Bay Mechanical & Electrical Corp. v. Testa
133 Ohio St. 3d 423
| Ohio | 2012Background
- Bay Mechanical challenges a sales-tax assessment on its purchase of allegedly taxable employment services during 2003–2005.
- Bay treated Tradesmen International and Construction Labor Contractors (CLC) workers as permanent-assignment employees under R.C. 5739.01(JJ)(3) to obtain exemption.
- The auditor overruled the exemption, finding Bay failed to provide facts and circumstances for permanent assignment.
- The BTA affirmed the denial, concluding Bay’s testimony and exhibits were insufficient to prove entitlement.
- Bay argued contract language and accompanying testimony satisfied the one-year and permanent-assignment criteria, but the court disagreed and affirmed.
- The decision hinges on whether contract language alone can establish exemption and whether facts-and-circumstances must be produced; the court sustained the commissioner and BTA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Contract language suffices for exemption | Bay: contract terms alone show permanent assignment entitles exemption. | Levin: contract language is not dispositive without actual assignment facts. | No; facts and circumstances must support the exemption even with contract language. |
| Necessity of contracts with individual employees | Bay: employee contracts are not required if contracts show permanent assignment. | Levin: employee contracts are not necessary; focus is on contracts and actual assignments. | Not necessary; exemption turns on overall contracts and actual assignments. |
| Documentation produced during audit | Bay: provided underlying documentation during proceedings; failure to produce during audit should not bar exemption. | Levin: taxpayer must produce pertinent documentation on request; Bay refused. | Bay’s refusal to produce requested documents justified denial of exemption. |
| BTA evidentiary weight of summary exhibits | Bay: summary exhibits based on invoices support exemption. | Levin: BTA properly gave no weight to hearsay-like summaries absent primary documents. | BTA acted within discretion in not weighting the summary exhibits without primary records. |
Key Cases Cited
- H.R. Options, Inc. v. Zaino, 100 Ohio St.3d 373 (2004-Ohio-1) (permanent assignment requires facts-and-circumstances evidence beyond contract language)
- Moore Personnel Serv., Inc. v. Zaino, 98 Ohio St.3d 337 (2003-Ohio-1089) (employment services taxability elements established; control, duration, and provider pay)
- A. Schulman, Inc. v. Levin, 116 Ohio St.3d 105 (2007-Ohio-5585) (tax findings presumptively valid; defer to BTA; standard review)
- HealthSouth Corp. v. Testa, 132 Ohio St.3d 55 (2012-Ohio-1871) (abuse-of-discretion standard; deference to BTA findings)
- Higbee Co. v. Evatt, 140 Ohio St.325 (1942) (evidentiary standards not uniform; agency discretion in tax determinations)
- Plain Local Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 130 Ohio St.3d 230 (2011-Ohio-3362) (interpretation of evidentiary standards; non-binding to strict evidentiary rules at BTA)