Summary
exempting roll-off rubbish containers because no separate charge was made for them
Summary of this case from Browning-Ferris Industries, Inc. v. State Tax CommOpinion
No. 70-151
Decided April 28, 1971.
Taxation — Sales and use tax — Personal service exception — R.C. 5739.01 (B) — Transfer of possession of refuse containers — Contract to remove refuse — Containers merely aids in rendition of personal service — No separate charge made for use — Evidence.
The transfer of possession of bins and containers under refuse removal contracts is a personal service transaction, and involves only the transfer of tangible personal property as an inconsequential element, for which no charge is made, and such transfer is exempt from the sales tax under R.C. 5739.01(B).
APPEAL from the Board of Tax Appeals.
Machinery Moving, Inc., doing business as Trashtainer Systems, hereinafter referred to as Trashtainer, is engaged in the business of removing rubbish and refuse from industrial and commercial locations. The three basic methods of refuse removal are (1) hand pickups, a method which sustains no pertinency to this appeal; (2) the container method, which involves a two-man crew dispatched to the customer's location where by means of a hydraulically-operated device the crew dumps the container into appellant's trucks; and (3) the bin method, a one-man operation consisting of removal of the bin from the customer's location, dumping it in a place of appellant's choosing, and then returning it or another similar one to the customer's place of business.
The bins and containers are exclusively designed and fitted for Trashtainer's trucks, and no other company engaged in the rubbish removal business is capable of utilizing the above-mentioned equipment. In either of the two methods of rubbish removal with which we are concerned here, the receptacle is left with the customer who loads it with solid wastes, rubbish or debris. Responsibility for the maintenance and repair of the bins and containers remains with Trashtainer, and customers using the service are charged neither an initial delivery fee nor for the use thereof, notwithstanding their condition or deterioration. Appellant bills its customers as a service, and no extra charge is made for the disposal of the debris at commercial landfill sites. Trashtainer determines what size container or bin a customer shall require, and charges for the service vary according to the size of the device used and the number of pickups made per week. In the overall operational cost to Trashtainer, the maintenance of the bins and containers, plus depreciation, of each is equal to less than one percent.
On April 23, 1969, the Tax Commissioner assessed sales taxes against the appellant, declaring the equipment used to be personal property subject to tax, and required payment of a basic tax of $11,591.25, plus a 15 percent penalty. Appellant, objecting, filed an application for review and redetermination with the Tax Commissioner who affirmed the basic tax, but conditionally cancelled the penalty. Upon appeal, the Board of Tax Appeals affirmed the final order of the Tax Commissioner.
The cause is before this court upon appeal by Trashtainer pursuant to R.C. 5717.04.
Mr. Bernard S. Goldfarb, for appellant.
Mr. Paul W. Brown, attorney general, Mr. George W. Hauswirth and Mr. C. Luther Heckman, for appellee.
The question is whether the transfers of containers and bins by Trashtainer to its customers constitute sales of tangible personal property, taxable under R.C. 5739.02, or whether the transfers are personal service transactions which constitute an inconsequential element for which no separate charges are made, and exempt from taxation.
R.C. 5739.01(B) provides:
"`Sale' and `selling' include all transactions by which title or possession, or both, of tangible personal property, is or is to be transferred. * * * Other than as provided in this section, `sale' and `selling' do not include * * * personal service transactions which involve the transfer of tangible personal property as an inconsequential element, for which no separate charges are made." (Emphasis added.)
We do not agree with the conclusion of the Board of Tax Appeals that the transactions involved herein are taxable as transfers of tangible personal property, and not exempted by R.C. 5739.01(B).
In the controlling case of American District Telegraph Co. v. Porterfield (1968), 15 Ohio St.2d 92, this court affirmed the decision of the Board of Tax Appeals, which held that the signal alarm devices, transferred under central station contracts, are personal service transactions. The court said:
"These cases are unlike Pla Mor, Inc., v. Glander, 149 Ohio St. 295, or Randall Park Jockey Club, Inc., v. Peck, 162 Ohio St. 245, where the tangible items transferred actually performed the desired service. Here, the tangible equipment is useless by itself. * * *
"Further, the tangible property installed by ADT and Morse may well be considered inconsequential, both economically and functionally * * *." 15 Ohio St. 2d at 94-95.
The bins and containers involved herein are used solely to aid the process of refuse disposal and require manpower for performance of the service. In Bunker-Ramo Corp. v. Porterfield (1970), 21 Ohio St.2d 231, this court held that the rental of electronic equipment, known as "quote boards," is a taxable transaction under R.C. 5739.01(B) for the reason that no personnel were involved in directly performing a service. That case is distinguishable from this case, in which the service could not be performed without the manpower needed to directly operate the trucks in conjunction with the bins and containers. Here, the devices used are simply aids in the rendition of a personal service, and are therefore functionally inconsequential to the total service performed by Trashtainer.
Further, the record in this case establishes that these devices are economically an inconsequential element of the transactions. The cost of the devices is insignificant as compared with the other costs involved in performing the service. It is uncontradicted that less than one percent of Trashtainer's operational expense involves the maintenance of the bins and containers. Additionally, the devices remain the exclusive property of the appellant, for the use of which its customers are never charged.
We conclude that, in this case, the transfers of bins and containers are personal service transactions exempt from taxation under the last sentence of R.C. 5739.01(B) because the transactions involve only the transfer of tangible personal property as an inconsequential element, for which no charges are made. We find the decision of the Board of Tax Appeals to be unreasonable and unlawful.
Decision reversed.
O'NEILL, C.J., SCHNEIDER, HERBERT, CORRIGAN, STERN and LEACH, JJ., concur.
MANOS, J., of the Eighth Appellate District, sitting for DUNCAN, J.