Summary
In Red Fox Stables, the Ohio Supreme Court held that the assumption that tax assessments and exemptions are based solely on the nature of the commodity sold was without merit.
Summary of this case from Pica Corp. v. TracyOpinion
No. 71-369
Decided January 5, 1972.
Taxation — Sales tax — R.C. 5739.02 — Riding and horse stables — Purchase and sale of horses — Taxpayer not engaged in agriculture — Not exempt from tax.
APPEAL from the Board of Tax Appeals.
Red Fox Stables, Inc., appellant herein, operates a riding academy at Milford, Ohio. Appellant maintains stables for approximately 80 horses, about half of which are boarded for a fee, the remainder being owned by appellant and used for giving riding instructions. Appellant also buys and sells horses but does not engage in breeding and raising horses.
The business, consisting of three barn areas, an indoor and outdoor riding range and pasture land, is located on a 187-acre tract of land. The business is operated during the entire year, employing six grooms, three instructors and a manager. A tack shop is maintained for purposes of selling clothing and supplies used in conjunction with appellant's business.
The Tax Commissioner, in his final order of October 2, 1970, made a sales and use tax assessment against the appellant. The assessment primarily involved the purchase and sale, by appellant, of horses. The final order provided, as follows:
"Based upon the evidence in the file and other available information, it is concluded that the assessee is not engaged in farming for sale and/or rendering farming services for others. The evidence indicates that the petitioner's primary functions are operating a riding school, and boarding and training horses owned by others. Additional functions are operating a tack shop, making taxable sales of horses which were used in the training school, and in buying horses for resale, some of which are trained as show horses."
The assessment order was affirmed by the Board of Tax Appeals, and has been appealed to this court.
Messrs. Boelter, Fisher Sullivan and Mr. James H. Sullivan, Jr., for appellant.
Mr. William J. Brown, attorney general, and Mr. David S. Bloomfield, for appellee.
Appellant contends that he is being denied equal protection of the law in that sales taxes are not assessed on the sales of horses at "claiming races" in the state of Ohio. Appellant argues that all sales of "horses" must be treated the same for purposes of the Ohio Retail Sales Tax Act. Such contention assumes that tax assessments, and exemptions, are based solely on the nature of the commodity sold. That contention is without merit.
The very nature of tax assessments and exemptions requires that certain items and persons be classified. Classifications for which exemptions have been created are found in R.C. 5739.02(B), and could include the sale of a "horse" in the following situations: a casual sale (R.C. 5739.02[B][8]); certain sales by a church or organization not for profit operated exclusively for charitable purposes (R.C. 5739.02[B][9]); sales not within the taxing power of this state under the Constitution of the United States (R.C. 5739.02[B][10]); certain sales to churches (R.C. 5739.02[B][12]); and sales to persons engaged in farming agriculture, horticulture, or floriculture (R.C. 5739.02[B][17]).
Those exceptions are based primarily upon the status of the vendor or vendee, not on the subject matter of the sale. If the status of the vendor at a claiming-race sale qualifies such sale for an exemption, then such classification is reasonable and does not deprive the appellant of equal protection of the laws.
Appellant contends further that the Board of Tax Appeals erred in holding that appellant is not engaged in agriculture, and also by failing to state a basis for that holding.
It should be noted that the Board of Tax Appeals, in passing on this issue, cited and quoted from R.C. 5739.01, 5739.02 and 5739.03. When read in pari materia those sections are directly in point. As such, they provide adequate reason for the holding of the board. Indeed, this court affirms the board's decision on the same basis.
It is true that appellant's business takes place in a large rural area. It is equally true that it involves the care of domestic animals. However, this is not dispositive of the question of whether appellant is engaged in agriculture. As stated in 3 American Jurisprudence 2d 752, Agriculture, Section 1:
"Whether a particular type of activity is agricultural depends in large measure upon the way in which that activity is organized. The question is not determined by the necessity of the activity to agriculture nor by the physical similarity of the activity to that done by farmers in other situations. The test is whether the activity in the particular case is carried on as part of the agricultural function or is separately organized as an independent productive activity."
We have examined the pertinent statutes and the definition of "agriculture" as set forth by the Board of Tax Appeals in Yoder Bros. v. Bowers (1959), 169 Ohio St. 211. That definition was expanded by this court in Benken v. Porterfield (1969), 18 Ohio St.2d 133. We also note and approve the Tax Commissioner's definition of "agriculture" which states: "Agriculture is defined as the cultivation of the soil for the purpose of producing vegetables and fruits and includes gardening or horticulture, together with the raising and feeding of cattle or stock for sale as a business." Rules of Tax Commissioner, TX-15-10.
Upon completion of such examination, and a review of the facts of this case, we conclude that appellant's business does not fall within the scope of agriculture.
We hold that the decision of the Board of Tax Appeals is reasonable and lawful, and it, therefore, is affirmed.
Decision affirmed.
O'NEILL, C.J., SCHNEIDER, HERBERT, VICTOR, CORRIGAN, STERN and LEACH, JJ., concur.
VICTOR, J., of the Ninth Appellate District, sitting for DUNCAN, J. JUDGE VICTOR of the Court of Appeals was, pursuant to Section 2 of Article IV of the Constitution of Ohio, duly directed by the Chief Justice "to sit with the justices of the Supreme Court in the place and stead of" JUSTICE DUNCAN and JUDGE VICTOR did so and heard and considered this cause prior to the resignation of JUSTICE DUNCAN on November 28, 1971.