Opinion
No. 34381
Decided December 21, 1955.
Taxation — Tangible personal property used in business — Exemptions — Charitable organizations — Property not used exclusively for charitable purpose, when — Used to produce income to be used for charitable purpose — Enterprise conducted for profit, not exempt.
APPEAL from the Board of Tax Appeals.
Appellant, The Lutheran Book Shop, is a department of The Lutheran Welfare Service of Northwestern Ohio. The latter is a corporation not for profit and organized for charitable purposes. The book shop is located near the downtown area of Toledo, on the first floor of a four-story building owned and occupied by the Lutheran Welfare Service. The shop is operated for the purpose of making available to Lutheran churches, pastors, teachers, and the general public a place to purchase Bibles, Christian literature, books, greeting cards, stationery, gifts, and religious materials and supplies for use in churches and Sunday schools. The shop is open to the public. It advertises its merchandise by means of newspapers, radio, telephone directories and passenger-bus cards. It has a full-time salaried manager and full-time and part-time employees. Each year in question here the book shop received a net income, from which specific sums of money were allocated monthly to the Lutheran Welfare Service for the building space the shop occupies, and a part was retained by the book shop for operating capital. The shop sells its merchandise at a price above cost. A ten per cent discount is made on sales to churches, pastors, and church organizations, but the discounted price is above the cost.
The Tax Commissioner made a tangible personal property tax assessment for the years 1940 through 1953, against the appellant, on the value of the furniture, fixtures and merchandise of the book shop.
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. Weber Hauland and Mr. Charles A. McKenney, Jr., for appellant.
Mr. C. William O'Neill, attorney general, and Mr. Larry H. Snyder, for appellee.
The basic question presented on this appeal is whether the tangible personal property used in the operation of The Lutheran Book Shop was used exclusively for charitable purposes.
Appellant contends that its operations are not conducted for gain, profit or income within the meaning of the Ohio Code, and, if there is such profit or gain, it is not such as would preclude a finding that the operations of the shop are exclusively charitable in nature.
Section 5709.01, Revised Code, relative to taxable property, provides that all personal property located and used in business in this state is subject to taxation.
The term, "business," as used in Title LVII (57) of the Revised Code, relative to taxation, is defined in Section 5701.08, Revised Code, as including "all enterprises conducted for gain, profit or income and extends to personal service occupations." The activities of The Lutheran Book Shop are such as bring it within the above-quoted definition.
The fact that a corporation is one not for profit does not mean that its enterprises may not be conducted for gain, profit or income. There is a distinction between gain, profit or net income to the incorporators or members, and gain, profit or net income to the corporation as a legal entity. American Jersey Cattle Club v. Glander, Tax Commr., 152 Ohio St. 506, 90 N.E.2d 433.
The question whether property is used exclusively for charitable purposes must be determined from the facts of each particular case.
Section 5709.12, Revised Code, provides in part: "Real and tangible personal property belonging to institutions that is used exclusively for charitable purposes shall be exempt from taxation."
"Under Section 2 of Article XII, Constitution of Ohio, and Section 5353, General Code [Section 5709.12, Revised Code], property which is used to produce income to be used exclusively for charitable purposes may not be exempted from taxation. The test is the present use of the property rather than the ultimate use of proceeds received from the property sought to be exempted." Incorporated Trustees of the Gospel Worker Society v. Evatt, Tax Commr., 140 Ohio St. 185, 42 N.E.2d 900.
The purpose of The Lutheran Book Shop is to make available to the people of Toledo a source of religious materials and supplies. It is being operated as a commercial enterprise.
"Where a substantial portion of the gross income of a corporation is received for work done in competition with commercial concerns in the same line, the property of such corporation may not be exempted from taxation under Section 5353, General Code [Section 5709.12, Revised Code], even though such corporation be one formed not for profit and owned by a religious institution, for whose use, benefit and behoof the property of the corporation is held." In re Complaint of Taxpayers, 138 Ohio St. 287, 34 N.E.2d 748.
Tax exemption statutes must be strictly construed. No presumption favorable to the exemption of property from taxation will be indulged. This must necessarily be the rule in order to preserve equality in the burden of taxation. Goldman, a Taxpayer, v. Robert E. Bentley Post No. 50, American Legion, 158 Ohio St. 205, 107 N.E.2d 528.
The decision of the Board of Tax Appeals is affirmed.
Decision affirmed.
WEYGANDT, C.J., MATTHIAS, HART, ZIMMERMAN, STEWART and BELL, JJ., concur.