Opinion
No. 37126
Decided January 31, 1962.
Taxation — Personal property "used in business" — Exception — Held for "storage only" — Not applicable, when — Manufactured outside and shipped into Ohio — Held until shipped on orders of customers.
APPEAL from the Board of Tax Appeals.
The appellant, The Torrington Company, a corporation organized under the laws of Indiana and authorized to do business in Ohio, manufactures antifriction bearings at its plant in Indiana. Some of the bearings manufactured are standard catalogue items and the others are specially ordered and made to customers' specifications. Items requiring immediate delivery are shipped from the plant in Indiana directly to the customers. Other bearings not requiring immediate delivery are packaged at the plant, labeled by code number only, and shipped to a warehouse, a three-story building, located in Ohio and leased by the manufacturer. This building is staffed by a manager and three assistant warehousemen, employees of the manufacturer who are paid from the Indiana office.
Bearings received at the Ohio warehouse are stored in the same packages in which they were shipped, and no further wrapping or packaging occurs in the warehouse except in the event of an occasional breakage or assembly of several packages in one container for shipment.
Orders for the sale of all bearings are solicited by salesmen located throughout the United States and foreign countries. All orders are forwarded to the Indiana office which handles all billings and payments.
No invoices or billings are ever received or handled at the warehouse. No manufacturing or processing operations are performed on the bearings, and no changes in form, quality, or otherwise are made while the bearings are kept in the warehouse.
Bearings are shipped from the warehouse to customers and to intercompany warehouses in other states and countries for resale. No sales personnel or customers ever go to the warehouse, nor are bearings displayed there. The average turnover in the warehouse is approximately between one and two years. On written orders from the Indiana office, particular packages of bearings are turned over by the warehouseman to a carrier for shipment to customers.
In its 1954 and 1955 personal property tax returns, The Torrington Company excluded its merchandise held in its warehouse in Ohio as merchandise held in storage, under the exception contained in Section 5701.08, Revised Code. The Tax Commissioner held such merchandise to be "kept on hand" and "used in business," within the meaning of the statute, and subject to taxation and ordered that final assessment certificates be issued.
The Board of Tax Appeals affirmed 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. Taft, Stettinius Hollister, Mr. Donald C. Alexander and Mr. Donald G. Rowlings, for appellant.
Mr. Mark McElroy, attorney general, and Mr. John Lokos, for appellee.
The issue presented is whether the bearings held by appellant in its Ohio warehouse during 1953 and 1954 were held "for storage only" or were "used in business," within the meaning of those words as used in Section 5701.08, Revised Code, as in effect during those years.
The statute then read in part:
"Personal property is `used' within the meaning of `used in business' when employed or utilized in connection with ordinary or special operations, when acquired or held as means or instruments for carrying on the business, when kept and maintained as a part of a plant capable of operation, whether actually in operation or not, or when stored or kept on hand as material, parts, products, or merchandise; but merchandise * * * belonging to a nonresident of this state is not used in business in this state if held in a storage warehouse for storage only * * *."
The treasurer of The Torrington Company, when testifying at the hearing before the Board of Tax Appeals, was asked whether he considered the warehouse in Ohio to be a part of the production or manufacturing operation. His answer was, "very definitely." He testified further that in order to show a profit the company must produce a certain quantity and in so doing it would not necessarily have immediate need for all the quantity produced, and the excess would have to be stored for future sales, thus the need for a warehouse. Clearly, the subject property was not stored but was held in inventory at the warehouse, a distribution point, for sale, and, until sold upon orders of customers, the property was returnable as personal property used in business. Joslyn Mfg. Supply Co. v. Bowers, Tax Commr., 170 Ohio St. 575; Grinnell Corp. v. Bowers, Tax Commr., 167 Ohio St. 267.
The decision of the Board of Tax Appeals is affirmed.
Decision affirmed.
WEYGANDT, C.J., ZIMMERMAN, MATTHIAS and BELL, JJ., concur.
O'NEILL, J., dissents.
HERBERT, J., not participating.