Summary
In Union Metal Mfg. Co. v. Kosydar (1974), 38 Ohio St.2d 53, 310 N.E.2d 249, it is noted that a taxpayer has the burden of affirmatively establishing sales tax exemption by obtaining the necessary exemption certificates.
Summary of this case from American Handling Equipment Co. v. KosydarOpinion
No. 73-582
Decided April 24, 1974.
Taxation — Sales tax — Exemptions — R.C. 5739.03, construed — Sale presumed taxable, when — Presumption not overcome, when — Exemption certificate not timely furnished or obtained — Evidence.
1. In any sale claimed to be exempt from sales taxes under R.C. 5739.01(E), or 5739.02, except for those sales described in R.C. 5739.02(B) (1) to (B) (11), inclusive, the vendor and the consumer are mutually responsible to insure that a properly executed exemption certificate, covering the transaction, is furnished and obtained within the period for filing the return for the period in which such sale is consummated. (R.C. 5739.03 construed.)
2. If an exemption certificate required by R.C. 5739.03 is not timely furnished or obtained, it will be presumed that all sales are taxable, and that presumption will not be overcome by evidence consisting solely of exemption certificates or other equivalent verification, procured within 60 days of the giving of notice by the Tax Commissioner. (R.C. 5739.03 construed and applied.)
APPEAL from the Court of Appeals for Stark County.
In June 1970, appellant Tax Commissioner initiated a sales and use tax audit of appellee, The Union Metal Manufacturing Company. After finding that a number of sales made by appellee under claim of exemption were not covered by exemption certificates, the commissioner, on July 16, 1970, issued a notice of intent to levy a tax assessment (commonly known as a "60-day letter"). That notice stated, in part:
"* * * You [Union Metal] have, therefore, sixty days in which to establish that any sales in question are not subject to the tax. This cannot be done by obtaining an exemption certificate at this time. A statement from the purchaser, furnishing information concerning the exact use of each item involved, would, however, be given consideration."
Appellee offered four categories of evidence to establish the tax-exempt status of its questioned transactions. With minor exceptions, the commissioner rejected all the proffered proof as insufficient, and the Board of Tax Appeals sustained his position as to three of the four categories. Those were (1) Ohio exemption certificates, (2) letters from purchasers, stating that the items bought were being used directly in manufacturing, or were purchased for resale, and (3) copies of invoices, on which the purchaser had certified that the products were purchased for direct use in manufacturing.
The fourth category of evidence was an Illinois blanket exemption certificate covering sales made by appellee after January 12, 1965, to Western Industries, Inc., a firm located in Chicago. The Board of Tax Appeals found that the Illinois certificate was in substantially the same form as required by Ohio, that there was testimony supporting the assertions on the certificate, and that the transactions covered by the Illinois certificate were, therefore, exempt from Ohio sales tax. Since the commissioner has not appealed this ruling, it is final.
The Court of Appeals reversed the decision of the board, holding that appellee's submitted evidence in the three disputed categories was sufficient to establish the tax-exempt status of the transactions involved.
The cause is now before this court pursuant to the allowance of a motion to certify the record.
Messrs. Black, McCuskey, Souers Arbaugh and Mr. Charles J. Tyburski, for appellee.
Mr. William J. Brown, attorney general, and Mrs. Maryann B. Gall, for appellant.
We face here a question left open by our recent decision in Dayton Sash Door Co. v. Kosydar (1973), 36 Ohio St.2d 120, 304 N.E.2d 388, i. e., whether exemption certificates and other equivalent verification, obtained within the 60-day period prescribed by R.C. 5739.03, are sufficient to establish the exempt status of sales questioned by a 60-day letter.
R.C. 5739.03, as applicable, provides:
"If any sale is claimed to be exempt under division (E) of Section 5739.01 of the Revised Code or under Section 5739.02 of the Revised Code, with the exception of divisions (B) (1) to (B) (11), inclusive, of Section 5739.02, the consumer must furnish to the vendor, and the vendor must obtain from the consumer, a certificate specifying the reason that the sale is not legally subject to the tax. * * * If no certificate is furnished or obtained within the period for filing the return for the period in which such sale is consummated, it shall be presumed that the tax applies. The failure to have so furnished, or to have so obtained, a certificate shall not prevent a vendor or consumer from establishing that the sale is not subject to the tax within sixty days of the giving of notice by the commissioner of intention to levy an assessment, in which event the tax shall not apply."
Appellee argues, in effect, that evidence obtained during the 60-day period following receipt of the commissioner's notice of intent need be no more probative than that contained in an exemption certificate. We disagree.
R.C. 5739.03 clearly requires a vendor to obtain, subject to certain exceptions not applicable herein, an exemption certificate "within the period for filing the return for the period in which such sale is consummated." If an exemption certificate is not timely procured, it is presumed that the sale is taxable. Although the statute provides a 60-day grace period within which a vendor may establish the exempt status of his sale, it should be emphasized that the vendor, at that point, must produce evidence sufficient to overcome the statutory presumption of taxability, which is specifically reiterated in R.C. 5739.03.
None of the documents proffered by appellee contains more than bare conclusions that the questioned transactions involve sales falling within some specific exemptions. Standing alone, a statement by a vendee that an item was purchased for use in manufacturng is insufficient to overcome the presumption of taxability. The burden is upon the vendor to affirmatively establish his right to a claim of exemption. Dayton Sash Door Co., supra, at page 122, and cases cited therein.
After receiving the commissioner's 60-day letter, appellee wrote to the vendees in the transactions in question, and asked for verification that the products involved were purchased for tax-exempt purposes. Some vendees responded by sending Ohio exemption certificates. Others sent brief responses which conveyed no more information than might have been gleaned from an exemption certificate.
Absent specific evidence as to the use of the items involved in the questioned transactions, the commissioner was justified in disallowing appellee's exemption claims.
The commissioner, in his brief, suggests that "a creative taxpayer could submit affidavits, depositions, photographs, or even videotapes of the property to establish that the property is used in an exempt fashion."
The judgment of the Court of Appeals is, therefore, reversed.
Judgment reversed.
O'NEILL, C.J., HERBERT and CELEBREZZE, JJ., concur.
CORRIGAN, W. BROWN and P. BROWN, JJ., concur in the judgment.