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statuteappeal
lawyerappellant

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CCH Computax, Inc. v. Tracy, 68 Ohio St.3d 86, 623 N.E.2d 1178, 1993 -Ohio- 238

Facts

CCH Computax, Inc. provides services to professional tax preparers by processing information from their clients and preparing tax returns. The Tax Commissioner assessed a use tax of $514,638.81 against Computax for the audit period from July 1, 1983, to November 30, 1985, which was upheld by the Board of Tax Appeals. Computax argued that its services were exempt from taxation as personal or professional services and that the tax returns were resold in the same form as received.

Appellant, CCH Computax, Inc. (“Computax”), conducts its business with professional tax preparers, such as lawyers or accountants, and does not engage in business directly with tax preparers' clients.

Issue

Whether Computax's services are subject to use tax as automatic data processing services and whether the tax returns prepared by Computax are resold in the same form as received.

As to the first issue, set forth supra, the BTA decision is neither unreasonable nor unlawful and it is affirmed.

Rule

Automatic data processing services are defined as the processing of others' data and providing access to computer equipment for processing data, which are subject to use tax unless exempted under specific statutory provisions.

R.C. 5739.01(Y) defined ADP services to mean 'processing of others' data' and providing 'access to computer equipment' for the purpose of 'processing data or examining or acquiring data stored in or accessible to such computer equipment.'

Analysis

The court determined that Computax's activities involved sorting, classifying, and mechanically printing tax returns, which constituted automatic data processing services rather than personal or professional services. The Board of Tax Appeals found that the true object of the transactions was the provision of ADP services, and thus, the services were taxable. The court also noted that the printed tax returns were not resold in the same form as received due to the tax preparer's signature, which altered the form of the return.

The BTA found that Computax sorts, classifies and rearranges information and then mechanically prints tax returns and appropriate schedules which are sold to its customers.

Conclusion

The court affirmed the Board of Tax Appeals' decision in part, holding that Computax's services were subject to use tax, but reversed the decision regarding the resale exemption, finding that the BTA failed to properly analyze the applicable statute.

Decision affirmed in part and reversed in part.

Who won?

The Tax Commissioner prevailed in part because the court upheld the assessment of use tax on Computax's services as automatic data processing services.

The BTA's finding to the contrary is unreasonable.

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