MIB, INC., APPELLANT, v. TRACY, TAX COMMR., APPELLEE.
No. 97-1283
SUPREME COURT OF OHIO
September 23, 1998
83 Ohio St.3d 154 | 1998-Ohio-117
Taxation—Delaware nonstock membership corporation, consisting of life insurance companies, which collects information from, and provides information to, members concerning applicants for life insurance—Use tax on charges made to Ohio companies for receiving and responding to inquiries for information on life insurance applicants. APPEAL from the Board of Tax Appeals, No. 95-B-109. Submitted May 20, 1998.
{¶ 1} Appellant, MIB, Inc. (“MIB“), formerly Medical Information Bureau, is a Delaware nonstock membership corporation located in Massachusetts. MIB‘s membership currently consists of six hundred fifty life insurance companies, with about forty of those located in Ohio.
{¶ 2} MIB collects information from, and provides information to, members concerning applicants for life insurance. The information collected from and provided to members by MIB is principally of a medical nature, but also includes some information about lifestyle. Of the over two hundred types of information which MIB has coded for reporting, only five relate to lifestyle. The lifestyle information relates to adverse driving record, participation in hazardous sports, aviation activity, possible overinsurance, and criminal association. The information that MIB collects and distributes comes only from members. This information is used by member companies in their pricing and underwriting of life insurance policies. The goal of MIB‘s members is to avoid the financial harm that might befall them if an applicant misrepresents or suffers a memory lapse about personal information.
{¶ 3} When a member wants to input information to MIB, the member‘s computer will contact a stand-alone front-end computer at MIB to verify its identity. After identification has been established and the member‘s data have been transmitted, MIB‘s front-end computer terminates the communication. MIB‘s front-end computer stores the data received from members on a disc. Later MIB‘s front-end computer links up with MIB‘s host computer and retrieves the data on the disc and transfers the data to the host computer.
{¶ 4} The host computer transfers and saves the incoming data to its own disc. Around midnight, the data that have been saved by the host computer during the day are taken off the disc and processed either by opening a new file or combining the data with an existing file. Whether the data furnished by a member about an applicant become a new file or are combined with an existing file is determined in accordance with preset criteria stored in MIB‘s host computer.
{¶ 5} A request for information on an applicant for insurance is made by a member‘s computer‘s contacting MIB and identifying itself to MIB‘s front-end computer. MIB‘s front-end computer records the request on a disc and terminates the communication with the member. The request for information is transferred from the disc to MIB‘s host computer. MIB‘s host computer searches for the requested information and the results of the search are put on a disc at MIB‘s front-end computer. Finally, MIB‘s front-end computer contacts the member‘s computer and transmits the results of the search. Inquiries by members are usually answered in two to five minutes.
{¶ 6} The computers and terminals located in members’ offices that are used to transmit and receive data are furnished and owned by MIB. With few exceptions, member companies keypunch their input data, which is sent over regular telephone lines to MIB using a code furnished by MIB.
{¶ 7} The Tax Commissioner made a use-tax assessment against MIB for charges made to Ohio companies for the audit period January 1, 1989 through December 31, 1991. The charges being appealed are those made by MIB for receiving and responding to inquiries for information on applicants.
{¶ 8} The Board of Tax Appeals affirmed the Tax Commissioner‘s assessment.
{¶ 9} This cause is now before the court upon an appeal as of right.
Betty D. Montgomery, Attorney General, and Barton A. Hubbard, Assistant Attorney General, for appellee.
Per Curiam.
{¶ 10} Appellant first contends that the members’ requests for information are not taxable under former
{¶ 11} Although the tax at issue is the use tax,
{¶ 12} During the audit period,
“(B) ‘Sale’ * * * include[s] all of the following transactions for a consideration * * *:
” * * *
“(3) All transactions by which:
” * * *
“(e) Automatic data processing or computer services are or are to be provided for use in business when the true object of the transaction is the receipt by the consumer of automatic data processing or computer services rather than the receipt of personal or professional services to which automatic data processing or computer services are incidental or supplemental.”
{¶ 13} In addition, former
” ‘Automatic data processing and computer services’ means: * * * processing of others’ data, including keypunching or similar data entry services together with verification thereof; providing access to computer equipment for the purpose of processing data or examining or acquiring data stored in or accessible to such computer equipment * * *. ‘Automatic data processing and computer services’ shall not include personal or professional services.”
{¶ 14} In support of
{¶ 15} In Quotron Sys., Inc. v. Limbach (1992), 62 Ohio St.3d 447, 584 N.E.2d 658, customers were able to access Quotron‘s computers to receive current pricing information on securities and commodities. In Amerestate, Inc. v. Tracy (1995), 72 Ohio St.3d 222, 648 N.E.2d 1336, customers were able to contact Amerestate‘s computer to download and print the information desired. In both of these cases, we held that the services provided were taxable as automatic data processing and computer services.
{¶ 16} MIB attempts to distinguish its factual situation from Quotron and Amerestate by pointing out that in those cases the customers had direct access to the database where the information was stored. However, the wording of the statute does not require that the members have direct access to search MIB‘s host computer before their transactions can be taxed.
{¶ 17} Prior to the audit period in this case, the definition of “automatic data processing and computer services” in former
{¶ 18} During the audit period, former
{¶ 19} The two words in
{¶ 20} The word “access,” as defined in Webster‘s Third New International Dictionary (1986), at 11, has several meanings, but the ones most appropriate to the context of this statute are “permission, liberty, or ability to enter, approach, communicate with” and “freedom or ability to obtain or make use of.” According to these definitions of “access,” MIB‘s members had “access” to MIB‘s computer because they had the ability to communicate with and enter and make use of MIB‘s computer equipment to retrieve the data stored therein.
