Opinion
No. 33369
Decided May 27, 1953.
Taxation — Listing personal property by manufacturer — Manufacturing inventory — Average value ascertained, how — Sections 5385 and 5386, General Code — Apportionment to taxing districts in which property situated — Section 5371, General Code.
APPEAL from the Board of Tax Appeals.
The appellant, Buckeye Furnace Pipe Company, is engaged in the manufacturing business in the city of Columbus taxing district where its factory is located, and was so engaged and held manufacturing inventory during the entire tax years 1950 and 1951. During ten months of the tax year 1950 and one month of the tax year 1951, appellant owned manufacturing inventory in warehouse space in the Clinton township taxing district, and during eleven months of 1950 and eight months of 1951 owned manufacturing inventory in warehouse space in the Grandview Heights taxing district, all in Franklin county. Appellant did no business in the named latter two taxing districts other than warehousing portions of its manufacturing inventory therein.
In computing the average value of its manufacturing inventory, held in each such taxing district in Franklin county, for listing in its personal property tax returns for the tax years 1950 and 1951, appellant divided the sum of the monthly values of its inventory held in each taxing district by twelve, the number of months it was doing business during the tax year.
The Tax Commissioner increased the value of appellant's taxable personal property by dividing the sum of monthly values of its inventory held in each taxing district by the number of months the inventory was held in each such district, rather than by the number of months appellant was engaged in the manufacturing business. This method was used because of the commissioner's application of his rule 212 which provides, in part, that "the value of an inventory required to be listed on the average value basis by a taxpayer in the course of his business shall be determined as provided by Sections 5382 and 5386, General Code, by considering the number of months of the next preceding year that such taxpayer has been engaged in business in each taxing district in which such taxpayer is so engaged on tax listing day."
The Board of Tax Appeals affirmed the order of the Tax Commissioner.
An appeal to this court from the decision of the Board of Tax Appeals presents the question whether the Tax Commissioner's Rule 212 is in accordance or in conflict with the provisions of Sections 5371, 5385 and 5386, General Code.
Messrs. Vorys, Sater, Seymour Pease and Mr. Carl Tangeman, for appellant.
Mr. C. William O'Neill, attorney general, and Mr. Everett H. Krueger, Jr., for appellee.
Section 5385, General Code, relative to the listing for taxation of personal property of a manufacturer, provides, inter alia, that "he shall include therein the average value estimated, as hereinafter provided * * * which, from time to time, he has had on hand during the year next previous to listing day annually, if he has been engaged in such manufacturing business so long, and if not, then during the time he has been so engaged."
This section provides for valuation of inventory on an average basis because of the obvious inequity which would result from valuation as of any particular tax listing day during the year. The section makes no reference to taxing districts, but rather to the portion of the year in which the taxpayer was engaged in business. It does not refer to any portion of the year in which he held inventory or was engaged in business in any particular taxing district.
Section 5386, General Code, provides: "Such average value shall be ascertained by taking the value of all property subject to be listed on the average basis, owned by such manufacturer, on the last business day of each month the manufacturer was engaged in business during the year, adding such monthly values together and dividing the results by the number of months the manufacturer was engaged in such business during the year. Such result shall be the average value to be listed. * * *" (Emphasis added.)
This section, in prescribing the method to be followed in determining the annual average, refers to the number of months the taxpayer was engaged in business during the year, but not to the portion of the year during which the taxpayer held inventory or engaged in business in any particular taxing district. It makes no reference to taxing districts.
Section 5371, General Code, requires that personal property used in business shall be listed and assessed in the taxing district in which such business is carried on, and that if such business is carried on in more than one taxing district in the same county the value of the whole of the personal property used in business shall be apportioned to and assessed in each of such taxing districts in proportion to the value of the personal property situated therein.
The last named section contains an apportionment provision. It requires the apportionment of the whole of the personal property to the several taxing districts in proportion to the value of the property in each district.
It is thus apparent that Tax Commissioner's Rule 212 is in conflict with the above-quoted statutory provisions, and its application in determining the tax valuation of appellant's manufacturing inventory was error.
The decision of the Board of Tax Appeals, affirming the order of the Tax Commissioner, being unreasonable and unlawful, is reversed.
Decision reversed.
WEYGANDT, C.J., MIDDLETON, TAFT, MATTHIAS, HART, ZIMMERMAN and STEWART, JJ., concur.