Opinion
No. 77-187
Decided November 16, 1977.
Taxation — Personal property — Foreign holding company — Account receivable from Ohio subsidiary taxable, when.
APPEAL from the Board of Tax Appeals.
This cause involves the interrelationship of three corporations.
Management Horizons, Incorporated (not the taxpayer), was incorporated in Ohio, in 1968, to provide consulting and research functions for, primarily, small retail concerns for whom it was not feasible to make the capital expenditures necessary to perform such functions themselves.
Management Horizons, Inc., the taxpayer-appellant herein, was incorporated in Delaware, in March of 1969, and all the stock of the Ohio corporation was transferred to the taxpayer.
Management Horizons Data Systems ("MHDS") was incorporated in Ohio, in June of 1969, and all the stock of that corporation was transferred to the taxpayer. The function of this second Ohio corporation was to provide computer control of inventory to small retail establishments. MHDS required considerable capital investment for acquisition of buildings and computer equipment.
The taxpayer sold its own stock to the First National City Bank of New York and acquired $3,000,000. This sum was invested by the taxpayer in certificates of deposit which were cashed as MHDS needed funds. Taxpayer then advanced the money to MHDS and carried these advances as an account receivable. It is this account receivable which the Tax Commissioner seeks to tax as personal property.
The Board of Tax Appeals, affirming the commissioner's assessment, also determined that the taxpayer arranged for the construction of computer facilities and the lease of buildings and equipment used by MHDS in its business, and, further, guaranteed the payment of financial obligations of MHDS.
The cause is now before this court upon taxpayer's appeal as a matter of right.
Messrs. Schwartz, Remsen, Shapiro Kelm and Mr. Joseph R. Stewart, for appellant.
Mr. William J. Brown, attorney general, and Mr. Michael L. Moushey, for appellee.
R.C. 5709.01 subjects to taxation "[a]ll personal property located and used in business in this state * * * regardless of the residence of the owners thereof."
Management Horizons, Inc., maintains that it was a holding company; that it was not using property in business in Ohio because it was not doing business in Ohio; and, therefore, that it is not subject to the Ohio personal property tax on its account receivable from MHDS.
The Board of Tax Appeals concluded that there was active participation by the appellant in the business of its subsidiary, MHDS, and it was, therefore, engaged in business in Ohio and using personal property in such business. See Nationwide Corp. v. Schneider, Tax Commr. (1966), 7 Ohio St.2d 59; Standard Carloading Corp. v. Glander, Tax Commr. (1949), 152 Ohio St. 404. This court does not find that determination to be unreasonable or unlawful and the decision of the board is, therefore, affirmed.
Decision affirmed.
O'NEILL, C.J., HERBERT, CELEBREZZE, W. BROWN, P. BROWN, SWEENEY and LOCHER, JJ., concur.