Opinion
No. 73-384
Decided December 5, 1973.
Taxation — Sales tax — Collection and reporting of tax by vendor — Exemption statutes strictly construed — R.C. 5739.03 — Burden to establish right to exemption — On one claiming exemption — Sales taxable, when.
APPEAL from the Board of Tax Appeals.
Appellee, Tax Commissioner, conducted an audit of sales made by appellant, Dayton Sash Door Company, a wholesale distributor of building materials, during the calendar years 1968, 1969 and 1970, to determine the amount of sales taxes due the state for that period. In a final order, dated April 25, 1972, the Tax Commissioner assessed appellant for such taxes in the amount of $16,322.76; to this was added a penalty of $2,448.41, for a total liability of $18,771.17. Appellant's request for reassessment was denied, and it appealed from the commissioner's order to the Board of Tax Appeals.
At the hearing before the board, the agent of the Tax Commissioner who made the audit testified as to the procedure used in the audit. He testified that, after receiving all the exemption certificates held by the taxpayer for sales made during the audit period, he checked the validity of each. On February 21, 1971, he gave appellant notice of his intention to levy an assessment. Such notification, in the form of a so-called 60-day letter, begins a 60-day period, pursuant to R.C. 5739.03(B), during which a taxpayer may establish that his sales are not subject to the sales tax.
During the 60-day period following the 60-day letter appellant produced evidence establishing that many of the sales were not subject to the tax. Accordingly, the assessment was reduced to $16,322.76, to which was added a penalty of $2,448.41.
Appellant contends that the ultimate tax liability was assessed on sales of $408,694; that approximately three-fourths of those sales (specifically, $301,067.11), made to A D Building Materials, Inc., were entitled to exemption from the sales tax, but that exemption was improperly denied. Appellant acknowledges that no exemption certificate covering those sales was furnished the Tax Commissioner within the 60-day period — it was, however, made available several days after the 60-day period had elapsed — but it contends that the Department of Taxation had in its records evidence which would have substantiated the claimed exemption, and that it was the investigative duty of the commission to examine such evidence.
The Board of Tax Appeals affirmed the assessment order of the Tax Commissioner, and the cause is now before this court upon an appeal from the decision of the board.
Messrs. Cohen, Todd, Kite Spiegel and Mr. James Q. Doran, for appellant.
Mr. William J. Brown, attorney general, and Mr. Will Kuhlmann, for appellee.
This court must decide whether the Board of Tax Appeals acted reasonably and lawfully in deciding that appellant failed to carry its burden of establishing the tax-exempt nature of the questioned sales. The uncontroverted record demonstrates conclusively that it did so act, and we therefore affirm the decision of the board.
R.C. 5739.02 states, in pertinent part:
"* * * it is presumed that all sales made in this state are subject to the tax until the contrary is established."
R.C. 5739.03 requires a vendor to collect, as trustee for the state, the tax charged on each sale. However, he can escape that liability in the manner outlined in R.C. 5739.03(B), as follows:
"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 the transaction is claimed to be exempt under division (B) (13) of Section 5739.02 of the Revised Code, the exemption certificate shall be signed by both the contractor and his contractee and such contractee shall be deemed to be the consumer of all items purchased under such claim of exemption in the event it is subsequently determined that the exemption is not properly claimed. The certificate shall be in such form as the tax commissioner by regulation prescribes. 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. * * *" (Emphasis added.)
Thus, a vendor who fails to obtain an exemption certificate from the consumer is allowed an additional opportunity to establish the tax-exempt nature of sales within 60 days of giving of notice by the Tax Commissioner of his intention to levy an assessment.
This court has consistently held that statutes granting an exemption from a tax are to be strictly construed, and that one claiming an exemption must affirmatively establish his right thereto. National Tube v. Glander (1952), 157 Ohio St. 407; Goldman v. Bentley Post (1952), 158 Ohio St. 205; Wallover Oil Co. v. Ohio Water Pollution Control Bd. (1972), 32 Ohio St.2d 233.
It is admitted by appellant that as to sales made to A D Building Materials, which sales generated the only part of the tax assessment challenged, no exemption certificate was produced within the 60-day period following the giving of notice of the intended assessment on February 21, 1971. Therefore, those sales were taxable, and the tax on such sales was properly assessed. Under the mandatory provisions of R.C. 5739.03(B), the burden is on the vendor to establish his right to sales tax exemption.
In this case, appellant failed to carry its burden of affirmatively establishing its right to exemption from sales taxes, and, under the clear language of the statute, it can not shift that burden to the Tax Commissioner.
Therefore, the decision of the Board of Tax Appeals is affirmed.
Decision affirmed.
O'NEILL, C.J, HERBERT, CORRIGAN, STERN, CELEBREZZE, W. BROWN and P. BROWN, JJ., concur.