Summary
In Miami Citizens Natl. Bank Trust Co. v. Lindley, 50 Ohio St.2d 249, 364 N.E.2d 25 (1977), the court viewed the providing of printouts of bank transactions as a transfer of tangible property and the real object of the transaction.
Summary of this case from Consolidated Freightways Corp. v. State, Department of Revenue & TaxationOpinion
No. 76-1080
Decided June 22, 1977.
Taxation — Sales taxes — Computer print-outs — Not excepted from taxation, when.
Where a bank uses its management to analyze the business operations of its client correspondent banks and devises programs which organize information taken from clients' records and provide the client with the organized information in computer print-out report forms, which reports are necessary to make informed management, operational, auditing, marketing and other business decisions, the true object of the transactions as shown by the record is the receipt of the printed form which contains the computer-organized data and, therefore, such transactions constitute sales of tangible personal property pursuant to R.C. 5739.01(B). ( Lindner Bros. v. Kosydar, 46 Ohio St.2d 162, approved and followed.)
APPEAL from the Board of Tax Appeals.
This is an appeal by the Miami Citizens National Bank and Trust Company of Miami County from a decision of the Board of Tax Appeals which affirmed a sales tax assessment made by the Tax Commissioner. The bank claimed an exception from the sales tax assessment under the "personal service" provision of R.C. 5739.01(B).
The bank installed a data processing system in 1967 for the purpose of doing its own computer work. Eventually it began doing data processing for other banks and provided those banks with various programs which may be summarized as follows:
(1) A demand deposit program consisting of 20 reports;
(2) a savings account program consisting of 10 reports;
(3) an installment loan program consisting of 13 reports;
(4) a variety of other programs, including the special demand deposit balance analysis report, the F.D.I.C. summary of accounts and deposits report, the time certificate of deposit program, the shareholders accounting program, and the Christmas Club accounting program;
(5) a consulting program involving comparative studies, and special programs which include preparation of correspondence to customers of the correspondent banks; and
(6) payroll and sales analysis programs, offered primarily to customers other than correspondent banks.
Many of Miami Citizens' programs were provided to the correspondent banks on a daily basis. Each program customarily consisted of a series of "reports" which reveal considerable information for use by the correspondent bank in making informed management decisions for future operations.
The customer bank paid a set monthly fee per account, depending upon the type of account; e.g., saving accounts are 15 cents per account per month. Miami Citizens also billed separately for changes requested in a particular customer's program. The sales tax was assessed only on charges for "computer print-outs," and not for programming time.
The cause is before this court upon an appeal as of right.
Messrs. Gaier, Pratt Freed and Mr. Frederick D. Freed, for appellant.
Mr. William J. Brown attorney general, and Ms. J. Elaine Bialczak, for appellee.
The decision of the Board of Tax Appeals is affirmed.
The issue presented to this court is whether Miami Citizens' transactions are excepted from the sales tax under the provisions of R.C. 5739.01(B). That statute provides, in pertinent part:
"`Sale' and `selling' include all transactions by which title or possession, or both, of tangible personal property, is or is to be transferred * * * for a consideration in any manner * * *. Other than as provided in this section, `sale' and `selling' do not include professional, insurance, or personal service transactions which involve the transfer of tangible personal property as an inconsequential element for which no separate charges are made."
Effective August 27, 1976, R.C. 5739.01(B) was amended to include the following:
"The transfer of title or possession, or both, of tangible personal property, or the granting of a license to use or consume tangible personal property, by an electronic data processor in conveying the results of the electronic processing of others' data by such processor is not a sale, and the electronic data processor is deemed to be rendering a service."
The controlling law is set forth in the syllabus of Accountant's Computer Services v. Kosydar (1973) 35 Ohio St.2d 120, 298 N.E.2d 519.
In applying the "real object" test as set forth in the syllabus of Computer Services, supra, the Board of Tax Appeals concluded that the true object sought by the taxpayer's customers was the property produced, i.e., the computer program data in printed form. The board consequently held the transactions taxable.
Both parties to the instant action contend that the principles of Accountant's Computer Services, supra, as applied to the three cases consolidated in that opinion, are dispositive of the issues herein.
The activities of the appellant are substantially identical to those integrated data processing services considered by this court in Lindner Bros. v. Kosydar (1976), 46 Ohio St.2d 162, 346 N.E.2d 690. In that case, American Financial Leasing Services Co. provided valuable services to a bank in a number of fields, including demand deposits, accounting, savings accounts, commercial loan problems, installment loan problems, problems relating to bond portfolio analysis in the trust department, and the problem of maintaining a proper collateral loan program. This court found the transaction taxable upon the authority of Citizens Financial Corp. v. Kosydar (1975), 43 Ohio St.2d 148, 331 N.E.2d 435; Federated Department Stores v. Kosydar (1976), 45 Ohio St.2d 1, 340 N.E.2d 840; and Accountant's Computer Services, supra.
This court holds that where a bank uses its management to analyze the business operations of its client correspondent banks and devises programs which organize information taken from clients' records and provide the client with the organized information in computer print-out forms, which reports are necessary to make informed management, operational, auditing, marketing and other business decisions, the true object of the transactions as shown by the record is the receipt of the printed form which contains the computer organized data and therefore such transactions constitute sales of tangible personal property pursuant to R.C. 5739.01(B).
The decision of the Board of Tax Appeals is, therefore, affirmed.
Decision affirmed.
HERBERT, CELEBREZZE, W. BROWN, SWEENEY and LOCHER, JJ., concur.
I dissent for the reasons given in my dissenting opinions in United States Shoe Corp. v. Kosydar (1975), 41 Ohio St.2d 68, at page 73, and Citizens Financial Corp. v. Kosydar (1975), 43 Ohio St.2d 148, at page 151.