Philips Industries, Inc. v. Limbach

Locher, J. The issue presented in this action is whether payment of the annual license tax on aircraft pursuant to R.C. 4561.18 provides an exemption from assessment of the state use tax. Appellant contends that it does. We hold in the negative and accordingly affirm the decision of the Board of Tax Appeals. The standard of review to be applied to this type of action is well-established. “Statutes relating to the exemption or exception from sales or use taxes are to be strictly construed. * * *” Celina Mut. Ins. Co. v. Bowers (1965), 5 Ohio St. 2d 12, 34 O.O. 2d 7, 213 N.E. 2d 175, paragraph one of the syllabus. Our duty is limited to a determination of whether the decision of the Board of Tax Appeals was unreasonable or unlawful. R.C. 4561.17 provides for an annual license tax to be levied upon all aircraft operating over the lands and waters of this state.1 R.C. 4561.18 re [102] quires an owner of an aircraft to license and register the aircraft and to pay the proper license tax. This section provides: “Applications for the licensing and registration of aircraft shall be made and signed by the owner thereof upon forms prepared by the department of transportation and shall contain a description of the aircraft, including its federal registration number, and such other information as is required by the department. “Applications shall be filed with the director of transportation during the month of January, annually and shall be renewed according to the standard renewal procedure of sections 4745.01 to 4745.03 of the Revised Code. Application for registration of any aircraft not previously registered in this state, if such aircraft is acquired or becomes subject to such license tax subsequent to the last day of January in any year, shall be made for the balance of the year in which the same is acquired, within forty-eight hours after such acquisition or after becoming subject to such license tax. Each such application shall be accompanied by the proper license tax which shall be at the following rates: For aircraft other than gliders, listed by the manufacturer thereof as having a maximum seating capacity of either one or two persons, six dollars annually; three persons, eight dollars annually; four persons, twelve dollars annually; five persons, fifteen dollars annually; over five persons, fifteen dollars plus five dollars for each person in excess thereof, annually; and for gliders, three dollars annually. “Such taxes are in lieu of all other taxes on or with respect to ownership of such aircraft. ” (Emphasis added.) It is this last sentence of R.C. 4561.18 upon which appellant bases its argument. The Board of Tax Appeals essentially concluded that the use tax assessed in this instance was not a tax “on or with respect to ownership of such aircraft.” Based on the following discussion, we agree. In Howell Air, Inc. v. Porterfield (1970), 22 Ohio St. 2d 32, 51 O.O 2d 62, 257 N.E. 2d 742, this court examined the claim of a taxpayer that its aircraft were not subject to sales taxes by virtue of the last sentence of R.C. 4561.18. We unanimously held: “Prior to 1951, any aircraft located and used in business in this state was subject to taxation as being ‘personal property located and used in business in this state,’ within the provisions of Section 5328, General Code. In 1951, by the passage of Amended House Bill No. 405 (124 Ohio Laws 852), an annual license fee was levied on aircraft to provide revenue for the expenses of administering the Ohio laws relative to registration thereof, establishment of air markings, etc., and Section 5328, General Code, was amended to exclude from personal property taxation ‘those [aircraft] properly licensed in accordance with the provisions of Sections 6310 to 6310-5 inclusive of the General Code.’ “Section 6310-5, General Code, enacted at that time, as recodified with no essential change, is now the last sentence of Section 4561.18, Revised Code, reading: “ ‘Such taxes are in lieu of all other taxes on or with respect to ownership of such aircraft.’ (Emphasis added.) “The Ohio sales tax is not a tax on or with respect to the ownership of property. It is not a property tax. It is, [103] as specifically designated in Section 5739.02, Revised Code, an excise tax. An excise tax is neither on the ownership of property, nor is it with respect to such ownership. * * *” (Emphasis added in part.) Id. at 33-34, 51 O.O. 2d at 62-63, 257 N.E. 2d at 742-743. Ohio’s use tax is levied pursuant to R.C. 5741.02. That section provides in pertinent part: “(A) For the use of the general revenue fund of the state, an excise tax is hereby levied on the storage, use or other consumption in the state of tangible personal property or the benefit realized in this state of any service provided. * * *” (Emphasis added.) While appellant correctly asserts that the use tax differs from the sales tax,2 the General Assembly did specifically designate it an excise tax in R.C. 5741.02.3 In General Motors Corp. v. Lindley (1981), 67 Ohio St. 2d 331, 21 O.O. 3d 208, 423 N.E. 2d 479, we recognized this specific designation by the legislature and followed Howell Air, supra, in holding that: “The use tax levied under R.C. Chapter 5741 is an excise tax, not an ad valorem, tax. As such, it is imposed ‘neither on the ownership of property, nor is it with respect to such ownership. * * *’ ” (Emphasis sic.) Id. at 333, 21 O.O. 3d at 210, 423 N.E. 2d at 481. We arrived at this conclusion mindful of the fact that the use tax is complementary or supplemental to, but not duplicative of, the sales tax. Id. at 334, 21 O.O. 3d at 210, 423 N.E. 2d at 481. We find our holding in General Motors to be controlling in the cause sub judice. As the use tax is imposed neither on the ownership of property nor with respect to such ownership, it does not fall within the exemption provided by the last sentence of R.C. 4561.18. In reaching this conclusion, we also abide by our previous holding that “* * * [i]n reality, the Ohio sales and use taxes are on transactions — the exercise of a privilege, viz., the right to acquire and use tangible personal property, and they apply only to the transactions by which that privilege is exercised.” (Emphasis sic.) Celina Mut., supra, at 16, 34 O.O. 2d at 9, 213 N.E. 2d at 178. Thus, in accord with our prior decisions and based on the foregoing, we hold that payment of the annual license tax on aircraft pursuant to R.C. 4561.18 does not provide an exemption from assessment of the use tax under R.C. Chapter 5741.4 We also find that the decision of the Board of Tax Appeals was both reasonable and lawful. Accordingly, we affirm the decision of the Board of Tax Appeals. Decision affirmed. [104] Moyer, C.J., Sweeney, Holmes, Douglas and H. Brown, JJ., concur. Wright, J., dissents. Footnotes [1] R.C. 4561.17 provided during the audit period herein: “For the purpose of providing revenue for paying the expenses of administering sections 4561.17 to 4561.222 of the Revised Code relative to the registration of aircraft, for the surveying of and the establishment, checking, maintenance, and repair of aviation air marking and of air navigation facilities, for the acquiring, maintaining, and repairing of equipment necessary therefor, and for the cost of the creation and distribution of Ohio aeronautical charts and Ohio airport and landing field directories, an annual license tax is hereby levied upon all aircraft operating over the lands and waters of this state except the following: “(A) Aircraft owned by the United States or any territory thereof; “(B) Aircraft owned by any foreign government; “(C) Aircraft owned by any state or any political subdivision thereof; “(D) Aircraft operated under a certificate of convenience and necessity issued by the civil aeronautics board or any successor thereto; “(E) Aircraft owned by any nonresident of this state whether such owner is an individual, partnership, or corporation, provided such owner has complied with all the laws in regard to the licensing of aircraft in the state of his residence; “(F) Aircraft owned by aircraft manufacturers or aircraft engine manufacturers and operated only for purposes of testing, delivery, or demonstration; “(G) Aircraft operated for hire over regularly scheduled routes within the state. “Such license tax shall be at the rates specified in section 4561.18 of the Revised Code, and shall be paid to and collected by [102] the director of transportation at the time of making application as provided in such section.” [2] “[T]he ‘use tax’ is complementary or supplemental to the ‘sales tax’ and is not designed to duplicate it.” Celina Mut., supra, at 15, 34 O.O. 2d at 9, 213 N.E. 2d at 178. [3] We also note that no exemption for properly licensed aircraft is included in R.C. 5741.02, which contains its own listing of exemptions from the use tax. [4] This holding is consistent with this court’s interpretation of the purpose of the use tax, especially under the facts presented by the case at bar. “ ‘* * * The purpose behind the imposition of this “use tax” is two-fold. First, it serves to protect the revenues of the state by taking away the advantages of making purchases outside the reach of the state’s sales tax. Second, it serves to protect local merchants against the competition of out-of-state stores not required to charge in-state sales taxes.’ ” (Citation omitted.) General Motors, supra, at 334, 21 O.O. 3d at 210, 423 N.E. 2d at 481.