{¶ 21} The
{¶ 22} Despite the inability of MIB‘s members to search directly the data stored in MIB‘s computer, the members had access to MIB‘s computers. Members were able to access MIB‘s computer equipment using the equipment in their offices provided by MIB. Despite the inability of the members to search MIB‘s data files directly, and despite the members’ requests being routed through several computers, the members had access to MIB‘s computers for the purpose of examining and acquiring the data stored therein. As the BTA so aptly put it, “the computers utilized by MIB‘s members worked in direct concert with the computers at MIB to provide that member with access to the information sought by that member.” Thus, the transactions between MIB and its members qualify as automatic data processing and computer services.
{¶ 23} MIB argues next that it is rendering a personal service. In support of this argument, MIB cites three cases: Credit Bur. of Miami Cty. v. Collins (1977), 50 Ohio St.2d 270, 4 O.O.3d 439, 364 N.E.2d 27; Avco Broadcasting Corp. v. Lindley (1978), 53 Ohio St.2d 64, 7 O.O.3d 145, 372 N.E.2d 350; and Dun & Bradstreet, Inc. v. Lindley (1981), 66 Ohio St.2d 295, 20 O.O.3d 280, 421 N.E.2d 525. MIB contends that its activities are similar to those granted exemption in these three cases. We disagree with MIB‘s analysis.
{¶ 24} The three cases cited by MIB were all decided prior to the enactment of the tax on automatic data processing and computer services in 1983. 140 Ohio Laws, Part II, 2872, 3215. The definition of “automatic data processing and computer services” contained in former
{¶ 25}
{¶ 26} The general description of personal and professional services contained in
{¶ 27} MIB‘s last contention is that its computer services should be exempted as personal or professional services under
“(i) Providing credit information to users of such information by a consumer reporting agency, as defined in the ‘Fair Credit Reporting Act,’ 84 Stat. 1114, 1129 (1970), 15 U.S.C. 1681a(f), or as hereafter amended, including but not limited to gathering, organizing, analyzing, recording, and furnishing such information by any oral, written, graphic or electronic medium[.]” (Emphasis added.)
{¶ 28} The Tax Commissioner contends that in order to qualify for the exemption set forth in
{¶ 29} Although
{¶ 30} MIB contends that the term “credit information” was defined in the context of the FCRA in Fed. Trade Comm. v. TRW, Inc. (N.D.Tex.1991), 784 F.Supp. 361. However, review of that case does not confirm MIB‘s contention. TRW involved a consent order agreed to by the parties without trial adjudication of any issue of
{¶ 31} By its own terms the definition of “credit information” set forth in TRW is limited to the consent order. The facts recited in the TRW case do not describe what type of information TRW maintained, or for what purpose the information was used. TRW does not establish a definition of “credit information” for purposes of
{¶ 32} MIB further contends that it is a “consumer reporting agency” as defined by FCRA. For purposes of discussion we are willing to accept MIB‘s assertion. Section 1681a(f), Title 15, U.S.Code defines as a “consumer reporting agency” “any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties.” (Emphasis added.)
{¶ 33} In turn, FCRA defines a “consumer report” in Section 1681a(d)(1), Title 15, U.S.Code as:
“[A]ny written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer‘s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer‘s eligibility for—
“(A) credit or insurance * * *.”
{¶ 34} From the above it can be seen that being a consumer reporting agency does not mean that the information being reported is credit information. A credit reporting agency can provide consumer reports to third parties on “credit information or other information.” To determine whether MIB is dealing with credit information we must look at the word “credit.” Because “credit” is not defined in
{¶ 35} The evidence clearly established that the information provided by MIB to its members was used to help determine an applicant‘s eligibility for insurance, not credit. The information provided by MIB to its members was not “credit information” within the meaning of
{¶ 36} Accordingly, we find the decision of the Board of Tax Appeals to be reasonable and lawful, and we therefore affirm it.
Decision affirmed.
MOYER, C.J., RESNICK, F.E. SWEENEY, PFEIFER and COOK, JJ., concur.
DOUGLAS, J., concurs in judgment only.
LUNDBERG STRATTON, J., dissents.
MIB, INC., APPELLANT, v. TRACY, TAX COMMR., APPELLEE.
No. 97-1283
SUPREME COURT OF OHIO
September 23, 1998
83 Ohio St.3d 154 | 1998-Ohio-117
LUNDBERG STRATTON, J., dissenting.
{¶ 37} I respectfully dissent. I would find that MIB is exempt from taxation on information that it provides to its members.
{¶ 38} MIB contends that it is a “consumer reporting agency” as defined in the Fair Credit Reporting Act (“FCRA“), Section 1681 et seq., Title 15, U.S.Code, and therefore is exempt from taxation pursuant to
{¶ 39} As the majority notes, a “consumer reporting agency” is “[a]ny person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties.” (Emphasis added.) Section 1681a(f), Title 15, U.S.Code.
{¶ 40} Also consistent with the majority‘s conclusions, a “consumer report” communicates consumer credit or other information regarding the consumer for purposes
{¶ 41} In determining whether MIB issues a consumer report, as defined in Section 1681a(d)(1), the majority focuses exclusively on the definition of “credit” in a financial sense only and finds that MIB‘s reports were not related to credit. The majority ignores the fact that a consumer report may also transmit “other information” for the purpose of “furnishing consumer reports to third parties” in order to “establis[h] the consumer‘s eligibility for * * * insurance.” This is precisely what MIB does. MIB assembles and disseminates information that contains medical and lifestyle information to allow its members to determine an individual‘s insurance eligibility.
{¶ 42} Thus, I would find that MIB is a consumer reporting agency which is exempt from taxation pursuant to