Summary
In Wheeling Steel Corp. v. Porterfield (1970), 24 Ohio St.2d 24, 27-28, 53 O.O.2d 13, 263 N.E.2d 249, we stated that "[n]either the Board of Tax Appeals, nor this court, may legislate to add a requirement to a statute enacted by the General Assembly."
Summary of this case from Moore Personnel Serv., Inc. v. ZainoOpinion
No. 70-2
Decided September 24, 1970.
Taxation — Sales tax — Exceptions — Rails, ties and other railroad auxiliary equipment — Used by manufacturer to transfer property between plants for processing — Whether property becomes realty, no relevance to exception.
Standard gauge rails, ties, spikes, switches, plates and other railroad auxiliary equipment used to construct a railroad system, which system is used by a steel manufacturer to transfer tangible personal property within and between its plants in the process of production for sale by manufacturing, processing, assembling, or refining, are transportation equipment excepted from sales and use taxation by virtue of former R.C. 5739.02(B)(18) and R.C. 5741.02(C) (2), without regard to whether the property becomes real property.
APPEAL from the Board of Tax Appeals.
Appellant, a steel manufacturer, has plants at Steubenville and Mingo Junction, Ohio. In the steel-making process, beginning with molten iron, essential operations are conducted at both plants, and material in process is continuously moved by rail within and between the plants.
Involved herein are appellant's purchases of standard gauge rails, ties, spikes, switches, and other railroad equipment which were used to construct a railroad system, within and between the two plants, to transport its goods in the process of production. Although intended for permanent use, the rails and other equipment can be moved to different locations if desired. The Tax Commissioner assessed sales and use taxes on the purchases of the equipment. Wheeling Steel contends that such equipment is specifically excepted from sales and use taxes under former R.C. 5739.02(B)(18) (now R.C. 5739.02[B][16], without change affecting this case), as that section read during the audit period (January 1, 1963, through December 31, 1965), and R.C. 5741.02(C)(2).
R.C. 5741.02(C)(2) reads, in pertinent part, as follows:
"(C) The tax does not apply to the storage, use, or consumption in this state of the following described tangible personal property, nor to the storage, use, or consumption in this state of tangible personal property purchased under the following described circumstances:
"* * *
"(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, inclusive, of the Revised Code."
A Tax Commissioner's rule (TX-1-01) classifies permanent standard gauge railroad tracks as real property for the purpose of taxation.
The Board of Tax Appeals acknowledged that the items were used to transport steel in various stages of manufacturing, but refused to allow the exception because the rails and related accessories were found to be real estate and therefore not entitled to the exception. From the decision of the Board of Tax Appeals, affirming the assessment order, Wheeling Steel has perfected an appeal to this court.
Messrs. Dargusch Day, Mr. Roger F. Day and Mr. Frances St. C. O'Leary, for appellant.
Mr. Paul W. Brown, attorney general, and Mr. R.A. Malrick, for appellee.
The narrow question before us is whether the property in issue is excepted from sales and use taxation by virtue of former R.C. 5739.02(B)(18) and R.C. 5741.02(C)(2). We hold that the railroad rails, ties, and related items are excepted from sales and use taxation.
Appellant's claimed exception, pursuant to former R.C. 5739.02(B)(18), actually is a case of first impression in this court. The cases cited by the parties ( France Co. v. Evatt, 143 Ohio St. 455; and Mead Corp. v. Glander, 153 Ohio St. 539) were decided before former R.C. 5739(B)(18) was enacted. Compare G.C. 5546-2 with 129 Ohio Laws 1336 (effective January 2, 1962). The France and Mead cases were directly concerned with the definition of "retail sale" in G.C. 5546-1, which is comparable to present R.C. 5739.01(E)(2). Former R.C. 5739.02(B) (18), the statute in issue in the present case, was not involved in either of those cases. Therefore, any reliance upon those cases must be made with cognizance of the statutory changes.
During the audit period former R.C. 5739.02(B) read as follows:
"(B). The tax does not apply to the following:
"* * *
"(18) Sales to persons engaged in manufacturing processing, assembling, or refining, of protective shipping materials, or handling and transportation equipment, except motor vehicles licensed to operate on the public highways, used in intra or inter plant transfers or shipments of tangible personal property in the process of production for sale by manufacturing, processing, assembling, or refining, where the plant or plants within or between which such transfers or shipments occur are operated by the same person * * *."
The exception therein covered two types of sales, i. e., sales to certain persons of protective shipping materials and sales to certain persons of handling and transportation equipment where the stated exceptions and qualifications are met. The instant case is concerned only with the latter exception.
For the exception to be available here, former R.C. 5739.02(B)(18) required only that the property be transportation equipment used in intra or inter plant transfers of tangible personal property in the process of production for sale by manufacturing where the plant or plants involved are operated by the same person. Both parties agree that the property involved is used for transportation within and between plants of personal property being processed, but disagree concerning the Tax Commissioner's position which, in effect, will permit exemption only if the property remains tangible personal property.
The fact that the tangible personal property may be used in such a way as to possibly become real estate has no relevance to the exception in question so long as the use meets the specific requirements of the statute. The effect of the board's decision is to legislate a further requirement into R.C. 5739.02(B)(18), to wit, "provided that any transportation equipment must remain tangible personal property after installation and during its use." The addition of such a requirement is both unlawful and unreasonable.
Neither the Board of Tax Appeals, nor this court, may legislate to add a requirement to a statute enacted by the General Assembly. In determining the legislative intent of a statute "it is the duty of this court to give effect to the words used [in a statute], not to delete words used or to insert words not used." (Emphasis added.) Columbus-Suburban Coach Lines v. Pub. Util. Comm., 20 Ohio St.2d 125, at 127. If the General Assembly intended to impose the requirement which the board and the Tax Commissioner advocate it would have written it into the statute, just as it recently did in enacting a similar requirement in subparagraph (Q) of R.C. 5739.01. (See 132 Ohio Laws 1981, 1985.) Although R.C. 5739.02 was also amended in the same session of the General Assembly, it did not add such a requirement in its amendment of present R.C. 5739.02(B)(16), and it is not within our province to do so. Therefore, we find it unnecessary to decide whether, after purchase, the property became real property.
"(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."
Appellant's purchase of rails, ties and related accessories is excepted from sales taxation by virtue of former R.C. 5739.02(B)(18) and from use taxation by virtue of R.C. 5741.02(C)(2). We find that the decision of the Board of Tax Appeals is unreasonable and unlawful, and its decision is, therefore, reversed.
Decision reversed.
O'NEILL, C.J., LEACH, SCHNEIDER, HERBERT and CORRIGAN, JJ., concur.
LEACH, J., of the Tenth Appellate District, sitting for MATTHIAS, J.