Opinion
No. 37144
Decided February 14, 1962.
Taxation — Sales and use taxes — Lump-sum construction contract — Purchase of personal property to be incorporated into realty — No separation of material and labor — Taxable retail sales.
APPEAL from the Board of Tax Appeals.
The appellant, Fritchie Asphalt Paving Company, the holder of a vendor's license, is an Ohio corporation and during the audit period involved herein (July 1, 1955, to June 30, 1959) was engaged as a paving contractor. The items of sales and use taxes in issue here were assessed on purchases by appellant of tangible personal property used in the completion of paving contracts principally with various tax-exempt organizations such as political subdivisions and religious organizations. Proper exemption certificates were executed and delivered to appellant by tax-exempt organizations.
The majority of the contracts were either oral or based on oral or written estimates given by the appellant to the other contracting parties. In many instances it was not possible, at the time the contracts were entered into, to determine the exact amount of material to be used or labor expended, which amount was broken down as to labor and material after the jobs were completed. In rendering invoices, the appellant noted a breakdown of labor and material charges on copies of the invoices retained by it, but included no such breakdown on the original invoices furnished to customers.
Upon audit, the Tax Commissioner found that the appellant was a "consumer" of the materials purchased which went into the paving jobs, and assessed the sales tax against appellant, based on the cost of the materials to the appellant.
The Board of Tax Appeals, on appeal, held that, since there was no breakdown in the consideration to be received for material and for labor in either the contract or the invoice or other billing rendered by the contractor to the consumer, the appellant was a "consumer" of the materials purchased to fulfill the contract, and sustained the order of the commissioner.
An appeal from the decision of the Board of Tax Appeals brings the cause to this court for review.
Messrs. Meredith, Meredith Tait, for appellant.
Mr. Mark McElroy, attorney general, and Mr. John J. Lokos, for appellee.
The issue presented is whether the oral quotations by the appellant and the later separation of material and labor on the appellant's records constitute a sufficient compliance with Section 5739.01, Revised Code, to place appellant in the category of a "vendor" of the property incorporated into the paving improvements.
That section, as in effect at the beginning of the audit period (July 1, 1955), read in part:
"(B) * * * A construction contract, pursuant to which tangible personal property is or is to be incorporated into a structure or improvement * * * is, if the consideration for such incorporation is agreed upon, charged or paid separately from the consideration for the performance of the other obligations of such construction contract, a sale of such tangible personal property."
During the early part of the audit period, and effective September 30, 1955, subsequent to which all the subject transactions occurred, the section was amended to read in part as follows:
"(B) * * * A construction contract pursuant to which tangible personal property is or is to be incorporated into a structure or improvement * * * is a sale of such tangible personal property, and the construction contractor is the vendor thereof, if the consideration received or to be received for the tangible personal property is separately stated from the consideration received or to be received for the performance of the other contractual obligations. Such separation must appear in the contract between the parties or on the invoice or billing rendered by the contractor to the consumer."
The statute required a "separation." This separation cannot "appear in the contract" if the contract is oral. Notations only on the contractor's copies of invoices in his possession are not a sufficient compliance with the statute. The separation must appear "on the invoice or billing rendered by the contractor to the consumer." The appellant, not having complied with the requirements of the statute, was a "consumer" within the meaning of the statute, not a "vendor." Guy Johnston Lumber Supply Co. v. Bowers, Tax Commr., 170 Ohio St. 395.
The decision of the Board of Tax Appeals is affirmed.
Decision affirmed.
WEYGANDT, C.J., ZIMMERMAN, TAFT, MATTHIAS, BELL and O'NEILL, JJ., concur.
HERBERT, J., not participating.