Opinion
No. 70-483
Decided March 17, 1971.
Taxation — Use tax — Definition — Statutory definition of term controls in application of statute — R.C. 5741.01 — Tangible personal property purchased for awards and emblems program — By nonprofit corporation — Taxable "use," when.
1. In paragraph (C) of R.C. 5741.01, the General Assembly has defined the word use, as used in R.C. 5741.01 to 5741.22, inclusive, to mean and include "the exercise of any right or power incidental to the ownership of the thing used."
2. Where a statute defines terms used therein which are applicable to the subject matter affected by the legislation, such definition controls in the application of the statute. (Paragraph one of the syllabus in Terteling Bros. v. Glander, 151 Ohio St. 236, followed.)
3. Where a nonprofit corporation, in administering an emblems and awards program for its members, determines who is to receive such awards, opens original bulk packages of award items, selects and commingles the items into kits for shipment to the members, and removes certain awards from their individual wrappings for special engraving work or for proper sizing, a taxable use of such tangible personal property has been made within the meaning of paragraph (C) of R.C. 5741.01 and 5741.02.
APPEAL from the Board of Tax Appeals.
This cause is here on appeal from a decision of the Board of Tax Appeals affirming the Tax Commissioner's use tax assessment on tangible personal property purchased by appellant during the period of July 1, 1962, to December 31, 1967.
Appellant, Woman's International Bowling Congress, Inc., is a nonprofit corporation organized under the laws of Illinois, with headquarters located in Columbus, Ohio. It has approximately three million members, in approximately 124 thousand leagues throughout the United States and Canada. Appellant's sole source of income consists of annual dues of 50 cents for each individual member, and one dollar for each league.
In addition to promulgating rules and regulations governing the participation of its members in the game of bowling, appellant maintains and administers an "emblems and awards" program for its membership.
The Board of Tax Appeals described the operational aspects of the emblems and awards program in its entry, as follows:
"In the instant case, the appellant, in its corporate capacity orders [from out-of-state suppliers] the items to be shipped to its Ohio office. At that time, their eventual destination is undetermined.
"As the leagues are formed, the dues and league fees are sent to the Columbus office. The appellant then determines who is to receive the awards. Ninety-six per cent (96%) of the dollar cost of the emblems and awards consist of three items that are individually packed in small envelopes and then packed in large cartons containing many individual envelopes.
"Employees of the appellant open the master cartons, select one of each of the three small envelopes, place them in a larger envelope and mail them to a previously sanctioned league.
"The remainder (4%) of the items are for unusual high scores achieved by individuals. These are special plaques and pins. They are ordered by appellant in small quantities, held in the Ohio office until needed, unpacked, engraved, and then mailed to the individual meriting it."
In a stipulation filed before the Board of Tax Appeals, appellant conceded the taxability of emblems and awards which are ultimately distributed to its Ohio members. In contest are those items which appellant mails to its out-of-state members.
The cause is before this court upon an appeal as of right.
Messrs. Knepper, White Richards Miller and Mr. Milton S. Bartholomew and Mr. Donald A. Davies, for appellant.
Mr. Paul W. Brown, attorney general, and Mr. C. Luther Heckman, for appellee.
Paragraph (A) of R.C. 5741.02 provides, in part:
"For the use of the general revenue fund of the state, an excise tax is hereby levied on the storage, use, or other consumption in this state of tangible personal property * * *." (Emphasis added.)
In R.C. 5741.01, the General Assembly has provided, in pertinent part, as follows:
"As used in Sections 5741.01 to 5741.22, inclusive, of the Revised Code:
"* * *
"(B) `Storage' means and includes any keeping or retention in this state for use or other consumption in this state.
"(C) `Use' means and includes the exercise of any right or power incidental to the ownership of the thing used."
Appellant contends that the emblems and awards which it mails to its out-of-state members are not susceptible to a use tax because appellant, rather than purchasing such items for use in Ohio, merely stores them for use outside of this state. In effect, appellant would define the word use to mean the intended or the ultimate use of such property, viz. the enjoyment of these awards by the WIBC members who eventually receive them. To support this argument, appellant emphasizes that the bulk of the emblems and awards are received by it in individual envelopes which it mails to its members unopened.
