UNITED TRANSPORTATION UNION INSURANCE ASSOCIATION, APPELLANT, v. TRACY, TAX COMMR., APPELLEE.
No. 97-1190
SUPREME COURT OF OHIO
Submitted April 21, 1998—Decided July 8, 1998.
82 Ohio St.3d 333 | 1998-Ohio-233
APPEAL from the Board of Tax Appeals, No. 95-J-417.
The use tax is not a tax on the funds of a fraternal benefit society. (
{¶ 1} Appellant, United Transportation Union Insurance Association (“United“), is a fraternal benefit society organized and operating pursuant to
{¶ 2} Beginning in July 1993, an audit of United‘s purchases was conducted by an agent of the appellee, Tax Commissioner. An assessment for use tax plus interest and a penalty was issued to United. Subsequently, United filed a petition for reassessment. The commissioner affirmed the use tax assessment, including interest, and conditionally remitted a portion of the penalty assessed against United.
{¶ 3} Upon appeal, the Board of Tax Appeals (“BTA“) affirmed the commissionеr‘s orders. The BTA concluded that former
{¶ 4} This matter is now before the court upon an appeal as a matter of right.
Ball, Noga & Tanoury and Ronald B. Noga; and Clinton J. Miller III, for appellant.
Betty D. Montgomery, Attorney General, and Robert C. Maier, Assistant Attorney General, for appellee.
DOUGLAS, J.
{¶ 5} A “fraternal benefit society” is defined in
{¶ 6}
“Every fraternal benefit society organized or licensed under this chapter is hereby declared to be a charitable and benevolent institution, and all of its funds are exempt from all state, county, district, municipal, and school taxes other than franchise taxes and taxes on real estate.” (Emphasis added.)
{¶ 7} United contends that
{¶ 8} It is well established that “[s]tatutеs relating to the exemption or exception from sales or use taxes are to be strictly construed, and one claiming such exemption or exception must affirmatively show his right thereto.” Celina Mut. Ins. Co. v. Bowers (1965), 5 Ohio St.2d 12, 34 O.O.2d 7, 213 N.E.2d 175, paragraph one of the syllabus. See, also, Philips Industries, Inc. v. Limbach (1988), 37 Ohio St.3d 100, 101, 524 N.E.2d 161, 161-162. Further, “[o]ur duty is limited to a determination of whether the decision of the Board of Tax Appeals was unreasonable or unlawful.” Id.
{¶ 9} In arguing that it is exempt from paying the use tax, United has set forth a selective reading of
{¶ 10} The term “funds” is not defined in
{¶ 11} United asserts that the BTA‘s decision was premised on an improper “narrow” interpretation of the term “funds.” United points to
{¶ 12} However, it is clear that
{¶ 13}
“The use tax levied under
R.C. Chapter 5741 is an excise tax, not an ad valorem tax. As such, it is imposed ‘neither on the ownership of property, nor is it with respect to such ownership. It is not a tax “laid directly on persons or property.” * * * It is a tax assessed for some special privilege or immunity. * * *’ (Citations omitted.) Howell Air, Inc. v. Porterfield (1970), 22 Ohio St.2d 32, 34 [51 O.O.2d 62, 63, 257 N.E.2d 742, 743]. The use tаx, therefore, is not a tax laid upon the property, itself, but, rather, ‘is a tax upon the privilege of use of property * * *.’ Federal Paper Bd. Co. v. Kosydar (1974), 37 Ohio St.2d 28, at 32 [66 O.O.2d 82, 85, 306 N.E.2d 416, 419]. Under the statutes in question, ’ “use” means and includes the exercise of any right or power incidental to the ownership of the thing used.’R.C. 5741.01(C) .” (Emphasis sic.)
{¶ 14} Accordingly, thе commissioner did not assess a tax on the funds of United. Rather, the commissioner properly assessed a tax on United‘s exercise of its privilege to use the items it purchased, measured by the purchase price of the items. The BTA correctly decided this issue.
