Youngstown Sheet & Tube Co. v. Bowers

• Decision Date: 30 January 1957
• Docket Number: Nos. 34868,34872,s. 34868
• Citation: 140 N.E.2d 313,1 O.O.2d 345,166 Ohio St. 122
• Court: Ohio Supreme Court
• Parties: , 1 O.O.2d 345 YOUNGSTOWN SHEET & TUBE CO., Appellant, v. BOWERS, Tax Com'r, Appellee. YOUNGSTOWN SHEET & TUBE CO., Appellee, v. BOWERS, Tax Com'r, Appellant.

Page 122

166 Ohio St. 122

140 N.E.2d 313, 1 O.O.2d 345

YOUNGSTOWN SHEET & TUBE CO., Appellant, v. BOWERS, Tax Com'r, Appellee.

YOUNGSTOWN SHEET & TUBE CO., Appellee, v. BOWERS, Tax Com'r, Appellant.

Nos. 34868, 34872.

Supreme Court of Ohio.

Jan. 30, 1957.

Syllabus by the Court

1. If, pursuant to Clause 2 of Section 10 of Article I of the Constitution of the United States, the same protection from state taxes can be accorded to an imported fungible commodity such as iron ore as is accorded to goods imported in a package, such protection cannot extend to such iron ore (1) after it has been commingled with other iron ore imported at a different time, even though such other iron ore is of the same grade and was imported from the same place, and (2) after portions of such iron ore have been removed for use in manufacturing.

2. The word 'drawings' as used in Section 5701.03, Revised Code, does not necessarily include specifications relating to drawings.

3. Even though the cost of drawings does not determine their true value for personal property tax assessment purposes, such cost is some evidence of such value at least at a time while the items to which such drawings relate are being constructed and before the completion of those items.

4. Where a substantial cost in preparing a substantial number of drawings is included in the book cost of certain construction projects and where such book cost of such construction projects is taken as the value of those projects for personal property taxation purposes without any deduction therefrom for the value of such drawings, the Tax Commissioner cannot avoid the provisions of Section 5701.03, Revised Code, relating to 'drawings' merely by arguments that he is only taxing the construction projects and that the books of the taxpayer show everything that is taxed as allocated to the cost of those projects.

5. Where the record on appeal to the Board of Tax Appeals from an order of the Tax Commissioner contains substantial evidence, supporting the claim of the taxpayer, the order of the commissioner, to be sustained, must be supported by something more than a mere presumption in its behalf. (Paragraph three of the syllabus of Bloch v. Glander, 151 Ohio St. 381, 86 N.E.2d 318, approved and followed.)

The Youngstown Sheet & Tube Company, herein referred to as the taxpayer, is an Ohio corporation. In its 1954 return, it eliminated from the average value of its reported manufacturing inventories certain inventories of property owned by it and held in various storage places in Ohio. The Tax Commissioner in his final order found these withheld inventories to be taxable. Furthermore, the Tax Commissioner in that order made no deduction from the tax base of any amount on account of 'drawings' which the taxpayer claimed to be exempt from taxation.

On appeal to the Board of Tax Appeals, that board affirmed the order of the Tax Commissioner so far as it related to the 'drawings.' With respect to the property held in storage, the taxpayer had contended that that provision of Section 5701.08, Revised Code, which, prior to September 30, 1955, read, 'but merchandise * * * belonging to a nonresident of this state is not used in business in this state if held in a storage warehouse for storage only,' should have stricken therefrom the words 'belonging to a nonresident of this state' for the reason that those words made such provision unconstitutional and that such provision when so revised excepted such property from taxation. The Board of Tax Appeals determined that it had no power to determine that any part of Section 5701.08, Revised Code, was unconstitutional and that it was therefore bound to render its decision in accordance with the provisions of that statute as it found them.

The taxpayer further contended that certain iron ores imported by it from foreign countries were exempt from taxation by reason of the provisions of Clause 2 of Section 10 of Article I of the Constitution of the United States. This contention was sustained by the Board of Tax Appeals.

The cause is now before this court on appeals by the Tax Commissioner and by the taxpayer from the decision of the Board of Tax Appeals.

Carlton S. Dargusch, Sr., and Jack H. Bertsch, Columbus, for appellant in case No. 34868 and appellee in case No. 34872 C. William O'Neill, Atty. Gen., Larry Snyder and Kiehner Johnson, Columbus, for appellee in case No. 34868 and appellant in case No. 34872.

TAFT, Judge.

For the reasons stated in Allied Stores of Ohio, Inc., v. Bowers, Ohio, 140 N.E.2d 411, the taxpayer's contentions with respect to property held in storage must be rejected, except to the extent that the property so held represented iron ores imported by the taxpayer from foreign countries.

As to such iron ores, the claim for tax exemption is based upon that provision of Clause 2 of Section 10 of Article I of the Constitution of the United States which reads:

'No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspection Laws * * *.'

That constitutional provision has been applied so as to prevent a state tax on property imported from outside the United States so long as it remains in the original package. Hooven & Allison Co. v. Evatt, 324 U.S. 652, 65 S.Ct. 870, 89 L.Ed. 1252; Brown v. State of Maryland, 12 Wheat. 419, 6 L.Ed. 678; Low v. Austin, 13 Wall. 29, 20 L.Ed. 517.

However, where the original package in which property was so imported has been broken, it has been held that the foregoing constitutional provision does not prevent imposition of a state tax upon the property which had previously been imported. F. May & Co. v. City of New Orleans, 178 U.S. 496, 20 S.Ct. 976, 44 L.Ed. 1165.

In the instant cases, it is not necessary to determine whether commodities, which are usually imported in bulk as is iron ore, may ever be exempt from state taxation by reason of that constitutional provision after such commodities have been taken from the ship or vessel that carried them to this country. Cf. Mexican Petroleum Corp. v. City of South Portland, 121 Me. 128, 115 A. 900, 26 A.L.R. 965, and Tres Ritos Ranch Co. v. Abbott, 44 N.M. 556, 105 P.2d 1070, 130 A.L.R. 963, with In re Taxes Pacific Guano & Fertilizer Co., 32 Hawaii, 431, and Mexican Petroleum Corp. of Louisiana v. Louisiana Tax Commission, 173 La. 604, 138 So. 117.

Although it does not appear that the Supreme Court of the United States has ever been called upon to determine when fungible goods, such as iron ore, cease to be imports within the meaning of the foregoing constitutional provision (see annotation, 89 L.Ed. 1279, 1284 et seq.), that court has by its five to four decision in F. May & Co. v. City of New Orleans, supra, provided some guidance with respect to that problem. In that case, it was held that, where goods were packaged in small packages by a manufacturer and then packed in a larger package for shipment, such goods, although still in the unbroken smaller packages, were subject to state taxation as soon as the large shipping package had been broken.

In the opinion by Mr. Justice Harlan it is said [178 U.S. 496, 20...