Opinion
No. 36547
Decided December 21, 1960.
Taxation — Sales tax — Lump-sum contracts for street improvements — Invoices separately stating material and labor costs — Furnished after work completed but before final payment — Section 5739.01 (B), Revised Code, not complied with, when.
APPEAL from the Board of Tax Appeals.
This is an appeal by Fellows Construction Company from a decision of the Board of Tax Appeals entered March 30, 1960, affirming a final order by the Tax Commissioner, dated July 14, 1959, which order confirmed a sales tax assessment against the appellant in the amount of $1,819.99 for the audit period from January 1, 1953, to December 31, 1956, inclusive.
A summary of the facts appears in the entry of the Board of Tax Appeals as follows:
"On consideration of the facts in the case as they were submitted to the board, it appears that the sales tax assessment * * * is the aggregate amount of bracket sales taxes extended against appellant as a consumer on purchases made by it from time to time during the year 1956 of concrete, sand, gravel, stone, pipes, tiles, and other materials made and consumed by it as a contractor in constructing improvements on seven different streets or sections thereof in Columbus, Ohio, on several contracts therefor entered into by and between appellant and the city during said year providing for the construction of such street improvements. Each and all of these contracts were lump-sum contracts in the sense that there was no separate statement therein of the consideration to be paid to the appellant for the materials to be used and consumed in the construction of said several improvements from that to be paid to it for labor and other services and obligations entering into the performance of the contracts by the appellant. Likewise, no invoices or billings of any kind were made by it and rendered to the city for the payment of any moneys due the appellant during the progress of the work under these contracts or on the completion thereof; but progress payments were made to the appellant on these contracts from time to time on engineering estimates. And on the completion of the contracts by the appellant all moneys due it were thus paid in full except a 10% retainage on each contract, which retainages were then or shortly thereafter transferred to the contractors trust fund of the city to cover the contingent liability of the city as to the payment of such retainages to the appellant. And it appears that all of such retainages have since been paid to the appellant. Four of these contractual projects were completed by the appellant in 1956; and the other three were completed on September 17 and prior thereto in the year 1957, while, as above noted, all of the materials used and consumed by the appellant in the performance of these contracts were purchased by it in the year 1956. No sales taxes were paid by appellant on the purchase of these materials, but all of the same were purchased on blanket certificates of exemption executed and delivered by appellant to the several suppliers of such materials. Sometime in the month of June 1957, a sales tax examiner made an audit of appellant's business for the audit period above stated, which audit resulted in the sales tax assessment against the appellant herein complained of which assessment was made by the Tax Commissioner under date of July 23, 1957.
"It further appears from the evidence in the case that on September 26, 1957, after the construction of these several street improvements had been completed by the appellant, and after it had been paid for the work done by it on these several contracts, except as to the retainages above referred to, and after the sales tax assessment against the appellant herein complained of was made by the Tax Commissioner, and while the same was pending before the Tax Commissioner on a petition for reassessment, Mr. Floyd C. Redick, then Director of Public Service of the City of Columbus, directed a letter to the appellant in which he said:
"`It is requested that you submit to this office a new statement on each of the above contracts, separating the cost for labor and material in order that consideration may be given for sales tax exemption purposes.'
"Responsive to this communication, the appellant, on or about October 1, 1957, made and rendered to the city statements with respect to each of said several contracts in which it made a complete breakdown between the cost of material and labor in the performance of said contracts and each of the same."
With respect to the "statements" referred to in the last paragraph quoted above, counsel stipulated before the Board of Tax Appeals as follows:
"8. On October 1, 1957, the contractor, Fellows Construction Co., submitted billings to the city of Columbus on each of the subject contracts, copies of which are attached hereto as exhibits, B, C, D, E, F, G, and H.
"In said billings, the consideration received or to be received for the tangible personal property incorporated into the structure or improvement on and becoming a part of real property was separately stated from the consideration received or to be received for the performance of the other contractual obligations."
On the above-recited facts, the Board of Tax Appeals affirmed the order of assessment of the Tax Commissioner, and the cause is now before this court pursuant to the provisions of Section 5717.04, Revised Code.
Messrs. Bricker, Evatt, Barton, Eckler Niehoff and Mr. Richard C. Pickett, for appellant.
Mr. Mark McElroy, attorney general, and Mr. Stewart R. Jaffy, for appellee.
