, Harlor, Morris, Arnold & Glander, Columbus, for The Recording Devices, Inc.

William B. Saxbe, Atty. Gen., and Edgar L. Lindley, for Stanley J. Bowers, Tax Commissioner.

GRIFFITH, Judge.

Two appeals are before us. The first appeal (case No. 37756) was perfected by the Tax Commissioner from the decision of the Board of Tax Appeals. The board reversed a final order of the Tax Commissioner, wherein the Tax Commissioner found that The Recording Devices, Inc., was engaged in certain taxable sales transactions, and made an assessment. The Board of Tax Appeals held at such transactions were taxable, and that, until a Tax Commission letter, under date of April 6, 1938, addressed to the taxpayer, is rescinded in writing by the Tax Commissioner, the taxpayer, having relied on the ruling, coupled with the long-continued administrative practice of the state assessing body in following such ruling, is entitled to have its assessment cancelled.

The sales tax assessment was in the amount of $4,721.38, together with a 15% penalty, the audit covering the period from January 1, 1957, to December 31, 1960.

The taxpayer in its appeal to the Board of Tax Appeals produced a letter giving a ruling on this question, which reads as follows:

'The Recording Devices Co.,

'57 E. Spring St.,

'Columbus, Ohio.

'Attention: Mr. Cooperrider

'Gentlemen:

'Pursuant to our conversation of April 4, 1938, I am writing this letter concerning the application of the sales tax to the business in which you are engaged. I wish to inform you that when your company installs a time recording lock retains title and renders periodic statements to your customer showing the opening and closing time on the lock that you are rendering a service for your customer and need not collect the sales tax. This is true whether your man winds the clock and picks up the tape or whether your customer winds the clock and sends the tape to you for reading.

'Under these facts your company is the consumer of all equipment used and must pay the sales tax upon the purchase of the same.

'The time recording locks which are sold outright to your customers involves a taxable transaction and the tax must be collected on the full amount charged for the lock.

'If further information is desired, I shall be glad to supply the same upon request.

'Very truly yours,

'The Tax Commission of Ohio

'By: /s/ John W. King

'John W. King,

'Legal Department.'

As to the first appeal, i. e., that of the Tax Commissioner we are of the opinion that, although the equitable principle of estoppel cannot operate against the state of Ohio, and that the Tax Commissioner cannot be bound in all cases by acts or opinions of employees, yet where a long-established practice has been followed, such administrative practice does have much persuasive weight especially where the practice has gone on unchallenged for a quarter of a century. Miami Conservancy District v. Bucher, 87 Ohio App. 390, 95 N.E.2d 266; State v. Ridgway, 73 Ohio St. 31, 76 N.E. 95; Norwegian Nitrogen Products Co. v. United States, 288 U.S. 294, 53 S.Ct. 350, 77 L.Ed. 796.

We are of the opinion that the decision of the Board of Tax Appeals in reversing the Tax Commissioner's assessment is neither unreasonable nor unlawful.

The second appeal (case No. 37757) was perfected by the taxpayer from the same decision of the Board of Tax Appeals. We have an anomalous situation wherein the appellee in case No. 37756 is an appellant in case No. 37757. In this case, the taxpayer is appealing only from that part of the decision of the board finding that the rental transactions are subject to the sales tax. This type of appeal is a deviation from the general rule, but because of the ruling of this court in the case of Goldman v. L. B. Harrison (Club), 156 Ohio St. 403, 102 N.E.2d 848, wherein the court held that there in no statutory provision for any notice of so-called cross-appeal in a case of this type, the taxpayer, out of the abundance of precaution, chose this manner of appeal.

In its journal entry of reversal (July 25, 1962), the board stated:

It seems quite clear that the April 6, 1938, ruling given by the legal representative of the Tax Commission of Ohio can now be considered erroneous.'

The taxpayer feels that the board made certain conclusions which are prejudicial to its present and future operations and which might be regarded as res judicate in the litigation of future cases, and, further, that the board failed to find that the taxpayer was not engaged in the sale or rental of the recording devices, and also failed to find that the devices are specifically excepted as to the sales tax because the taxpayer is engaged only in the rendition of personal service transactions. The Board of Tax Appeals found that the transactions were sales within the meaning of Section 5739.01, Revised Code.

Is the taxpayer a vendor or a consumer?

'Vendor' is...