Rotek, Inc. v. Limbach
| Decision Date | 11 April 1990 |
| Docket Number | No. 88-1347,88-1347 |
| Parties | ROTEK, INC., Appellant, v. LIMBACH, Tax Commr., Appellee. |
| Court | Ohio Supreme Court |
Jones, Day, Reavis & Pogue and John C. Duffy, Jr., for appellant.
Anthony J. Celebrezze, Jr., Atty. Gen., and James C. Sauer, for appellee.
This appeal presents three issues. First, what is the proper test to determine whether items purchased under the Austin construction contract are excepted from sales tax by reason of R.C. 5739.01(B)? Second, what determines whether the electrical substation is exempt from taxation as an adjunct to manufacturing? Third, what factors control the application of the county permissive tax?
For the reasons which follow, we find that those items which are incorporated into structures are real property and excepted from sales tax; that the electrical substation, to be exempt as an adjunct to manufacturing, must be used at the location where manufacturing occurs, and must reduce the electrical voltage to a voltage utilized by equipment engaged directly in manufacturing a product for sale; and that the location of delivery of purchases under the construction contracts determines the applicability of the county permissive tax.
R.C. 5739.01(B), at the time of the audit period, read as follows:
* * *"
"Real property" is defined in R.C. 5701.02 as follows:
"As used in Title LVII of the Revised Code, 'real property' and 'land' include land itself * * * and, unless otherwise specified, all buildings, structures, improvements, and fixtures of whatever kind on the land and all rights and privileges belonging or appertaining thereto."
R.C. 5701.03 defines "personal property" to include every tangible thing not forming part of a parcel of real property.
If the items in question constitute real property they are excepted from sales tax; but if they constitute personal property they are subject to tax. The proper test to be applied is in the syllabus of Shutter Bug v. Kosydar (1974), 40 Ohio St.2d 99, 69 O.O.2d 487, 321 N.E.2d 239:
"Even if a structure or building located on land is personal property, such structure or building will, for purposes of taxation, be included within the definition of 'real property' as that term is defined in R.C. 5701.02, unless the General Assembly has otherwise specified. * * *"
We find no applicable statutory exception.
More recently, in Green Circle Growers, Inc. v. Lorain Cty. Bd. of Revision (1988), 35 Ohio St.3d 38, 517 N.E.2d 899, the property in question was double poly hoop greenhouses which were constructed by stretching plastic sheeting over a frame consisting of metal pipes bolted to other metal pipes which were imbedded into concrete and attached to the ground. The "greenhouses" were capable of being disassembled and stored seasonally. During use, the greenhouses were heated by a series of satellite boilers and piping systems which circulated hot water. These structures constituted "structures" within the contemplation of R.C. 5701.02, and were, therefore, real property exempt from sales tax.
The BTA, having based its decision upon the determination that the property was devoted primarily to the business conducted on the land, did not make a determination as to whether the property in question was incorporated into a structure, thus becoming real property. Accordingly, the decision of the BTA on this issue is reversed and the cause is remanded with instructions to review and redetermine the facts of record and to decide whether the items in question were "structures" and, therefore, real property under R.C. 5701.02 and excepted from sales tax as provided in R.C. 5739.01(B).
Next, we examine the issue of tax exemption for the electrical substation under the Hatfield contract and the modifications to the substation under the Electrical Equipment Co. contract.
R.C. 5739.01(E), as pertinent, provided:
R.C. 5739.01(S), now referred to as 5739.01(R), read:
" 'Manufacturing' or 'processing' means the transformation or conversion of material or things into a different state or form from that in which they originally existed and, for the purpose of the exceptions contained in division (E)(2) of this section, includes the adjuncts used during and in, and...
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