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Copperweld Steel Co. v. Lindley, 31 Ohio St.3d 207, 509 N.E.2d 1242, 31 O.B.R. 404

Facts

Copperweld Steel Company, an Ohio corporation, was assessed a sales and use tax exceeding $220,000 by the Tax Commissioner based on an audit of its purchases from 1975 to 1977. After filing a petition for reassessment and appealing to the Board of Tax Appeals, the company contested the taxability of various items used in its manufacturing process. The Board modified the assessment, exempting some items, but the company continued to appeal for further exemptions, leading to the case being heard by the Supreme Court of Ohio.

Copperweld Steel Company, an Ohio corporation, was assessed a sales and use tax exceeding $220,000 by the Tax Commissioner based on an audit of its purchases from 1975 to 1977.

Issue

Whether certain equipment purchased and used by Copperweld Steel Company during the audit period in the production of its specialty grade steel alloys is exempt from sales and use taxes.

Whether certain equipment purchased and used by Copperweld Steel Company during the audit period in the production of its specialty grade steel alloys is exempt from sales and use taxes.

Rule

R.C. 5739.01 provides that items used directly in the production of tangible personal property for sale by manufacturing, processing, refining, or mining are exempt from sales and use taxes.

R.C. 5739.01 provides that items used directly in the production of tangible personal property for sale by manufacturing, processing, refining, or mining are exempt from sales and use taxes.

Analysis

The court analyzed the manufacturing process and determined that it begins when materials are measured or mixed, not solely when heat is applied. The court found that various containers and equipment used to weigh and mix raw materials were essential to the manufacturing process and thus exempt from taxation. However, items used after the manufacturing process, such as equipment transporting by-products to another corporation, were not exempt.

The court analyzed the manufacturing process and determined that it begins when materials are measured or mixed, not solely when heat is applied.

Conclusion

The Supreme Court affirmed in part and reversed in part the decision of the Court of Appeals, holding that certain items were exempt from sales and use taxes while others were not, and remanded the case for modification consistent with its opinion.

The Supreme Court affirmed in part and reversed in part the decision of the Court of Appeals, holding that certain items were exempt from sales and use taxes while others were not, and remanded the case for modification consistent with its opinion.

Who won?

Copperweld Steel Company prevailed in part, as the court recognized that certain equipment used in the manufacturing process was exempt from sales and use taxes based on the commencement of the manufacturing process.

Copperweld Steel Company prevailed in part, as the court recognized that certain equipment used in the manufacturing process was exempt from sales and use taxes based on the commencement of the manufacturing process.

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