Lead Opinion
{¶ 1} The Tax Commissioner appeals from the decision of the Eighth District Court of Appeals that reversed the Board of Tax Appeals and held that the Tax Commissioner erred when he assessed use tax against Marc Glassman, Inc. (“Marc Glassman”) for the audit period January 1, 1999, through September 30, 2001. The assessment relates to services Marc Glassman purchased from National Data Corporation and Envoy Corporation. The issue is whether the purchased services constituted “electronic information services,” which are subject to sales and use tax pursuant to R.C. 5741.02(A)(1), 5741.01(M), 5739.01(X), and 5739.01(B)(3)(e).
{¶ 2} Marc Glassman owns and operates a chain of discount pharmacies in northern Ohio, and it contracted with National Data and Envoy in order to ascertain whether particular purchases of prescriptions by its customers were covered by insurance. The court of appeals held that because Marc Glassman obtained only insurance approval and did not obtain access to the insurance company data, Marc Glassman did not purchase electronic information service as defined by the statute. The Tax Commissioner requested, and we granted, discretionary review of that judgment. The commissioner contends that the
I
{¶ 3} The record demonstrates that when a customer attempted to fill a prescription at a Marc Glassman store, the customer would typically show an insurance card to the attendant, who would enter information from the insurance card into a computer terminal either owned or leased by Marc Glassman. The information would travel “via a private dedicated line and modem” to a “frame relay network” operated by a telecommunications company, which then routed the transmission to one of Marc Glassman’s service providers, National Data or Envoy. Upon receipt of the transmission from Marc Glassman, the provider would route the transmission to a particular insurance company.
{¶ 4} The provider then expected an “authorization response” from the insurance company. If that response was not forthcoming within 15 seconds, the provider terminated the transmission. When the insurance company made a decision and responded, it would send a message stating whether the prescription coverage was approved, the amount of the copay, and the authorization number for reimbursement to the pharmacy. The provider received this information from the insurance company and transmitted it back to the computer terminal at Marc Glassman’s store.
{¶ 5} We are reviewing the Tax Commissioner’s determination that by purchasing the service just described, Marc Glassman was a consumer of a taxable service. Pursuant to R.C. 5741.02(A)(1), Ohio imposes use tax on “the benefit realized in this state of any service provided,” and the definition of “providing a service” in R.C. 5741.01(M) and 5739.01(X) ties that term to the provision of the services that are included in the definition of “sale” under the sales tax. R.C. 5739.01(B)(3)(e) includes sales of electronic information services as taxable sales, and that is the only legal basis the Tax Commissioner asserted for issuing the assessment.
{¶ 6} Pursuant to R.C. 5739.01(B)(3)(e), electronic information services are provided when (a) the services are provided for “use in business” and (b) the “true object of the transaction is the receipt by the consumer” of those services. “Electronic information services” is defined in R.C. 5739.01(Y)(1)(c) as “providing access to computer equipment by means of telecommunications equipment for the purpose of either” (1) “[e]xamining or acquiring data stored in or accessible to the computer equipment” or (2) “[p]lacing data into the computer equipment to be retrieved by designated recipients with access to the computer equipment.” Subsection (2) is not at issue in this case; rather, the issue is whether the activity described in subsection (1) occurs. In other words, we must decide whether
II
{¶ 7} The Board of Tax Appeals’ findings of “basic fact” furnish the basis for applying the statutory definition of “electronic information services,” but the determination whether the services in this case are within the statutory definition involves an “inference of an ultimate fact” that is subject to judicial review. Ace Steel Baling, Inc. v. Porterfield, (1969),
{¶ 8} Although the Board of Tax Appeals’ finding of basic fact accords with the evidence, the Board of Tax Appeals erred in its ultimate conclusion that Marc Glassman purchased electronic information service. What Marc Glassman received from the insurance companies through its provider was not access to the data maintained by the insurance companies, but rather a conclusion formulated by the insurer in response to a routine request. This conclusion did not consist of pure data; rather, it was a preliminary determination that the purchase was covered by insurance — a determination that was even documented with an “authorization number.”
{¶ 9} It is easy to imagine a different set of facts under which the Tax Commissioner .could appropriately assess the tax. If, for example, the pharmacy’s inquiry led to a list of names of insured persons appearing on the screen, so that the pharmacy could determine whether the customer’s name was on the list — that would involve accessing the database. In this case, the insurer
{¶ 10} Because the service Marc Glassman purchased did not involve its obtaining access to computer equipment for the purpose of “examining or acquiring” the insurance data, that service was not an electronic information service.
Ill
{¶ 11} Our conclusion is consistent with case law. The Tax Commissioner contends that Quotron Systems, Inc. v. Limbach (1992),
{¶ 12} The only statutory issue that we addressed in Quotron was whether the tax obligation arose “only when the vendor rendering the service processes another’s data or permits the customer to use the vendor’s equipment to process the customer’s data.” Id.,
{¶ 13} Quotron gathered publicly available financial information and made the information available through computer and telecommunications equipment to its customers. Unlike in the present case, the Board of Tax Appeals in Quotron found that Quotron’s service was “clearly antithetical” to services that involve interpretation or analysis of data. Quotron Systems, Inc. v. Limbach (Nov. 23, 1990), BTA No. 88-A-377,
{¶ 14} Nor did we resolve the issue presented in this case when we decided Amerestate, Inc. v. Tracy (1995),
{¶ 15} Similarly, our description of the service provided in MIB shows a series of steps ending with “the results of the search [being] put on a disc at MIB’s front-end computer,” after which “MIB’s front-end computer contacts the mem
{¶ 16} In analyzing the service provided in this case, we have determined that the Board of Tax Appeals’ decision that is most directly on point is PNC Bank, Ohio, N.A. v. Tracy (July 7, 1995), BTA No. 93-T-1316,
{¶ 17} In its decision, the Board of Tax Appeals acknowledged the factual similarity between this case and PNC Bank. The reason the Board of Tax Appeals did not follow its earlier decision was not because of any factual distinction, but because of the Board of Tax Appeals’ perception that the law had changed. The Board of Tax Appeals observed that PNC Bank concerned transactions that occurred before the enactment of Am.Sub.H.B. No. 152 in 1993, which amended the law by replacing the former “automatic data processing and computer services” with three different categories of taxable service: “automatic data processing,” “electronic information service,” and “computer service.” Am. Sub.H.B. No. 152, 145 Ohio Laws, Part II, 3341, and Part III, 4287, 4294; see current R.C. 5739.01(B)(3)(e) and 5739.01(Y). The Board of Tax Appeals interprets this change as expanding the scope of taxable transactions, but we see no reason either on the face of the legislation or elsewhere to concur in that view.
{¶ 18} To the contrary, the amendments appear to have split the former broad category of “automatic data processing and computer services” into three separate categories without thereby expanding the overall scope of the sales tax. Previously, the law had defined “automatic data processing and computer services” to include “providing access to computer equipment for the purpose of
IV
{¶ 19} For the foregoing reasons, we agree with the Eighth District Court of Appeals’ conclusion that the service Marc Glassman purchased did not constitute taxable “electronic information service,” and we therefore affirm the decision of the court of appeals.
Judgment affirmed.
Dissenting Opinion
dissenting.
{¶ 20} The transactions in this case are quite similar to the transactions held taxable in Quotron Sys., Inc. v. Limbach (1992),