That line of reasoning does not comport with the statutory definition of use set forth in paragraph (C) of R.C. 5741.01, supra, wherein the General Asesmbly defined use to mean and include "the exercise of any right or power incidental to the ownership of the thing used." (Emphasis added.)
The 1959 amendment of paragraph (C) of R.C. 5741.01 deleted certain exceptions to the definition of use. It is noteworthy that the exceptions which the General Assembly deleted pertained to the consumer's intended purpose with respect to the thing purchased. Any lingering doubts over the question of whether the definition of use under the Ohio use tax turns on the intended or ultimate use of the thing purchased seem to have been dispelled by this amendment. Prior to 1959, paragraph (C) of R.C. 5741.01 stated:
"(C) `Use' means and includes the exercise of any right or power incidental to the ownership of the thing used, except as provided in this division of this section.
"When the purpose of the consumer is any of the following: (1) To resell the thing purchased in the form in which the same has been received by him; (2) To incorporate the thing purchased, as a material or a part, into tangible personal property to be produced for sale by manufacturing, assembling, processing, or refining, or to use or consume the thing transferred directly in the production of tangible personal property for sale by manufacturing, processing, refining, or mining, including without limitation the extraction from the earth of all substances which are classed geologically as minerals, production of crude oil and natural gas, farming, agriculture, horticulture, or floriculture, and persons engaged in rendering farming, agricultural, horticultural, or floricultural services, and services in the exploration for and production of crude oil and natural gas, for others are deemed engaged directly in farming, agriculture, horticulture, or floriculture, or exploration for and production of crude oil and natural gas; or directly in making retail sales or directly in the rendition of a public-utility service; (3) To hold the thing transferred as security for the performance of an obligation of the seller, or to use or consume the thing transferred directly in industrial cleaning of tangible personal property; or to use or consume the thing transferred directly in the rendition of towel and linen service or supply; such service or supply is not deemed a rental, but is deemed a personal service transaction; (4) To resell, hold, use, or consume the thing transferred as evidence of a contract of insurance; (5) To use or consume the thing directly in commercial fishing; the attainment of such a purpose shall not be considered to be a storage, a use, or a consumption of the thing purchased."
The prefatory language in R.C. 5741.01 ("As used in Sections 5741.01 to 5741.22, inclusive") leaves no doubt that the statutory definition of use in paragraph (C) of R.C. 5741.01 controls the meaning of the word use as it appears in R.C. 5741.01 (B) and R.C. 5741.02 (A). Statutory definitions of terms are controlling in the application of the statute to which such definitions pertain. Terteling Bros. v. Glander (1949), 151 Ohio St. 236, 85 N.E.2d 379. See, also, Baltimore Ohio Rd. Co. v. Board of Revision (1950), 152 Ohio St. 521, 533, 90 N.E.2d 574.
The instant record contains ample probative evidence to support the decision of the board that appellant's activities with respect to the emblems and awards constituted use, as that term appears in paragraph (C) of R.C. 5741.01. The only witness before the board was appellant's comptroller. He testified in great detail as to the functional operations whereby appellant administers the emblems and awards program for the WIBC membership. Appellant purchases the items in its corporate capacity; it decides how many items to purchase; its employees open original bulk packages; the employees select and commingle different items into kits and cause the items to be placed in the mail for shipment to the various leagues; and, in some cases, appellant's employees remove certain awards from their individual wrappings for special engraving work or for proper sizing before being mailed to the member-recipient.
Moreover, the appellant clearly "used" the emblems and awards purchased by it in the ordinary and everyday meaning of the word. Webster's Third New International Dictionary defines "use," inter alia, to mean "to put into action or service" or "to carry out a purpose or action by means of." The appellant carried out one of its signal purposes, i.e., the emblems and awards program, by means of the various items which it purchased and distributed to its members.
The decision of the Board of Tax Appeals affirming the Tax Commissioner's use tax assessment against appellant, being neither unreasonable nor unlawful, must be affirmed.
Decision affirmed.
O'NEILL, C.J., SCHNEIDER, DUNCAN, CORRIGAN, STERN and LEACH, JJ., concur.