SFZ Transp., Inc. v. Limbach

• Decision Date: 30 June 1993
• Docket Number: No. 92-1481,92-1481
• Citation: 613 N.E.2d 1037,66 Ohio St.3d 602
• Parties: SFZ TRANSPORTATION, INC., Appellant, v. LIMBACH, Tax Commr., Appellee.
• Court: Ohio Supreme Court

Page 602

66 Ohio St.3d 602

613 N.E.2d 1037

SFZ TRANSPORTATION, INC., Appellant, v. LIMBACH, Tax Commr., Appellee.

No. 92-1481.

Supreme Court of Ohio.

Submitted April 20, 1993.

Decided June 30, 1993.

Jones, Day, Reavis & Pogue and John C. Duffy, Jr., Cleveland, for appellant.

Lee I. Fisher, Atty. Gen., and Richard C. Farrin, Asst. Atty. Gen., for appellee.

PER CURIAM.

In Proposition of Law No. 1, SFZ argues that the BTA's ultimate legal conclusions concerning Ex. 3 were unlawful and that its conclusion as to the primary use of the equipment was unreasonable. It asserts that the entire record establishes that the primary use of the equipment was in the common carrier business and that the equipment, consequently, was used directly in the rendition of a public utility service and excepted from taxation.

The commissioner, on the other hand, argues that we cannot disturb the factual determination by the BTA as to the primary use of the equipment because SFZ has failed to establish that the BTA's finding was an abuse of discretion. Nevertheless, we agree with SFZ and reverse the BTA's decision. We also take this opportunity to clarify our review of the BTA's factual determinations.

R.C. 5739.01(E)(2) excepts from the sales tax purchases that are to be used directly in the rendition of a public utility service, and R.C. 5741.02(C)(2) excepts such purchases from the use tax. In Inland Refuse Transfer Co. v. Limbach (1990), 53 Ohio St.3d 10, 11, 558 N.E.2d 42, 43, citing Manfredi Motor Transit Co. v. Limbach (1988), 35 Ohio St.3d 73, 76, 518 N.E.2d 936, 939, we set forth the conditions necessary to meet the public utility exception: "First, the taxpayer must be a regulated public utility. Second, it must render a public utility service when the items are purchased. Third, it must use the items directly in rendering the public utility service."

Further, in Manfredi, we required the BTA to consider the primary use of the purchased items in light of Ace Steel Baling, Inc. v. Porterfield (1969), 19 Ohio St.2d 137, 48 O.O.2d 169, 249 N.E.2d 892. According to paragraph two of the syllabus of Ace Steel Baling:

"The 'primary use' of an item of equipment, for the purposes of taxing, or excepting from tax, its sale or use under Sections 5739.02 and 5741.02, Revised Code, is not to be determined solely from a measure of the relative time it is utilized in a taxable and a nontaxable capacity but also from the value of its direct contribution to the product which is processed."

We have consistently held that the board's determinations on the weight to be given evidence and the credibility of witnesses will not be disturbed, absent a showing of patent abuse of discretion. Southwestern Portland Cement Co. v. Lindley (1981), 67 Ohio St.2d 417, 421-422, 21 O.O.3d 261, 264, 424 N.E.2d 304, 307; and Cardinal Fed. S. & L. Assn. v. Cuyahoga Cty. Bd. of Revision (1975), 44 Ohio St.2d 13, 19-20, 73 O.O.2d 83, 87, 336 N.E.2d 433, 437. However, we have reversed BTA decisions on ultimate factual conclusions, i.e., legal conclusions. Avco Broadcasting Corp. v. Lindley (1978), 53 Ohio St.2d 64, 7 O.O.3d 145, 372 N.E.2d 350 (court reversed BTA decision on true or real object test), and Consolidation Coal Co. v. Porterfield (1971), 25 Ohio St.2d 154, 54 O.O.2d 277, 267 N.E.2d 304 (court reversed BTA decision on taxable moment as unsupported by any probative evidence).

In Ace Steel Baling, supra, 19 Ohio St.2d at 142, 48 O.O.2d at 171-172, 249 N.E.2d at 895-896, we held as follows:

"The decision of the board derived from an inference of an ultimate fact, i.e., a factual conclusion derived from given basic facts. The reasonableness of such an inference is a question appropriate for judicial determination. 'What the evidence in a case tends to prove, is a question of law; and when all the facts are admitted which the evidence tends to prove, the effect of such facts raises a question of law only.' Turner v. Turner (1867), 17 Ohio St. 449, 452. See, also, Southern Pacific Co. v. Pub. Util. Comm. (1953), 41 Cal.2d 354, 362, 260 P.2d 70 .

"In this appeal, the findings of the agency not only do not support, but contradict its conclusion. In such case, the latter must fall and the findings must prevail. * * * " (Citations omitted.)

A review as to the reasonableness and lawfulness of the agency decision necessarily includes an examination of the record "to examine the evidence and determine as to the ultimate facts established by it, and whether such ultimate facts furnished sufficient legal predicate upon which to base the order complained of." Hocking Valley Ry. Co. v. Pub. Util. Comm. (1919), 100 Ohio St. 321, 325, 126 N.E. 397, 398. "The fact that a question of law involves a consideration of the...