Satullo v. Wilkins

• Decision Date: 29 November 2006
• Docket Number: No. 2006-0046.,2006-0046.
• Citation: 856 N.E.2d 954,2006 Ohio 5856,111 Ohio St.3d 399
• Parties: SATULLO et al., Appellants, v. WILKINS, Tax Commr., Appellee.
• Court: Ohio Supreme Court

856 N.E.2d 954

111 Ohio St.3d 399

2006-Ohio-5856

SATULLO et al., Appellants, v. WILKINS, Tax Commr., Appellee.

No. 2006-0046.

Supreme Court of Ohio.

Submitted September 20, 2006.

Decided November 29, 2006.

Wegman, Hessler & Vanderburg, Keith A. Vanderburg, and Angela M. Privitera Lavin, Cleveland, for appellants.

Jim Petro, Attorney General, Robert C. Maier, Senior Deputy Attorney General, and Barton A. Hubbard, Assistant Attorney General, for appellee.

PER CURIAM.

{¶ 1} The appellants, S. Sandy Satullo II and Copper Kettle Marina, Inc., argue in this appeal as of right that they do not owe Ohio use tax for their use of two boats between November 1, 1995, and October 31, 1999. The Board of Tax Appeals ("BTA") found that the state Tax Commissioner had properly imposed a use tax on the appellants. According to the BTA, the appellants did not purchase the boats with the intent to resell them, and therefore the R.C. 5739.01(E) resale exception to the sales and use tax did not apply. The BTA likewise rejected the appellants' request for a tax exemption under R.C. 5741.02(C)(4), which exempts the transient use of tangible personal property in Ohio "by a nonresident tourist or vacationer."

{¶ 2} For the reasons that follow, we affirm the BTA's decision.

Facts

{¶ 3} Copper Kettle is an Ohio corporation that began selling boats in the 1970s. From its 12,000-square-foot showroom in Lorain, Ohio, the company not only sold boats but also serviced and stored them.

{¶ 4} In the mid-1990s, the president of Copper Kettle wanted the company to serve as a dealer for a British-made boat model called the Sunseeker. Copper Kettle's line of credit was too small, however, for the company to purchase one of the boats. The founder of Copper Kettle—S. Sandy Satullo—used his own funds in 1995 to acquire one 55-foot Sunseeker boat for $750,000. Satullo was listed as the buyer of the boat on the sales contract prepared by the seller—Hideaway Yacht Sales, Inc., of Pompano Beach, Florida—although the BTA found that the buyer's signature on the document appeared to be that of Satullo's son, appellant S. Sandy Satullo II. No documents signed by the elder Satullo suggest that he purchased the Sunseeker for Copper Kettle, although Copper Kettle was listed as the buyer of the boat on a document titled "Order Acknowledgement and Agreement of Sale" that was also prepared by the seller, Hideaway Yacht Sales.

{¶ 5} Neither the Satullos nor Copper Kettle paid sales tax in Florida when the Sunseeker was purchased there in 1995. In January 1998—more than two years after the Sunseeker was purchased—the younger Satullo signed an affidavit stating that no sales or use tax was owed in Florida in connection with that purchase because the boat had been acquired with the intent to resell it.

{¶ 6} Appellant Satullo and two other persons sailed the Sunseeker from Florida to Ohio in 1996. That summer and the following summer, it was docked in Ohio and Michigan. The boat was stored in Florida during the winter months. While the Sunseeker was in Ohio, it was docked at private marinas in Bratenahl and Port Clinton, and also at a public boathouse in Lakewood.

{¶ 7} Appellant Satullo testified that the Sunseeker was being demonstrated for resale during the summer months when it was in Ohio. He denied using the boat for his own personal enjoyment. The BTA found, however, that the private marinas and limited-public-access sites where the Sunseeker was stored were not typical locations where boats were offered for sale. Also, correspondence in the record between an insurance broker and an insurance agency indicates that the Satullos listed the owner of the Sunseeker as Copper Kettle "for tax purposes only," and the insurance carrier noted that the boat would be "used 100%" for "pleasure use by S. Satullo, Jr. and S. Satullo, Sr." The younger Satullo arranged for the purchase of the insurance on the boat.

{¶ 8} Although the younger Satullo listed himself as the owner of the Sunseeker in 1996 on a registration form for a private marina in Port Clinton, he denied that he had ever owned the boat when the Tax Commissioner's office inquired about it two years later. The boat was not listed on Copper Kettle's 1996 personal property tax return or on Copper Kettle's accounting records, and it was never displayed at any boat shows in Ohio, Michigan, or Florida.

{¶ 9} In 1998, the Sunseeker was traded in for a larger boat made by Azimut, an Italian manufacturer. The seller of the 70-foot Azimut yacht was Richard Bertram, Inc., a Florida boat dealer. The elder Satullo wrote two personal checks to Richard Bertram, Inc. in late 1997 and early 1998, and he also provided an additional cashier's check to that company. The checks totaled more than $1.7 million, and those funds, together with the $645,523 trade-in value of the Sunseeker, were used to purchase the Azimut, which cost more than $2.4 million. The invoice does not indicate that the Satullos or Copper Kettle paid sales tax in Florida on the purchase of the Azimut.

