Summary
In Dayton Press, we affirmed the BTA's finding that certain equipment being held for disposal was not used in business, and, therefore, not taxable.
Summary of this case from United Tel. Co. v. TracyOpinion
No. 88-186
Submitted February 22, 1989 —
Decided April 26, 1989.
Taxation — Personal property tax — Liquidation of corporate assets — Equipment is held for disposal and not "used in business," when — R.C. 5709.01(B) and 5701.08, applied.
APPEAL from the Board of Tax Appeals, Nos. 85-C-640 and 85-F-641.
Dayton Press, Inc., appellee. printed several national magazines. In 1979, Dayton Press, a division of the Charter Company, began incurring huge losses that made it uneconomical to continue in business. After an employee buy-out failed, the Charter Company announced, in March 1981, that it was closing Dayton Press. After the magazine publishers found others to print the magazines, Dayton Press began selling its unneeded equipment. Some equipment was sold as used equipment, and other equipment was sold as junk. On May 21, 1982, the last magazine was printed at Dayton Press, and the equipment was no longer used by Dayton Press.
All electrical power and gas were also shut off on May 21. Within several days, the electrical transformers were sold or scrapped and removed. Equipment salvagers, in exchange for providing security, removed the electrical pipe conduit and copper wiring throughout the plant to be sold as salvage. Thus, the plant could not be operated shortly after May 21.
Dayton Press continued to offer the remaining equipment for sale. To preserve the equipment for sale, Dayton Press replaced water in the printing presses with antifreeze and heavily greased or oiled the equipment. On December 31, 1982, the tax listing date for the tax year 1983, and December 31, 1983, the tax listing date for the tax year 1984, Dayton Press still owned some equipment, which it offered for sale.
For each tax year, Dayton Press filed an Ohio personal property tax return, which included a "Claim For Deduction From Book Value" for this equipment, contending that the equipment was worthless. The Tax Commissioner, appellant, audited the returns and denied the deductions in part. She ruled that Dayton Press was engaging in business when it liquidated its assets and that the equipment was, thus, "used in business." However, she did not value it at depreciated book value. Rather, she found that the true value of the equipment was either the bona fide asking price or its selling price. For the tax year 1983, she determined this value to be $1,762,880 and, for the tax year 1984, $831,800.
On appeal, the Board of Tax Appeals ("BTA") found that Dayton Press was not in the printing business and did not use the subject property for printing on either tax listing date. Therefore, the BTA ruled that the equipment was not "used in business" and not subject to the personal property tax, reversing the commissioner's assessments.
The cause is now before this court upon an appeal as of right.
Porter, Wright, Morris Arthur and Ted B. Clevenger, for appellee.
Anthony J. Celebrezze, Jr., attorney general, and James C. Sauer, for appellant.
All personal property located and used in business in Ohio is taxable unless expressly exempted. R.C. 5709.01(B). The value of all taxable personal property used in business must be listed as of December 31 of each year. R.C. 5711.03. R.C. 5701.08 defines "used in business" and "business":
"(A) Personal property is `used' within the meaning of `used in business' when employed or utilized in connection with ordinary or special operations, when acquired or held as means or instruments for carrying on the business, when kept and maintained as a part of a plant capable of operation, whether actually in operation or not, or when stored or kept on hand as material, parts, products, or merchandise.* * *
"(B) `Business' includes all enterprises, except agriculture, conducted for gain, profit, or income and extends to personal service occupations."
The commissioner, conceding that the equipment was not capable of operation, argues that Dayton Press held the equipment for sale and that this was an enterprise for gain. Thus, according to the commissioner, the equipment was "used in business." Since we hold that the equipment is no longer used in Dayton Press's business of printing magazines, we disagree and affirm the BTA.
We have held that "[p]roperty is not `used in business' within the meaning of R.C. 5701.08 when it is no longer held for any business purpose other than disposal." Hatchadorian v. Lindley (1986), 21 Ohio St.3d 66, 69, 21 OBR 365, 367, 488 N.E.2d 145, 147. In Hatchadorian, the property had been retired in place pending removal for junk value and was not capable of use in the taxpayer's business. The taxpayer there had no intention to use the property and was simply holding it for disposal.
Here, Dayton Press's only purpose in holding this equipment was disposal. Dayton Press earned its profit by transforming paper and ink into a magazine, a purely manufacturing enterprise. See R.C. 5711.16. Its business was not to liquidate its operation. Since Dayton Press no longer used the equipment in its printing business and since it held the equipment for disposal, the equipment in question was not "used in business" and was not taxable. As this court declared in National Distillers Products Corp. v. Peck (1952), 158 Ohio St. 369, 373, 49 O.O. 243, 244-245, 109 N.E.2d 493, 495, "* * * it would be a weird concept to declare that property was acquired or held as means or instruments for carrying on the business, or was kept and maintained as part of a plant capable of operation, when there was no business, no plant, and no capacity for operation."
Accordingly, the BTA's decision is reasonable and lawful and is, therefore, affirmed.
Decision affirmed.
MOYER, C.J., SWEENEY, HOLMES, DOUGLAS, WRIGHT, H. BROWN and RESNICK, JJ., concur.