In the language of the appellant, the question of law presented by this appeal is whether the furnishing of invoices by a contractor separately stating the consideration for labor and that for materials furnished in the performance of a construction contract subsequent to completion of the work but prior to receiving final payment from the contractee is sufficient compliance with paragraph (B) of Section 5739.01, Revised Code, so as to place the contractor in the category of a vendor of the tangible personal property incorporated into the improvement.
The appellee states the issue to be, where a construction contractor enters into lump-sum construction contracts not separately stating the cost of material from the cost of labor and completes the work to be performed under these contracts, is such a contractor entitled to the benefit of a tax exemption under Section 5739.01, Revised Code, by virtue of his subsequently sending "new statements" to the contractee?
In 1955, the Legislature amended the pertinent portion of Section 5739.01 (B), Revised Code (126 Ohio Laws, 157), to read as follows:
"A construction contract pursuant to which tangible personal property is or is to be incorporated into a structure or improvement on and becoming a part of real property is a sale of such tangible personal property and the construction contractor is the vendor thereof, if the consideration received or to be received for the tangible personal property is separately stated from the consideration received or to be received for the performance of the other contractual obligations. Such separation must appear in the contract between the parties or on the invoice or billing rendered by the contractor to the consumer." (New language is italicized.)
The appellant company contends that its rendering of "billings" to the city on October 1, 1957, constituted sufficient compliance with the then operative provisions of Section 5739.01 (B) as to exempt it from the sales tax assessment. Therein lies the crux of this whole case. The words, "invoice" and "billing," are not defined in the statute, and therefore we must fall back on paragraph three of the syllabus in the case of Baker v. Powhatan Mining Co., 146 Ohio St. 600, 67 N.E.2d 714, which states:
"In the absence of any definition of the intended meaning of words or terms used in a legislative enactment they will, in the interpretation of the act, be given their common, ordinary and accepted meaning in the connection in which they are used."
See, also, the per curiam opinion in State, ex rel. Church of the Nazarene, v. Fogo, Registrar, 150 Ohio St. 45, 79 N.E.2d 546.
The Board of Tax Appeals noted in its entry that Section 162 of the Charter of the City of Columbus was amended, effective May 8, 1956, to read as follows: "If the work bid for embraces both labor and material it shall not be necessary to separately state the price for labor and/or material." It also noted that "each and all contracts for the construction of said several street improvements were lump sum contracts in that there was no separation of labor and material in the cost price or prices thereof." The entry then states as follows:
"As to this, the term `invoice' or `billing,' as applied to a construction contract, would seem to be a statement made and rendered by the contractor to the owner from time to time during the progress of the work under the contract or at the completion thereof, setting out the amount of completed work done by the contractor during the time covered by the invoice or billing, and likewise setting out the amount of money due the contractor on the price or prices provided for in the contract. And an invoice or billing of this kind is a recognized means by which the contractor secures payment of monies due him in the performance of the contract. If this view as to the character and purpose of an invoice or billing, as these terms are used in Section 5739.01, Revised Code, is measurably correct, it follows that, judging by their content, the statements filed by the appellant with the city under date of October 1, 1957, above referred to, do not even pretend to be invoices or billings. The appellant's contracts with the city had been completed and the contract prices therefor had been fully paid to the appellant except the 10% retainage as to each contract, which retainages had been paid into the contractor's trust fund and were payable — and thereafter paid to the appellant out of said fund without any reference whatever to the statements filed by the appellant with the city under date of October 1, 1957.
"In conclusion, we are of the view that nothing that was done, or attempted to be done, by the city or the appellant after this sales tax assessment was made, had, or could have, any retroactive effect with respect to said sales tax assessment, which was a legal and valid assessment under the then applicable provisions of Sections 5739.01 and 5739.02, Revised Code. Cf. State, ex rel. Struble, v. Davis, 132 Ohio St. 555 (Syl. 4)." (Emphasis added.)
We are in accord with the foregoing statement, and we find the decision of the Board of Tax Appeals to be neither unreasonable nor unlawful. It is, therefore, affirmed.
Decision affirmed.
WEYGANDT, C.J., ZIMMERMAN, BELL and HERBERT, JJ., concur.
TAFT and MATTHIAS, JJ., dissent.
O'NEILL, J., not participating.