Opinion
No. 34373
Decided December 21, 1955.
Taxation — Tax on sale of diesel fuel oil — Fuel used in power equipment in dredging and dock repairing — Not used in interstate or foreign commerce — Sale not excepted from tax — Section 5739.02, Revised Code.
APPEAL from the Board of Tax Appeals.
The appellant, an Ohio corporation with its offices and operating yards located in Cleveland, is engaged in the work of marine contracting, consisting of dredging, building and repairing docks and piers, and pile driving. All the work is performed on the Great Lakes and navigable tributaries thereof, and mostly on Lake Erie within the state of Ohio. This work is done for the federal government, municipalities, industrial corporations, and private concerns. It is necessary to obtain a permit from the Engineering Corps of the United States Army for each job. All work performed by appellant is under supervision and control of an instrumentality of the federal government. The equipment used in the performance of this work consists of diesel tugs, derrick scows and dredges. All such equipment must be and is registered with a federal instrumentality.
Diesel fuel oil for use in this power equipment was purchased by appellant from an oil company in Cleveland and delivered to appellant in Cleveland. Prior to these purchases of fuel oil, appellant gave sales tax exemption certificates to the vendor oil company for all purchases in question here.
The Tax Commissioner levied a sales tax assessment on all purchases by appellant of fuel oil from the oil company in Cleveland during the period from January 1, 1950, to December 31, 1953.
The Board of Tax Appeals, on appeal, affirmed the order of the Tax Commissioner.
An appeal from the decision of the Board of Tax Appeals brings the cause to this court for review.
Messrs. Squire, Sanders Dempsey and Mr. George Farr, Jr., for appellant.
Mr. C. William O'Neill, attorney general, and Mr. Larry H. Snyder, for appellee.
Appellant contends that the sales in question are excepted from taxation under subdivision (B) (18) of Section 5739.02, Revised Code, which provides that the tax does not apply to "sales of ships * * * or vessels used or to be used principally in interstate or foreign commerce, and repairs, alterations, fuel, and lubricants for such ships * * * or vessels"; that it is not necessary to have physical movements between states to come within the category of interstate commerce; that appellant's work is in aid of navigation; and that appellant is engaged in interstate commerce.
The question presented for consideration is whether the sales in question were sales of fuel oil for "vessels used or to be used principally in interstate or foreign commerce," within the meaning of Section 5739.02, Revised Code, supra.
By reason of provisions of Section 5739.02, Revised Code, statutes relating to exemption or exception from sales taxation are to be strictly construed, and one claiming such exemption or exception must affirmatively establish his right thereto. See National Tube Co. v. Glander, Tax Commr., 157 Ohio St. 407, 105 N.E.2d 648.
So far as the record discloses, the fuel oil purchased was consumed in Ohio and on Lake Erie adjacent thereto and was not obtained or used for transportation in interstate or foreign commerce. Although the work done by appellant may facilitate interstate commerce and affect it incidentally, it is distinct from transportation in interstate commerce and is clearly intrastate in character. There is no constitutional inhibition against the imposition of a state sales tax on such local transactions.
If the General Assembly had intended to include in the exception here under consideration activities of an intrastate character which facilitate interstate commerce, the result would be excepting from the tax sales of vessels, fuel therefor, etc., and at the same time taxing sales of land-operated equipment, fuel therefor, etc., used for the very same purpose. This court is of the opinion that the General Assembly did not so intend.
In the enactment of Section 5739.02, supra, the General Assembly intended only to except sales within the state of fuel for vessels, etc., which are used or to be used principally in the transportation of persons or property in interstate or foreign commerce. Appellant's equipment is not so used.
See Detroit International Bridge Co. v. Corporation Tax Appeal Board, 267 Mich. 384, 255 N.W. 368, the judgment in which was affirmed in Detroit International Bridge Co. v. Corporation Tax Appeal Board, 294 U.S. 83, 79 L. Ed., 777, 55 S. Ct., 332.
The sales in question are subject to taxation.
The decision of the Board of Tax Appeals is affirmed.
Decision affirmed.
WEYGANDT, C.J., MATTHIAS, HART, ZIMMERMAN, STEWART, BELL and TAFT, JJ., concur.