Opinion
No. 80-1559
Decided June 3, 1981.
Taxation — Use taxes — Exceptions — Personal service transactions — Purchase of commercial credit rating service — R.C. 5739.01(B), construed.
The purchase of a commercial credit rating service is a personal service transaction involving the transfer of tangible personal property as an inconsequential element for which no separate charges are made, and is therefore excepted from use taxation under the provisions of R.C. 5739.01(B) and 5741.02(C)(2). ( Avco Broadcasting Corp. v. Lindley, 53 Ohio St.2d 64; Credit Bureau v. Collins, 50 Ohio St.2d 270, approved and followed.)
APPEAL from the Board of Tax Appeals.
This is an appeal by the Tax Commissioner from a decision of the Board of Tax Appeals which reversed his denial of a request made by Dun Bradstreet, Inc., appellee, for refund of Ohio use taxes paid. Dun Bradstreet operates a nationwide commercial credit reporting service. Approximately 2,500 reporters are employed by Dun Bradstreet. These reporters continually collect and update information on the financial status of approximately three million businesses in the United States by examining public records, by contacting the business itself and by contacting the business' suppliers and bank.
All of this information is analyzed by a Dun Bradstreet reporter and a report is prepared. The report is continually updated. The customers of Dun Bradstreet subscribe to Dun Bradstreet's services to obtain reports which have already been prepared or which are prepared on the request of the customer.
Dun Bradstreet requested a refund on behalf of Dorcy Cycle Corporation (Dorcy Cycle), for use tax collected from Dorcy Cycle and paid to the state of Ohio for the period from October 1, 1974, to August 31, 1978. Dorcy Cycle which is primarily a supplier of bicycle parts and accessories subscribed to several of Dun Bradstreet's services. These services included a fee paid for reference books issued for the entire United States during March, July and November of each year together with the right to receive 100 telephone responses to inquiries for credit reports. Dorcy Cycle then paid at a set rate to receive additional responses to inquiries for credit reports. Dorcy Cycle also subscribed to Dun Bradstreet's change notification service which provided Dorcy Cycle with notice of changes in the credit rating of selected customers of Dorcy Cycle. To obtain details of the change, Dorcy Cycle was instructed to call or return an attached inquiry ticket.
The information obtained from Dun Bradstreet is used by Dorcy Cycle in making decisions on whether to extend credit to its customers. When a customer requests goods be shipped on credit, Dun Bradstreet's reference books are consulted to check the customer's credit rating. Unless the rating is 5A1, the best rating Dun Bradstreet gives, Dun Bradstreet is contacted to obtain an up-to-date credit report. A Dorcy Cycle employee obtains this report over the telephone and is later sent a written credit report in confirmation. This written report is then filed in the customer's credit file. The credit report may or may not have been prepared especially for Dorcy Cycle.
The Tax Commissioner denied Dun Bradstreet's request for a refund of use tax paid because the commissioner found that the services provided by Dun Bradstreet were not personal services involving only inconsequential transfers of tangible personal property. The commissioner distinguished this court's decision in Credit Bureau v. Collins (1977), 50 Ohio St.2d 270, finding that Dun Bradstreet was trying to establish an informational file and that the information furnished by Dun Bradstreet to its customers was not the product of an independent investigation in response to a customer inquiry but was a product of this file.
The Board of Tax Appeals reversed the commissioner, finding that:
"Giving consideration to the record before the Board of Tax Appeals and to the pronouncement of the Ohio Supreme Court in Credit Bureau of Miami v. Collins (1977), 50 Ohio St.2d 270, and Avco [ Broadcasting Corp. v. Lindley (1978), 53 Ohio St.2d 64], supra, it is the decision of the Board of Tax Appeals that the final order of the Tax Commissioner is unlawful and must be, and hereby is, reversed."
In so finding, the Board of Tax Appeals held that the services provided by appellee were personal service transactions and therefore excepted from use taxation under R.C. 5739.01(B) and 5741.02(C)(2).
This cause is now before this court upon appeal as a matter of right.
Mr. Stanley J. Bowers and Ms. Judy Nicely, for appellee.
Mr. William J. Brown, attorney general, and Mr. John C. Duffy, Jr., for appellant.
The decision of the Board of Tax Appeals is affirmed.
