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Emery Industries, Inc. v. Limbach, 43 Ohio St.3d 134, 539 N.E.2d 608

Facts

Emery Industries, Inc. expanded its plant at a cost of fifty million dollars and hired outside design firms due to its engineering staff's inability to handle the entire project. Emery engaged Camargo Associates to study and prepare a report for the installation of a boiler and a distillation unit, which included detailed plans and a bid package for contractors. Camargo charged Emery on an hourly basis for its services, which included design work and preparation of drawings, but Emery did not pay sales or use taxes on these charges.

Emery Industries, Inc. expanded its plant at a cost of fifty million dollars and hired outside design firms due to its engineering staff's inability to handle the entire project. Emery engaged Camargo Associates to study and prepare a report for the installation of a boiler and a distillation unit, which included detailed plans and a bid package for contractors. Camargo charged Emery on an hourly basis for its services, which included design work and preparation of drawings, but Emery did not pay sales or use taxes on these charges.

Issue

Whether the transactions between Emery Industries and the design firms were exempt from sales and use tax under Ohio law.

Whether the transactions between Emery Industries and the design firms were exempt from sales and use tax under Ohio law.

Rule

Under R.C. 5739.01(B), a professional service is exempt from sales tax if the transfer of tangible personal property is inconsequential to the service provided, and the overriding purpose of the purchaser is to receive the service rather than the property.

Under R.C. 5739.01(B), a professional service is exempt from sales tax if the transfer of tangible personal property is inconsequential to the service provided, and the overriding purpose of the purchaser is to receive the service rather than the property.

Analysis

The court applied the true object test to determine the nature of the transaction. It found that Emery's primary purpose in hiring the design firms was to obtain their professional services to design equipment, rather than to acquire the bid documents. The bid package was deemed inconsequential to the overall transaction, which focused on the professional services rendered by the design firms.

The court applied the true object test to determine the nature of the transaction. It found that Emery's primary purpose in hiring the design firms was to obtain their professional services to design equipment, rather than to acquire the bid documents. The bid package was deemed inconsequential to the overall transaction, which focused on the professional services rendered by the design firms.

Conclusion

The Supreme Court reversed the Board of Tax Appeals' decision, concluding that the transactions were not taxable as the design firms provided professional services and the bid documents were inconsequential.

The Supreme Court reversed the Board of Tax Appeals' decision, concluding that the transactions were not taxable as the design firms provided professional services and the bid documents were inconsequential.

Who won?

Emery Industries, Inc. prevailed in the case because the court determined that the design firms provided professional services and that the primary purpose of the transactions was to obtain those services, not the bid documents.

Emery Industries, Inc. prevailed in the case because the court determined that the design firms provided professional services and that the primary purpose of the transactions was to obtain those services, not the bid documents.

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