Columbus Equipment Co. v. Limbach

Per Curiam. The commissioner argues that the interest amounts collected from the lessees are part of the “price” of the retail sale and taxable, regardless of the name taxpayer gives them. Taxpayer responds that these amounts were the cost of borrowing money with which the lessee was able to purchase the property and were not part of the “price.” R.C. 5739.02 levies a tax on retail sales and this tax is measured by the “price” of the sale. R.C. 5739.01(H) defines “price” as: “* * * [T]he aggregate value in money of anything paid or delivered, or promised to be paid or delivered, in the complete performance of a retail sale, without any deduction on account of the cost of the property sold, cost of materials used, labor or service cost, interest or discount paid or allowed after the sale is consummated, or any other expense. * * *” The BTA adopted the interpretation of this definition set forth in Columbia Gas of Ohio, Inc. v. Lindley (Feb. 10, 1981), Franklin App. Nos. 79AP-879 through 79AP-882, unreported. In that case, the court recognized the distinction between the “price” of a sale and the interest paid for the use of money to purchase the item sold. The court ruled that an interest charge is not taxable. Prior decisions of this court further hold that not all sums paid in a transaction are part of the “price.” E.g., Grabler Mfg. Co. v. Kosydar (1973), 35 Ohio St. 2d 23, 64 O.O. 2d 14, 298 N.E. 2d 590. This court described “interest” in Fulton v. B.R. Baker-Toledo Co. (1934), 128 Ohio St. 226, 228, 190 N.E. 459, 460-461, as “* * * [a] compensation paid for the use of money. It may be compensation allowed by law or fixed by the parties.” See, also, Black’s Law Dictionary (5 Ed. 1979) 729. Interest is the agreed compensation that a borrower pays to a lender. It is the cost of borrowing money so that a person will have the money to purchase the item. Interest is not a part of the item’s price because it is not related to the cost of the property sold or materials used. R.C. 5739.01(H). In the instant case, taxpayer and its customers agreed that the lease payment would include interest. At the time of purchase, the total paid-in rent, which included the interest and principal payments, was deducted from the “total delivered price.” Taxpayer then computed the total interest that it had charged and added it back to the purchase price. When taxpayer did this, it was not adding compensation to the purchase price, but was retaining the interest that the parties' had agreed was due on and paid with the lease payments. Taxpayer received the interest [64] only once, when the lease payment was made. Since the BTA’s decision is reasonable and lawful, it is hereby affirmed. Decision affirmed. Moyer, C.J., Sweeney, Holmes, Wright and H. Brown, JJ., concur. Locher and Douglas, JJ., dissent.