{¶ 15} Finally, United argues that we should examine
{¶ 16} The BTA properly rejected United‘s argument. First,
{¶ 17} Thus, we hold that United is not entitled to an exemption from payment of the use tax with respect to the purchases in question. The decision of the BTA was both reasonаble and lawful. Accordingly, we affirm the decision of the BTA.
Decision affirmed.
MOYER, C.J., RESNICK, F.E. SWEENEY and COOK, JJ., concur.
PFEIFER and LUNDBERG STRATTON, JJ., dissent.
LUNDBERG STRATTON, J., dissenting.
{¶ 18} Because I would find that a plain reading of former
{¶ 19} A fraternal benefit society operates for the social, intellectual, educational, charitable, benevolеnt, moral, fraternal, patriotic, or religious benefit of its members.
{¶ 20}
“Every fraternal benefit society * * * is hereby declared to be a charitable and benevolent institution, and all of its funds are exempt from all * * * taxes other than franchise taxes and taxes on real estate.” (Emphasis added.)
{¶ 21} First, the statute expressly exempts a fraternal benefit society from taxes (except franchise and real estate taxes) on “all of its funds.” Although the statute does not define “funds,” the word is commonly understood to broadly signify monies and assets. The American Heritage Dictionary of the English Language (3 Ed.1992) 735, defines “funds” as “[a]vailable money.” Black‘s Law Dictionary (6 Ed.1990) 673, states that “funds” includes “moneys and much more * * * and in broader meaning may include property of all kind.”
{¶ 22} There is no language in the statute that limits the meaning of “funds.” Yet the BTA found it necessary to interpret the word. The majority affirmed the BTA‘s finding that the term “funds” is restricted to “the fund or funds which are maintаined and invested as prescribed by law to carry out the purposes of the society.” There is no reasonable or legal basis to narrowly define the word funds to limit the tax exemption that, I believe, the General Assembly conferred upon fraternal benefit societies. It is a well-settled principle of statutory construction that words used in a statute are to be given their plain and ordinary meaning unless otherwise indicated. Ohio Assn. of Pub. School Emp. v. Twin Valley Local School Dist. Bd. of Edn. (1983), 6 Ohio St.3d 178, 181, 6 OBR 235, 237, 451 N.E.2d 1211, 1213.
{¶ 23} However, even if we accept such a narrow interpretation, a logical progression in the analysis is that United Transportation Union Insurance Association (“United“) uses its “funds” to make necessary purchases to carry out the purposes of the society. The funds are exempt from all taxes (except frаnchise and real estate taxes), and consequently, the use of the funds, including purchases made with the funds, should be likewise exempt from taxes. The purchases become other property and part of the exempt funds just as real estate would if purchased.
{¶ 24} The mаjority labels the use tax as a “tax on United‘s exercise of its privilege to use the items it purchased.” Yet, no matter how the tax is described, the consequence of the BTA‘s finding is that United‘s funds, in this case, funds used to purchase necessary items for the operation of the fratеrnal benefit society, are being taxed. This taxing policy serves only to discourage a fraternal benefit society from providing services and benefits to its members in order to avoid taxation on the use of the funds. Because the exemption applies to all taxеs, with the exception of franchise and real estate taxes, I believe this interpretation violates the express terms of former
{¶ 25} Second, the statute also states that the exemption applies to “all * * * taxes other than franchise taxes and taxes оn real estate.” There is no express exclusion for sales and use taxes. I do not believe we should read additional exclusions into the statute. Had the General Assembly intended also to exclude sales and use taxes, it could have done so. The plain, ordinary meaning of the statute exempts fraternal benefit societies from all taxes other than those expressly excluded.
{¶ 26} In addition,
{¶ 27} I believe the language in the statute reflects the General Assembly‘s intent to exempt fraternal benefit societies from all taxes (except franсhise and real estate taxes), including sales and use taxes. Therefore, I would reverse the decision of the BTA as being unreasonable and unlawful.
PFEIFER, J., concurs in the foregoing dissenting opinion.