Opinion
Nos. 36172 and 36173
Decided April 6, 1960.
Taxation — Highway use tax — Failure to file return — Assessment of tax and penalty — Authority of Tax Commissioner to remit penalty — Section 5728.10, Revised Code, and Rule No. 128, Tax Commissioner — Jurisdiction of Board of Tax Appeals to remit penalty imposed by commissioner — Necessity of finding abuse of discretion.
APPEALS from the Board of Tax Appeals.
These causes are before the court on appeals from decisions of the Board of Tax Appeals reversing orders of the Tax Commissioner assessing penalties against the appellees herein under the authority of Section 5728.10, Revised Code. The effect of such reversals is to cause the remission of penalties assessed against appellees as provided in Section 5728.10, Revised Code. We find that the same question is raised in both these cases, and we shall, therefore, consider and dispose of them together.
Both causes arose by way of assessments of the highway use tax (the axle-mile tax) which appellees had failed to pay. Later, appellee Interstate Motor Freight System paid the assessment but contended that the statutory penalty should be remitted on the ground that it had in good faith refused to pay such tax because it was awaiting the outcome of a case involving another taxpayer, which case would determine the validity of the tax. After paying the tax assessment, Interstate requested the Tax Commissioner to remit the entire 15 per cent penalty. The commissioner remitted a part of such penalty but refused to remit the full amount.
Appellee Transport Motor Express, Inc., after paying its tax assessment, requested the Tax Commissioner to remit the penalty assessed, on the grounds that its tax records were adequate and that it had followed the requirements for such remission as set out in Rule No. 126 of the Department of Taxation. The commissioner refused to remit any part of such penalty on the grounds that the taxpayer had failed to maintain adequate tax records and that its failure to pay the highway use tax was due to its own negligence. Transport claims that the Tax Commissioner acted unreasonably in this regard and abused his discretion in refusing to make remission of such penalty.
The causes were appealed to the Board of Tax Appeals where it was determined that the orders of the Tax Commissioner were unreasonable and contrary to law. The board reversed the commissioner's orders and found that the penalties in both cases should have been remitted in their entirety.
Messrs. Calland, Stouffer Asher, Messrs. Warner, Norcross Judd and Mr. Leonard D. Verdier, Jr., for appellees.
Mr. Mark McElroy, attorney general, and Mr. Robert J. Kosydar, for appellant.
The primary question raised by these appeals is whether the Board of Tax Appeals in reviewing an assessment of a penalty by the Tax Commissioner under the provisions of Section 5728.10, Revised Code, must first determine that the Tax Commissioner abused his discretion in assessing the penalty before such board can reverse or modify the assessment.
That such a penalty, like any other assessment made by a taxing authority, is subject to review cannot be questioned. The only issue presented is the basis upon which such assessment may be reversed or modified by the Board of Tax Appeals. To determine this matter we must first look to the statute under which the penalty is imposed.
Section 5728.10, Revised Code, reads in part as follows:
"A penalty of 15 per cent shall be added to the amount of assessment made pursuant to the provisions of this section. The Tax Commissioner shall have power to adopt and promulgate rules and regulations providing for the remission of penalties added to assessments made pursuant to the provisions of this section."
An examination of this section clearly shows that the imposition of the penalty is mandatory with power reposed in the Tax Commissioner to adopt rules and regulations for the remission thereof.
On July 14, 1958, in order to implement the penalty remission power granted by Section 5728.10, Revised Code, the Tax Commissioner promulgated Rule No. 126, which provides in part as follows:
"In the event of a tax assessment to which a 15 per cent penalty has been added under the provisions of the Ohio sales tax, use tax or highway use tax laws is paid in its entirety within 30 days after the date on which notice of assessment is served on the person assessed, the Tax Commissioner may remit such part of the penalty as he may deem proper.* * *"
The statutory power to adopt rules and regulations for the remission of penalties creates a discretionary power in the Tax Commissioner. Thus, the remission of the penalty under Section 5728.10, Revised Code, differs from the ordinary assessment of taxes in that the remission of the penalty, unlike the assessment of a tax, is in the first instance left to the discretion of the Tax Commissioner.
Clearly, therefore, before the Board of Tax Appeals can order the remission of a penalty imposed by the Tax Commissioner under this section it must affirmatively find that the Tax Commissioner abused his discretion in refusing to remit the penalty.
The determination by the Board of Tax Appeals that the orders of the Tax Commissioner assessing such penalties are unreasonable and contrary to law does not in and of itself constitute a finding that the Tax Commissioner abused his discretion in making such orders.
The Board of Tax Appeals failed to determine that the Tax Commissioner abused his discretion in assessing the penalties. It follows that the board's decisions, which in effect remit the penalties, are unreasonable and contrary to law and must be reversed.
The decisions of the Board of Tax Appeals are reversed, and final judgments are rendered for the Tax Commissioner.
Decisions reversed.
WEYGANDT, C.J., ZIMMERMAN, MATTHIAS, BELL and PECK, JJ., concur.