{¶ 10} The Azimut was brought to Ohio and Michigan in the summer of 1998. The appellants eventually sold that yacht to a boat dealer in Florida.

{¶ 11} The Tax Commissioner performed an audit of the appellants' purchases and use of the two boats and concluded that the younger Satullo and Copper Kettle owed more than $300,000 in use taxes, penalties, and interest charges. (The elder Satullo had died by the time the Tax Commissioner issued his final determination.)

{¶ 12} The younger Satullo and Copper Kettle appealed the determination to the BTA, which held a hearing on the matter in September 2004. The BTA sided with the Tax Commissioner, finding that "Copper Kettle was the titled owner of the boats, but Mr. Satullo II had both possession and a license to use the boats within the state of Ohio," and therefore both Copper Kettle and the younger Satullo were liable for the payment of use taxes on the boats. The BTA also found insufficient support in the record for the appellants' claims that they had purchased the boats with the intent to resell them. "Copper Kettle was not a dealer for any boat line at the time of purchase and has provided no tangible evidence of proposed dealership agreements or sub-dealership agreements with any manufacturer," the BTA explained, and "[t]he purchases were not consummated as if the boats were intended to be a part [of] Copper Kettle's inventory."

{¶ 13} The younger Satullo and Copper Kettle have filed this appeal of right from the BTA's decision.

The Standard of Review

{¶ 14} In reviewing a BTA decision, this court looks to see if that decision was "reasonable and lawful." Columbus City School Dist. Bd. of Edn. v. Zaino (2001), 90 Ohio St.3d 496, 497, 739 N.E.2d 783; see R.C. 5717.04. The court "will not hesitate to reverse a BTA decision that is based on an incorrect legal conclusion." Gahanna-Jefferson Local School Dist. Bd. of Edn. v. Zaino (2001), 93 Ohio St.3d 231, 232, 754 N.E.2d 789. But "[t]he BTA is responsible for determining factual issues and, if the record contains reliable and probative support for these BTA determinations," this court will affirm them. Am. Natl. Can Co. v. Tracy (1995), 72 Ohio St.3d 150, 152, 648 N.E.2d 483.

{¶ 15} As for the burden of proof, it rests on the taxpayer "to show the manner and extent of the error in the Tax Commissioner's final determination." Stds. Testing Laboratories, Inc. v. Zaino, 100 Ohio St.3d 240, 2003-Ohio-5804, 797 N.E.2d 1278, ¶ 30. The Tax Commissioner's findings "are presumptively valid, absent a demonstration that those findings are clearly unreasonable or unlawful." Nusseibeh v. Zaino, 98 Ohio St.3d 292, 2003-Ohio-855, 784 N.E.2d 93, ¶ 10. Any claimed exemption from taxation "must be strictly construed," and the taxpayer "must affirmatively establish his or her right" to the exemption. Campus Bus Serv. v. Zaino, 98 Ohio St.3d 463, 2003-Ohio-1915, 786 N.E.2d 889, ¶ 8.

The Appellants' Compliance with R.C. 5717.04

{¶ 16} Before we address the merits of the case, a procedural wrinkle deserves mention. R.C. 5717.04, which prescribes the way in which appeals may be taken from decisions of the BTA, states as follows:

{¶ 17} "[A]ppeals shall be taken within thirty days after the date of the entry of the decision of the board * * * by the filing by appellant of a notice of appeal with the court to which the appeal is taken and the board. * * * Proof of the filing of such notice with the board shall be filed with the court to which the appeal is being taken. * * * Unless waived, notice of the appeal shall be served upon all appellees by certified mail."

{¶ 18} According to the Tax Commissioner, the appellants' notice of appeal is defective because (1) the proof of filing attached to the appellants' notice of appeal does not show that the notice filed in this court was also filed with the BTA, (2) the proof of filing states that the notice was sent by ordinary mail rather than by certified mail to the Tax Commissioner's counsel, and (3) the appellants failed to file a new proof of filing when they resent the notice to the Tax Commissioner by certified mail.

{¶ 19} The appellants' notice of appeal was timely filed, however, with both this court and the BTA. A copy of that notice was sent to the Tax Commissioner by certified mail, as well as by ordinary mail, within 30 days after the BTA issued its decision.

{¶ 20} In these circumstances, we find no jurisdictional defect that compels dismissal of the appeal. To be sure, the appellants should have indicated in their notice of appeal to this court that they had also timely filed the notice with the BTA. The appellants did provide us, however, with proof of that timely filing with the BTA in response to a show-cause order— see Satullo v. Wilkins, 108 Ohio St.3d 1464, 2006-Ohio-594, 842 N.E.2d 536—and we are therefore satisfied that the appellants have complied with R.C. 5717.04. The fact that the original...