Appellant presents the following proposition of law:
"When credit information is provided on an annual subscription basis through credit reference books and individual credit reports which are not the product of independent investigation prompted by each subscriber's inquiry, the same is not a `personal service' as that term is used in R.C. 5739.01(B) and the transaction is not, therefore, excepted from the definition of `sale.'"
We find the services provided by Dun Bradstreet to fall within the personal service exception of R.C. 5739.01(B), and thus excepted from the use tax under R.C. 5741.02(C)(2).
R.C. 5741.02(C) provides:
"The [use] tax does not apply to* * *:
"* * *
"(2) Tangible personal property, the acquisition of which, if made in Ohio, would be a sale not subject to the tax imposed by sections 5739.01 to 5739.31 of the Revised Code."
R.C. 5739.01(B) provides, in pertinent part, as follows:
"`Sale' and `selling' include all transactions by which title or possession, or both, of tangible personal property, is or is to be transferred, * * *. Other than as provided in this section, `sale' or `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."
In Credit Bureau v. Collins (1977), 50 Ohio St.2d 270, this court considered a similar service as that provided by Dun Bradstreet and found the service to be within the personal service exception of R.C. 5739.01(B). Credit Bureau of Miami County, Inc., maintained files of consumer credit information on approximately 50,000 persons in Miami County, Ohio. Information in these files was obtained from public records, and from credit applications of consumers. Customers of the credit bureau could contact the credit bureau and receive either an oral or written report on a consumer. The information obtained from these reports was utilized by the customer in deciding whether to grant credit to a consumer.
The Board of Tax Appeals in Credit Bureau refused to grant tax exception for the written reports. This court reversed and found that the written reports were excepted under R.C. 5739.01(B), stating in part:
"From an examination of the record in the instant cause, it is our conclusion that the true object sought by appellant's customers is the credit information communicated by the report. Although, as a matter of convenience or preference, a written report may be requested, it is the receipt of information which necessarily constitutes the sine qua non of the transaction between the consumer reporting agency and the person to whom such information is communicated. * * *"
In Avco Broadcasting Corp. v. Lindley (1978), 53 Ohio St.2d 64, the issue was whether certain news and wirephoto services and radio and television rating services fell within the personal service exception of R.C. 5739.01(B). This court found Credit Bureau v. Collins, supra, to be applicable and held, in part, at page 69, as follows:
"As was the case in Credit Bureau, the true object of the transactions herein was `the receipt of the information collected by the employees of the agency.' The written reports were but inconsequential elements of the transactions; hence, the transactions are not taxable. Cf. The Andrew Jergens Co. v. Kosydar (1973), 35 Ohio St.2d 120, 298 N.E.2d 519 (reported with Accountant's Computer Services v. Kosydar, supra).
"An examination of the transactions in question here between appellant and Associated Press makes it clear to this court that the real object of the appellant in subscribing to the service was to obtain the news information supplied by the service, which could be used in its broadcasting operations. The gathering of the news involves intellectual and manual personal effort on the part of those providing the service and it is the service per se which is the real object sought by appellant. The object is not to obtain the saleable end product of an individual's skill. The printed matter which is the end product of the news gathering service is but an inconsequential element of the transaction, the real object of which is to obtain new information. Therefore, the transactions are not taxable."
When we examine the case sub judice in light of Credit Bureau v. Collins, supra, and Avco Broadcasting Corp. v. Lindley, supra, we find that the true object of Dun Bradstreet's transactions with Dorcy Cycle concerned the furnishing of information collected by Dun Bradstreet's employees to Dorcy Cycle. The receipt of the written credit reports and the access to the reference books were inconsequential elements of this service. Dorcy Cycle subscribed to Dun Bradstreet's services to receive credit information obtained through the personal efforts and expertise of Dun Bradstreet's employees. Therefore, the services provided by Dun Bradstreet to Dorcy Cycle fall within the personal service exception of R.C. 5739.01(B).
The decision of the Board of Tax Appeals, being reasonable and lawful, is, therefore, affirmed.
Decision affirmed.
CELEBREZZE, C.J., W. BROWN, WHITESIDE, LOCHER, HOLMES and C. BROWN, JJ., concur.
POTTER, J., of the Sixth Appellate District, sitting for P. BROWN, J.
WHITESIDE, J., of the Tenth Appellate District, sitting for SWEENEY, J.