Opinion
No. 82-248
Decided March 2, 1983.
Taxation — Sales tax — Data processing systems and programming services — Sales subject to taxation pursuant to 5739.01(B), when.
APPEAL from the Board of Tax Appeals.
Appellant, Statistical Tabulating Corporation, was in the business of providing data processing systems and programming services to small and medium-sized businesses. It provided services related to payroll, accounts receivable, general ledger, inventory, billing, and specialized services requested by the customers. When a customer engaged appellant's services, appellant's employees would work with the customer to effectuate a conversion to the automated system and train the customer's personnel. Thereafter, the customer would submit to appellant "source documents," which included invoices and employees' time cards, and which information would be organized and processed by appellant. The appellant employed standard programs, which it would occasionally modify to meet a customer's needs, to process the data and to produce reports or other written documents which were transferred to the customer.
Appellant was issued a tax assessment for sales made from August 1, 1973 through July 31, 1976. The Tax Commissioner affirmed the assessment, but partially remitted the penalty. Upon appeal, the Board of Tax Appeals found that these transactions were sales subject to tax under R.C. 5739.01(B) and affirmed the order of the commissioner.
The cause is now before this court upon an appeal as of right.
Skidmore, Hall Marco Co., L.P.A., and Mr. Richard J. Marco, for appellant.
Mr. William J. Brown, attorney general, and Mr. Mark A. Engel, for appellee.
The issue raised by this appeal is whether the transactions involved are sales subject to tax as defined by R.C. 5739.01(B), which provides in part:
"`Sale' and `selling' include all transactions by which title or possession, or both, of tangible personal property, is or is to be transferred, * * * for a consideration in any manner, whether absolutely or conditionally, whether for a price or rental, in money or by exchange, and by any means whatsoever; * * *. Other than as provided in this section, `sale' and `selling' do not include professional, insurance, or personal service transactions which involve the transfer of tangible personal property as an inconsequential element, for which no separate charges are made."
Subsequent to the audit period herein, R.C. 5739.01(B) was amended, and this opinion does not address the amendment.
In Accountant's Computer Services v. Kosydar (1973), 35 Ohio St.2d 120 [64 O.O.2d 72], we set forth the criteria to be used in determining whether a mixed transaction involving both personal services and the transfer of personal property falls within the exception contained in the last sentence of R.C. 5739.01(B), and held at paragraphs one and two of the syllabus:
"1. * * * If the service rendered is inconsequential, the exception is not available and the entire transaction is taxable. If a consequential service is rendered, then it must be ascertained whether the transfer of the tangible personal property was an inconsequential element of the transaction. If so, then none of the consideration paid is taxable.
"2. In determining whether a mixed transaction constitutes a consequential personal service transaction, a distinction must be made as to the true object of the transaction contract; that is, is the real object sought by the buyer the service per se or the property produced by the service." (Emphasis sic.)
Therein, and in later cases applying this test where data processing services were concerned, we held that if the company supplied the print-outs for the customer to use in making management decisions or other purposes, the print-outs are not deemed inconsequential. Id. at 132-134; see, also, Miami Citizens National Bank v. Lindley (1977), 50 Ohio St.2d 249, 252 [4 O.O.3d 427].
The Board of Tax Appeals was "* * * not persuaded by the testimony and other evidence presented that the written material produced by the appellant was an `inconsequential element' of the transactions." It found that "[t]he true object of the transaction was the receipt of the written reports, documents, and payroll checks, and as such, taxable." Appellant urges this court to overrule the board's factual determination.
" `* * * This court traditionally does not substitute its judgment on factual issues for that of the Board of Tax Appeals, and we will not overrule a factual determination by the board unless the record reveals that the determination was unreasonable or unlawful.' Servi-Clean Industries v. Collins (1977), 50 Ohio St.2d 80, 86 [4 O.O.3d 199]." Financial Computer Services v. Lindley (1982), 70 Ohio St.2d 243, 245 [24 O.O.3d 336].
With this standard of review in mind, we find sufficient evidence in the record to support the board's determination that the written materials supplied by appellant to its customers were not an inconsequential element of the transaction.
The decision of the Board of Tax Appeals being neither unreasonable nor unlawful is hereby affirmed.
Decision affirmed.
CELEBREZZE, C.J., W. BROWN, SWEENEY, LOCHER, HOLMES and C. BROWN, JJ., concur.
J.P. CELEBREZZE, J., not participating.