Sun Finance & Loan Co. v. Kosydar

• Citation: 45 Ohio St.2d 283,344 N.E.2d 330,74 O.O.2d 434
• Decision Date: 17 March 1976
• Docket Number: No. 75-105,75-105
• Court: United States State Supreme Court of Ohio
• Parties: , 74 O.O.2d 434 SUN FINANCE & LOAN COMPANY, Appellee, v. KOSYDAR, Tax Commr., Appellant.

Page 283

45 Ohio St.2d 283

344 N.E.2d 330, 74 O.O.2d 434

SUN FINANCE & LOAN COMPANY, Appellee, v. KOSYDAR, Tax Commr., Appellant.

No. 75-105.

Supreme Court of Ohio.

March 17, 1976.

Walker & Chatfield, Burgess L. Doan, Harold W. Walker and Joseph Beech, III, Cincinnati, for appellee.

William J. Brown, Atty. Gen., and John C. Duffy, Jr., Columbus, for appellant.

PER CURIAM.

The sole issue before this court is whether the business done by Sun's out-of-state consumer finance subsidiaries, which subsidiaries do not operate offices in Ohio, should be included in the R.C. 5725.15 apportionment formula utilized to determine the extent to which Sun's total net worth is to be allocated to Ohio. ¹

There is no question that Sun is a 'dealer in intangibles' as that term is defined in R.C. 5725.01(B). ² As such, Sun is admittedly subject to the Ohio dealer-in-intangibles tax. The question presented, then, is to what extent is Sun so subjected.

Resolution of the issue presented herein requires consideration of a number of statutory enactments.

R.C. 5725.13 provides, in pertinent part:

'The following property shall be listed and assessed at its fair value * * *.

'(A) The shares of the stockholders in an incorporated dealer in intangibles having an actual place of business in this state, to the extent represented by capital employed in this state(.)'

R.C. 5725.14, which concerns the filing of returns and consolidated returns, provides, in pertinent part:

'Each dealer in intangibles shall return to the Tax Commissioner * * * annually, a report exhibiting in detail * * * his resources and liabilities at the close of business on the thirty-first day of December next preceding. * * *

'If a dealer in intangibles maintains separate business offices, whether within this state only or within and without this state, said report shall also show the gross receipts from business done at each such office during the year ending on the thirty-first day of December next preceding.

"Gross receipts' * * * means, in the case of a dealer in intangibles principally engaged in the business of lending money or discounting loans, the aggregate amount of loans effected or discounted * * *.

'* * *

'An incorporated dealer in intangibles which owns or controls fifty-one per cent or more of the common stock of another incorporated dealer in intangibles may, under uniform regulations prescribed by the tax commissioner, ³ make a consolidated return * * *.'

R.C. 5725.15, which sets forth the allocation formula and instructions for valuation, provides, in pertinent part:

'Upon receiving the report required by Section 5725.14 of the Revised Code, the tax commissioner shall ascertain and assess all the shares of such dealers in intangibles, the capital stock of which is divided into shares, representing capital employed in this state, and the value of the property representing the capital, not divided into shares, employed in this state by such dealer in intangibles, according to the aggregate fair value of the capital, surplus, and undivided profits as shown in such report * * *.

'If a dealer has separate offices, whether within this state only or within and without this state, the commissioner shall find the amount of capital employed in each office in this state, which shall bear the same ratio to the entire capital of such dealer, wherever employed, as the gross receipts of such office bears to the entire gross receipts of such dealer, wherever arising.'

Both parties rely upon two prior decisions of this court, Certified Credit Corp v. Bowers (1963), 174 Ohio St. 239, 188 N.E.2d 594, and Household Finance Corp. v. Porterfield (1970), 24 Ohio St.2d 39, 263 N.E.2d 243, in support of their respective positions.

In Certified Credit Corp. v. Bowers, supra, the court held the 'gross receipts formula' to be a reasonable method of allocation of captial and, as such, not violative of either the Due Process or the Commerce Clause of the United States Constitution. In so holding, the court construed and explained R.C. 5725.13, 5725.14, and 5725.15 in the following manner:

'By reading Sections 5725.13, 5725.14 and 5725.15 in pari materia, it is clear that the tax on the shares of shareholders of a dealer in intangibles is assessed at the fair value of the capital employed in this state, allocated on the basis of the ratio of the gross receipts of the Ohio office or offices from consumer financing to the entire gross receipts from the dealer's small-loan and consumer finance business. * * *' 174 Ohio St. at 241, 188 N.E.2d at 597.

We do not construe Certified Credit as dispositive of the instant cause, however, as the opinion in that case does not indicate the manner in which the taxpayer therein operated its business. Although it is clear that out-of-state subsidiaries were involved in Certified Credit, it is not clear whether such subsidiaries were maintained as separately incorporated entities or as non-corporate divisions of the corporate parent. As a difference in R.C. Chapter 5725 taxation may result, as will be discussed infra, such distinction is crucial, and compels rejection of Certified Credit as controlling authority applicable herein.

In Household Finance Corp. v. Porterfield, supra, the court held, 24 Ohio St.2d at page 42, 263 N.E.2d at page 245, that '* * * (T)he burden of the DIT tax falls * * * upon its (HFC's) issued...