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Keywords

appealappellant

appealhearingtestimonyappellant

Related Cases

Columbus Coated Fabrics Division v. Porterfield, 30 Ohio St.2d 307, 285 N.E.2d 50, 59 O.O.2d 376

Facts

The case involved the Columbus Coated Fabrics Division's appeal against the Board of Tax Appeals regarding an assessment of sales and use taxes on artistic designs purchased from independent artists and design studios. The appellant manufactures decorative vinyl coated wall coverings and acquires designs that are altered and reworked for production. The designs are not created specifically for the appellant and are selected from various sources, with no significant relationship between the cost of the original designs and their final use in manufacturing.

The transactions involved are purchases of certain art work, murals, layouts, panels, photo designs, or prints, which can be generally described as ‘designs.’ The essential facts, as revealed by testimony and evidence presented at the hearing before the Board of Tax Appeals, are not in dispute. Appellant manufactures a variety of decorative vinyl coated wall coverings, incorporating multicolor designs.

Issue

Whether the acquisition of artistic designs constitutes a personal service transaction exempt from sales and use taxes.

Whether the acquisition of the contested designs constitutes a ‘personal service transaction and involves only the transfer of tangible personal property as an inconsequential element for which no separate charges are made’ (R.C. s 5739.01(B)).

Rule

Sales and use taxes are to be assessed on purchases of artistic designs that represent the saleable product of an artist's skill, where the design is not prepared at the request of, nor for a specific purchaser.

Sales and use taxes are to be assessed by the Tax Commissioner on purchases of artistic designs which represent the saleable product of individual artist's skill, where the design, which is suitable for uses other than those intended by the purchaser, is neither prepared at the request of, nor for a specific purchaser.

Analysis

The court analyzed the nature of the transactions and determined that the designs were not personal service transactions because they were not specifically created for the appellant's needs. The designs were reworked for quantity production, and the court emphasized that the intrinsic value of the designs and the artist's skill did not transform the sale into a personal service transaction. The court distinguished this case from previous rulings that involved substantial manual personal effort.

The designs in issue here were selected by appellant from various design studios and represent the artistic efforts of individual artists or designers. The designs are not specifically created for appellant's use. Each is reworked for quantity production. The designs are not the result of a special request of appellant; they are not made to fit a particular need of appellant; and they presumably have significant intrinsic value other than for the purpose for which appellant purchases them.

Conclusion

The court affirmed the Board of Tax Appeals' decision, concluding that the sales and use taxes were appropriately assessed on the purchases of artistic designs.

We hold, therefore, that sales and use taxes are to be assessed by the Tax Commissioner on purchases of artistic designs which represent the saleable product of individual artist's skill, where the purchaser is interested solely in the end product rather than the service rendered, and the design, which is suitable for uses other than those intended by the purchaser, is neither prepared at the request of, nor for a specific purchaser.

Who won?

The Board of Tax Appeals prevailed because the court found that the assessment of sales and use taxes on the artistic designs was lawful and reasonable.

The decision of the Board of Tax Appeals, being neither unreasonable nor unlawful, is affirmed.

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Norwegian American Hosp., Inc. v. Illinois Dept. of Revenue, 139 Ill.2d 598, 575 N.E.2d 916 (Table), 159 Ill.Dec. 109

Container Corporation of America v. Franchise Tax Board, 464 U.S. 909, 104 S.Ct. 265, 78 L.Ed.2d 248

Illinois Tool Works, Inc. v. Lindley, 70 Ohio St.2d 175, 436 N.E.2d 220, 24 O.O.3d 280

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