Summary
considering whether an airline was "entitled to have its purchases excepted from the Ohio sales tax on the ground that the purchased items are used directly in the rendition of a public utility service"
Summary of this case from Time Warner Operations, Inc. v. WilkinsOpinion
No. 69-656
Decided May 13, 1970.
Taxation — Sales tax — Purchases of aircraft fuel — Commercial airline operating airplanes for transportation of passengers, freight and mail — Fuel used directly in rendition of public utility service — R.C. 5739.01 — Purchases excepted from sales tax.
APPEAL from the Board of Tax Appeals.
The Tax Commissioner of Ohio prosecutes this appeal and urges this court to reverse the decision of the Board of Tax Appeals which held that a sales tax assessment, issued by the Tax Commissioner upon aircraft fuel purchased by Trans World Airlines, Inc., appellee, at Dayton, Columbus and Cleveland, should be vacated for the reason that appellee is a public utility and that the aircraft (jet) fuel involved was purchased and used by appellee directly in the rendition of a public service, and therefore is not subject to sales taxation under R.C. 5739.01(E)(2).
The cause was submitted to the Board of Tax Appeals upon a stipulation of facts, the statutory transcript of the Tax Commissioner, notice of appeal and briefs of the parties.
The sales tax assessment, issued on June 11, 1968, totaled $67,757.75, including statutory penalty, and covered appellee's purchases during the audit period from September 1, 1967, to February 29, 1968.
The stipulation agreed that Trans World Airlines, Inc., is a commercial airline operating a fleet of airplanes for the transportation of passengers, freight and mail over regular routes within and without the state of Ohio; that it solicited patronage from the general public for use of such transportation services, which are detailed in published schedules and tariffs; that such transportation services are operated within and without Ohio under certificates of public convenience and necessity granted by the Civil Aeronautics Board, which also authorizes appellee to carry United States and foreign mails; that Trans World Airlines does not hold any certificate of public convenience and necessity granted by the Ohio Public Utilities Commission, nor has that commission ever regulated or supervised its activities; that if Trans World Airlines' activities of transporting passengers, freight and mail for hire over regular routes within and without the state of Ohio be determined by the Board of Tax Appeals in this appeal, or by any court upon further review, to be the rendition of a public utility service, as that term is used in R.C. 5739.01(E)(2), it is agreed, for the purpose of this appeal, that the aviation fuel so purchased by the appellee, which is the basis for the instant assessment, was used directly in the rendition of the public utility service.
Messrs. Wright, Harlor, Morris, Arnold Glander, Mr. C. Emory Glander and Mr. Robert E. Fultz, for appellee.
Mr. Paul W. Brown, attorney general, Mr. Jon A. Ziegler and Mr. George M. Hauswirth, for appellant.
Appellant Tax Commissioner urges as his first proposition of law that the Board of Tax Appeals erred in finding and determining that appellee's purchases of jet fuel were used directly in the rendition of a public utility service and therefore were not subject to sales taxation by virtue of the provision of R.C. 5739.01(E)(2).
Appellant contends that a consumer which is not defined by Ohio statutory law as a "public utility," and which is neither taxed nor regulated as a "public utility" by the state of Ohio, is not entitled to have its purchases excepted from the Ohio sales tax on the ground that the purchased items are used directly in the rendition of a public utility service.
We are unable to agree with that contention. The pertinent parts of R.C. 5739.01 provide:
"As used in Sections 5739.01 to 5739.31, inclusive, of the Revised Code:
"* * *
"(B) `Sale' and `selling' include all transactions by which title or possession, or both, of tangible personal property, is or is to be transferred * * * for a consideration in any manner * * *.
"* * *
"(E) `Retail sale' and `sales at retail' include all sales except those in which the purpose of the consumer is:
"* * *
"(2) * * * to use or consume the thing transferred * * * directly in the rendition of a public utility service * * *.
"* * *
"(Q) `Used directly in the rendition of a public utility service' means that property which is to be incorporated into and will become a part of the consumer's production, transmission, transportation, or distribution system and which retains its classification as tangible personal property after such incorporation; fuel or power used in the production, transmission, transportation, or distribution; and tangible personal property used in the repair and maintenance of the production, transmission, transportation or distribution system, including only such motor vehicles as are specially designed and equipped for such use." (Emphasis added.)
The stipulation also agrees that the Tax Commissioner's Rule TX-13-01 sets out that "public utility service" includes the furnishing of airplane services to, from, through or within this state and that the rates for such services must be subject to regulation by the Public Utilities Commission of Ohio or a corresponding agency of the United States Government.
We are of the opinion that, as the above-stated rule of the Tax Commissioner recognizes, Trans World Airlines is a public utility and that public utility as used in the Sales Tax Act, quoted supra, does not have a doubtful meaning but is clear and unambiguous. We hold that, since Trans World Airlines is such a public utility, and inasmuch as fuel used in transportation by this public utility is excepted from the sales tax, its purchases of jet fuel are not subject to sales tax in this state.
Accordingly, we conclude and hold that the decision of the Board of Tax Appeals is neither unreasonable nor unlawful and is, therefore, affirmed.
Decision affirmed.
O'NEILL, C.J., LEACH, SCHNEIDER, HERBERT, DUNCAN and CORRIGAN, JJ., concur.
CHIEF JUSTICE TAFT participated in this case which was, however, decided after his death.
LEACH, J, of the Tenth Appellate District, sitting for MATTHIAS, J.