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Federal Sign & Signal Corp. v. Bowers, 172 Ohio St. 161, 174 N.E.2d 91, 15 O.O.2d 318

Facts

Federal Sign & Signal Corporation, a New York corporation, was engaged in the business of furnishing, installing, and maintaining electrical outdoor advertising signs. The Tax Commissioner of Ohio issued a sales tax assessment against the company for the years 1955 to 1958 based on rentals charged for these signs. The Board of Tax Appeals reversed part of the Tax Commissioner's order, stating that the ownership of the premises where the signs were located was not the controlling factor for tax assessment.

The sales tax assessment issued against the appellee sign company is based on rentals charged by the company during the four-year period for certain electrical outdoor advertising signs owned, furnished, installed and maintained by it in the Cincinnati area under contracts with various customers.

Issue

Is the sales tax assessable against rentals received by Federal Sign & Signal Corporation for outdoor advertising signs based on the ownership of the premises where the signs are located?

The only question before the court is whether the assessed transactions in the instant case involved a transfer of possession.

Rule

Under Section 5739.02, Revised Code, and Rule 74 of the Tax Commissioner of Ohio, the sales tax is not assessable against rentals received for outdoor advertising signs when the company is responsible for their maintenance and operation.

The charges collected by outdoor advertising concerns are charges for services and are not subject to the tax imposed by Section 5546-2 of the General Code [Section 5739.02, Revised Code].

Analysis

The court analyzed the application of Rule 74 and determined that the Board of Tax Appeals correctly interpreted the rule as it applies to outdoor advertising concerns. The court noted that the Tax Commissioner’s distinction between rentals based on property ownership was not valid, as the company retained possession and responsibility for the signs regardless of their location.

The evidence before the Board of Tax Appeals makes it clear that the appellant qualifies as an ‘outdoor advertising concern,’ within the meaning of those words as used in Rule No. 74, and it is our view that the appellant was, and is, entitled to rely upon the provisions of Rule No. 74 so long as said rule remains in its present form.

Conclusion

The Supreme Court affirmed the decision of the Board of Tax Appeals, concluding that the sales tax was not applicable to the rentals received by the sign company.

In conformity with the foregoing reasoning, this court is of the view that the decision of the Board of Tax Appeals is neither unreasonable nor unlawful.

Who won?

Federal Sign & Signal Corporation prevailed in the case because the court upheld the Board of Tax Appeals' interpretation of the tax rules, which favored the company’s position regarding the non-applicability of the sales tax.

The Board of Tax Appeals held that the single fact of ownership of the premises on which the signs were located is not controlling, and both types of rentals were held not subject to the sales tax.

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