The Ohio Supreme Court has executed it again. It announced a sales and use tax decision two days after Christmas and some days earlier than New Year’s Eve. Great Lakes Bar Control, Inc. V. Testa (12‑27‑18), Slip Op. No. 2018‑Ohio‑5207. (The Court launched its income and use tax selection regarding bobblehead dolls and the resale exemption the day earlier than Thanksgiving.) Thus, within the spirit of excursion birthday celebration, I once more take pen in hand to jot down this alert.
The records in Great Lakes are unremarkable. The legal reasoning, however, is sublime in its simplicity. In that manner, the Court’s opinion is excellent.
The taxpayer provided beer line upkeep services to restaurants and bars to take away buildup of undesirable sediments inclusive of bacteria and yeast. Naturally going on contaminants clogged its clients’ beer traces and taps and gave the beer a horrific flavor. The taxpayer deployed technicians to investigate the lines, agitate its contents and inject compressed gas to remove sediments. The strains from time to time had been flushed with an acid or potassium rinse to inhibit bacteria growth.
The Ohio Department of Taxation decided that these offerings have been taxable constructing upkeep and janitorial service beneath R.C. 5739.01(B)(3)(j). The taxpayer challenged this determination.
Ohio income tax applies to building protection and janitorial services. “Building protection and janitorial provider” is defined as “cleansing the indoors or outside of a constructing and any tangible non-public property placed therein or thereon * * *.” R.C. 5739.01(II). The Court targeted its criminal analysis on whether the beer-line offerings certified as “cleansing” as that term is used inside the tax statute.
However, the time period “cleaning” isn’t always defined inside the Ohio tax code. What to do? Every lawyer recollects studying instances and taking checks in law college while the identical sort of questions have been presented: What does a phrase in a statute imply whilst the phrase itself isn’t always defined? What intent is maximum persuasive to aid the chosen meaning? Such an exercising calls for utility of sharp definitions to give meaning and barriers to phrases which might be themselves more blunt and gentle edged. This is what legal professionals, judges and courts are referred to as to do. They depend on words to present that means to statutes that function directional signposts for future behavior and the consequences that follow.
Fortunately, there are “policies of the road” that display us the first-class or at least a better direction to comply with in analyzing and making use of the law. These regulations are not new. They had been round for centuries and assist offer consistency and continuity. The majority relied on these examined axioms to attain its end in Great Lakes. They include:
When a time period is undefined, the time period is given its plain and ordinary that means.
When interpreting the language of a statute, words and phrases shall be study in context and construed consistent with the regulations of grammar and not unusual usage.
Evaluating the context wherein a phrase is written is essential to a truthful studying of the textual content. The words of a governing text are of paramount concern, and what they convey, of their context is what the textual content approach.
Instead of limiting evaluation to the hyperliteral that means of every phrase, consideration should accept to the everyday meaning of the phrase as it’s miles used in the surrounding textual content.
The Court checked out the common which means of the word “cleaning” in the context of janitorial offerings (i.E., services that embody interest which includes washing flooring or home windows, putting off rubbish, vacuuming, dusting and so forth). In the context of its surrounding words and the actual service being defined, specifically “janitorial provider,” the Court rejected the argument advanced by the Tax Commissioner to zero in handiest on the phrase “cleaning” in isolation because it would push aside the importance of the text as a whole. The Court known as such an technique a “hyperliteral analyzing” that falls flat because it disregards the natural connotation of “cleansing” that becomes most apparent when taken into consideration in the context of “janitorial offerings.” That is, the meaning of “cleaning” must not be divided and separated from the term it’s miles itself defining (i.E., janitorial services). This simple, common experience method were given lost when the Tax Commissioner and the Attorney General argued for more tax.
Our tax laws are written by using ladies and men to be examine, understood and observed with the aid of women and men. The Court understood this and approached the problem rationally. The Court became transparent and clean in its explanation. The terms “cleansing” and “janitorial offerings” are intertwined on this tax statute, and the Court’s holding abides in that result. The Court concluded that beer-line service does now not healthy the plain which means of “cleaning” in the context of “janitorial services.” The Tax Commissioner’s tax evaluation become reversed.
Over the years, the Department’s audit coverage on taxable janitorial offerings has been competitive. That policy become based totally at the misplaced notion that “cleansing” could mean any decontamination, debugging or waste/dust removal hobby. Virtually something unwanted and removed has been considered taxable janitorial services through the Department. There changed into no connection in Department audit coverage between cleansing offerings and concepts commonly understood as janitorial services. This result has turn out to be financially painful, particularly to companies that manufacture, refine, system or collect merchandise for sale.
Businesses should examine the taxability of transactions (buying and selling) with the selection in Great Lakes as a manual. Future income taxes might be stored and tax refunds might be had. In any event, Great Lakes is the contextual signpost that permits for higher navigation and choice of a tax course to comply with.