Opinion
No. 40840
Decided April 17, 1968.
Sales tax — Rare United States coins withdrawn from circulation — Privately sold at prices above face value — Sale of tangible personal property and taxable — Such money not "currency" — "Money" defined for tax purposes.
1. Where rare United States coins are withdrawn from circulation as currency and privately sold at prices substantially above their extrinsic, face, or par values, a tax on the sale of such coins is a valid constitutional exercise of the taxing power of this state and does not infringe upon the exclusive power of the Congress to coin money and regulate the value thereof as provided by Section 8 of Article I of the Constitution of the United States.
2. Money privately withdrawn from circulation and sold or traded as a collector's item at prices substantially above its value fixed by Congress, is not currency. (Section 5701.04, Revised Code, construed and applied.)
3. "Money," as defined for tax purposes by Section 5701.04, Revised Code, requires that its use, or intended use, be by the general public as currency.
4. The sale of rare coins at retail, at prices substantially above par value, in this state is a sale of tangible personal property taxable under Section 5739.02, Revised Code, and is not excluded from the operation of the sales tax statutes by the provision of Section 5701.03, Revised Code, which defines tangible personal property.
APPEAL from the Board of Tax Appeals.
The Board of Tax Appeals affirmed a final order of the Tax Commissioner assessing a deficiency sales tax and penalty against appellant Losana Corporation.
Losana was organized in 1953 for the purpose of investment in securities, real estate, coins, medals, etc. Approximately 85% of the business of Losana was concentrated in investments in coins, largely of United States origin. The following comment is from the decision of the Board of Tax Appeals:
"* * * The stated purpose of the investment in coins for future re-sale was to await or generate an appreciation in value of any particular coin, or coins appellant had purchased and to then sell appellant's stock of coins at a profit."
The business of buying and selling coins is not only a nationwide industry, but is international in scope. There are markets devoted to buying and selling coins operating similar to a stock or grain market.
Exhibit 1 is a series of coin market reports, and comments were published as a "newsletter" by "The Coin Dealer" of Gardena, California. This publication sells for one dollar a copy.
The following comment is from the April 29, 1966, issue of The Coin Dealer, as disclosed in exhibit 1:
"Investors note: The prices in the newsletter are from dealer-to-dealer transactions. As an investor, you may place your buy and sell orders through a dealer for a fee, as you would buy stock through a broker."
In the market transactions involving rare coins there is no reference to the extrinsic value of such coins or to their use as currency. The rare coins are treated as merchandise or a commodity to be bought and sold on a ready market; an activity motivated by profit from repeated transactions.
Losana does not deal directly with the public, but buys and sells coins through its sole shareholder, president and treasurer, Sol Kaplan. He is known to coin collectors as a numismatist and dealer in coins, and does business under the name of Cincinnati Stamp and Coin Company. His purchases for Losana are paid for by his personal check. Such purchases are charged to Losana's inventory and when Kaplan sells a part or all of such purchases, Losana credits the sales from its inventory at the original cost of the coins to Kaplan. The profit goes into the pocket of Kaplan. No sales tax is paid.
The sales tax deficiency and penalty were assessed upon transactions similar to those referred to in the preceding paragraph.
Losana perfected its appeal from the decision of the Board of Tax Appeals to this court as a matter of right.
Messrs. Cohen, Todd, Kite Spiegel and Mr. James Q. Doran, for appellant.
Mr. William B. Saxbe, attorney general, and Mr. W. Robinson Watters, for appellee.
Three questions are urged by Losana. They are quoted from Losana's brief as follows:
Question No. 1:
"The Congress of the United States has the exclusive power to coin money or any other medium of exchange and to regulate the value thereof, and the separate states are precluded from exercising dominion thereover."
Section 8 of Article I of the Constitution of the United States, relative to the coinage of money, states:
"The Congress shall have power * * *
"* * *
"To coin money, regulate the value thereof * * *."
No one claims, nor can it be contended, that there is any reference directly or indirectly, to the coinage of money by the state of Ohio. Likewise, there is no indication whatsoever of any regulation or attempted regulation by Ohio of the value of money. See Knox v. Lee (Legal Tender Cases), 79 U.S. (12 Wall.) 457. It follows, therefore, that neither the General Assembly of Ohio nor the Tax Commissioner has interfered with the power of Congress to coin money or regulate its value.
Question No. 2:
"Money, as defined in Section 5701.04, Ohio Revised Code, in all of its forms is intangible personal property, the sale or exchange of which is not subject to the taxation provision provided in Section 5705.01, et seq."
Section 5701.04 of the Revised Code defines money, as follows:
"As used in Title LVII of the Revised Code, `money' includes gold, silver, and other coin, circulating notes of national banking associations, United States legal tender notes, and other notes and certificates of the United States, payable on demand and circulating or intended to circulate as currency." (Emphasis added.)
We agree that "money," as defined in Section 5701.04 of the Revised Code, is intangible personal property and not subject to taxation under the provisions of Section 5739.01 of the Revised Code, so long as the statutory definition of "money" is strictly respected. It should be noted that, within the limitations set out in the definition, there is one feature or characteristic common to all forms of "money," as defined in Section 5701.04, supra, i. e., circulation as currency. See Klauber v. Biggerstaff, 47 Wis. 551, 560, 3 N.W. 357, 362.
No one claims that the rare coins, bought and sold at retail, in the instant case, constitute circulating currency, and it would be difficult to surmise any characteristics common to "money," as defined in Section 5701.04, supra, and rare coins described in the record in the case at bar.
Statutory "money" will decrease in value or purchasing power during inflation, whereas a rare coin may probably increase in market value under the same circumstances. The conclusion seems inescapable that the rare coins, subject of this action, are tangible commodities, bought and sold in the retail market place as any other commodity and consequently subject to the Ohio Sales Tax.
Question No. 3:
"The character of `money' does not change from intangible personal property to tangible personal property within the meaning of Section 5739.01, Ohio Revised Code, merely because it is considered the inventory of a business inasmuch as the actual value thereof to the government of the United States remains unchanged."
The evidence in the record supports the conclusion of the Board of Tax Appeals where, in its decision, it states:
"The coins which were the stock in trade of appellant are not comparable to money which is deposited in a bank wherein a debtor creditor relationship with the bank and depositor is created. Conversely the coins herein are specific coins, retained by appellant as an inventory or stock in trade in a business and as such are tangible personal property."
The sales tax is difficult to administer. It is complex and intricate. It requires skilled and accurate bookkeeping by the seller. There are those who would evade payment of the tax. The General Assembly recognized this problem and adopted stringent means to combat it and to make the collection of the tax certain. The burden of proof is placed upon the taxpayer to establish an exemption in his favor. For example, Section 5739.02 of the Revised Code provides that in order to secure funds for certain governmental purposes:
"* * * an excise tax is hereby levied on each retail sale made in this state.
"* * *
"For the purpose of the proper administration of Sections 5739.01 to 5739.31, inclusive, of the Revised Code, and to prevent the evasion of the tax, it is presumed that all sales made in this state are subject to the tax until the contrary is established. * * *" (Emphasis added.)
The second paragraph of the syllabus in National Tube Co. v. Glander, 157 Ohio St. 407, reads:
"Statutes relating to exemption or exception from taxation are to be strictly construed, and one claiming such exemption or exception must affirmatively establish his right thereto." (Emphasis added.)
Losana has not established a case for exemption.
The decision of the Board of Tax Appeals is reasonable and lawful and is affirmed.
Decision affirmed.
TAFT, C.J., ZIMMERMAN, MATTHIAS, O'NEILL, SCHNEIDER and BROWN, JJ., concur.