Warren Tel. Co. v. Bowers

Citation180 N.E.2d 595,173 Ohio St. 164
Decision Date28 February 1962
Docket NumberNo. 37127,37127
Parties, 18 O.O.2d 435 WARREN TELEPHONE CO., Appellant, v. BOWERS, Tax Com'r, Appellee.
CourtUnited States State Supreme Court of Ohio

Vorys, Sater, Seymour & Pease, James A. Gorrell, Columbus, Hoppe, Day & Ford and William Hewitt, Warren, for appellant.

Mark McElroy, Atty. Gen. and John J. Dilenschneider, Columbus, for appellee.

PER CURIAM.

Inasmuch as the provisions of the Sales and Use Tax Acts are the same, we will discuss this matter in relation to the Sales Tax Act.

This cause presents to us the problem of applying the Sales Tax Act to a particular set of facts. In this, the primary determination must necessarily rest with the taxing authorities, whereas our function is to determine whether the Board of Tax Appeals properly applied the statute and rules laid down by this court to the given factual situation. As was said in White Castle System, Inc. v. Bowers, Tax Com'r, 172 Ohio St. 141, 174 N.E.2d 108, 'it is not the function of this court ot substitute its judgment for that of the Board of Tax Appeals on such factual issues but only to determine from an examination of the record whether the decision [of] the board is unreasonable or unlawful.'

The board in its opinion categorized the material subject to taxation as used or consumed in constructing, remodeling, repairing and maintaining areas used for office space, rest rooms, lockers, a lobby, commercial air conditioning, a lunchroom, equipment storage, a driveway, classroom purposed and yard lights. An examination of the record shows that much of the material involved was used primarily for the commercial operation of the business, that is, for the billing of customers, the accepting of payments and the ordering of new telephone installations. The rest of the material subject to taxation was used in construction and equiping rest rooms, quiet rooms for operators and lunchrooms for the convenience of the employees.

The exception extended public utilities from the sales tax is found in Section 5739.01(E)(2), Revised Code, the pertinent portion of which reads as follows:

'(E) 'Retail sale' and 'sales at retail' include all sales except those in which the purpose of the consumer is:

* * *

* * *

'(2) * * * to use or consume the thing transferred * * * directly in the rendition of a public-utility service * * *.'

The general rule as to the exception of property used in business from the sales tax is that such property, in order to be entitled to such exception, must be indispensable to and directly connected with the actual manufacturing or processing of the particular article to be sold. Jackson Iron & Steel Co. v. Glander, Tax Com'r, 154 Ohio St. 369, 373, 96 N.E.2d 21; General Motors Corp. v. Bowers, Tax Com'r, 169 Ohio St. 361, 364, 159 N.E.2d 739.

However, the appellant urges that, under the cases of Athens Home Telephone Co. v. Peck, Tax Com'r, 158 Ohio St. 557, 110 N.E.2d 571, and Erie R. Co. v. Peck, Tax Com'r, 160 Ohio St. 322, 116 N.E.2d 304, the rule applicable to one engaged in rendering a public utility service is different from that applicable to one producing tangible personal property for sale, and that under those cases the above-mentioned property was entitled to be excepted from taxation. Appellant in making this contention relies on the following language in the Athens case, supra:

'The instant cases do not involve the production of property. Instead it is the rendition of service.

'Is this difference in the General Assembly's language important? This court is of the opinion that the contrast is significant and may not be disregarded. It seems unnecessary to labor the point that 'production of property' and 'rendition of servic' are not synonymous terms.

'But it is urged that in 1938 the word 'directly' was inserted in both provisions by amendment and must be considered. This, of course, is true. However, it does not follow that the common use of this one word renders the remainder of the two terms synonymous. Illustrative of this is the obvious fact that production ordinarily may be pursued part of each day, week or year. In contrast, the rendition of service by these appellants must be continuous 24 hours a day, seven days a week and 52 weeks a year. It does not consist solely of furnishing poles, wires, switchboards and other equipment. A substantial part of the rendition of the service is keeping the entire system in continuous operation. This requires the immediate and direct use of the concededly indispensable automotive facilities here involved.'

Basically, although appellant avoids the term, it is urging that so far as public utilities are concerned Ohio has adopted the integrated-plant theory. In relation to the production of property, this theory has been rejected in Ohio. The syllabus of Youngstown...

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11 cases
  • Canton Malleable Iron Co. v. Porterfield
    • United States
    • United States State Supreme Court of Ohio
    • May 24, 1972
    ...excepted from the tax because they are not used or consumed (directly) in the manufacturing process'), and Warren Telephone Co. v. Bowers (1962), 173 Ohio St. 164, 180 N.E.2d 595. Based on our decisions from Saunders Mills, supra (139 Ohio St. 227, 39 N.E.2d 526), to Warren Telephone, supra......
  • Courier Citizen Co. v. Commissioner of Corporations and Taxation
    • United States
    • United States State Supreme Judicial Court of Massachusetts
    • January 20, 1971
    ...295 (machines used in producing sand molds, in which metal castings are made, held not exempt). See also Warren Tel. Co. v. Tax Commr., 173 Ohio St. 164, 165, 180 N.E.2d 595. Cases dealing with fuel include State v. Cherokee Brick & Tile Co., 89 Ga.App. 235, 242, 79 S.E.2d 322 (gas used to ......
  • Com. v. Community Motor Bus Co., Inc.
    • United States
    • Supreme Court of Virginia
    • August 30, 1973
    ...immediately in production of tangible personal property or rendition of public-utility service. Warren Telephone Co. v. Bowers, 173 Ohio St. 164, 166, 180 N.E.2d 595, 597--598 (1962); Canton Malleable Iron Co. v. Porterfield, 30 Ohio St.2d 163, 172, 283 N.E.2d 434, 440 (1972), and cases the......
  • Zelnick v. Troy City Council
    • United States
    • Court of Common Pleas of Ohio
    • January 31, 1997
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