
    The Standard Oil Co., Appellant, v. Peck, Tax Commr. (Bowers, Successor Tax Commr.), et al., Appellees.
    (No. 33920
    Decided March 16, 1955.)
    
      
      Messrs. McAfee, Grossman, Taplin, Hanning, Newcomer £ Hazlett and Mr. Rufus S. Day, Jr., for appellant.
    
      Mr. G. William O’Neill, attorney general, and Mr. Larry Snyder, for appellee.
   Per Curiam.

As is often the case in appeals from decisions of the Board of Tax Appeals, questions of fact are presented and those questions are close. It is not the function of this court to substitute its judgment for that of the board on factual issues but only to determine from an examination of the entire record whether the decision reached by the board is unreasonable or unlawful.

Another important matter which must be borne in mind is that under Sections 5546-2 and 5546-26, General Code (Sections 5739.02 and 5741.02, Revised Code), every sale or use of tangible personal property in Ohio is presumed to be taxable, and the burden rests on the taxpayer to establish affirmatively its right to the exceptions claimed. National Tube Co. v. Glander, Tax Commr., 157 Ohio St., 407, 105 N. E. (2d), 648.

In order for appellant to prevail with respect to the first class of property here involved — the tanks and the roustabout crane at the Lima refinery — it is incumbent on it, under Sections 5546-1 and 5546-25, General Code (Sections 5739.01 and 5741.01, Revised Code), to show that such property is used or consumed “directly in the production of tangible personal property for sale by * * * processing, refining. ’ ’

And in order for appellant to prevail with respect to the second class of property described — the articles and equipment used at and in connection with its gasoline and service stations — it is incumbent upon appellant to show that such property is used ‘ * directly in making retail sales. ’ ’

The Board of Tax Appeals, applying decisions of this court, which it thought applicable and controlling, reached the conclusion that the tanks are primarily and essentially for storage and preservative purposes and that none of them play any actual part in refining oil, that in part of the tanks crude oil is stored to await the first step of refining, and that in the remainder of them completely refined oil is placed to await transportation and distribution.

The roustabout crane was found to be employed only in the maintenance of pipelines and valves, and that the uses to which it is put are merely facilitative to and not directly linked with oil refining.

As to most of the various items and articles connected with appellant’s filling and service stations, the board found that, although they are facilitative to and probably operate to induce and promote retail sales and are used or consumed indirectly in that activity, they are not used or consumed “directly in making retail sales.”

As to the fuel oil tank trucks, the board apparently found that they are devoted essentially to transportation purposes and represent items used or consumed in the rendition of a service incidental to retail sales and hence their sale or use is subject to taxation.

A majority of this court are agreed that the decision of the board is correct as concerns the tanks and roustabout crane at the Lima refinery. As to the filling and service station items, there is some divergence of view, based largely on different factual conceptions. However, those members of the court concurring in this opinion have reached the conclusion that, although they, if sitting as members of the Board of Tax Appeals, might have, been more liberal in finding certain purchases of the filling and service station items described excepted from sales and use taxes, they can not go so far as to hold the decision rendered by the board unreasonable or unlawful. That decision is, therefore, affirmed.

Decision affirmed.

Weygandt, C. J., Matthias, Hart and Zimmerman, JJ., concur.

Taft, J., concurs in part in the judgment and dissents in part.

Stewart and Bell, JJ., dissent.

Taft, J.,

concurring in part in the judgment and dissenting in part. In Kroger Grocery & Baking Co. v. Glander, Tax Commr., 149 Ohio St., 120, 77 N. E. (2d), 921, it is said by Hart, J., at page 129:

“It was the evident intention of the General Assembly, in excepting sales of types of property used and consumed in the process of creating other tangible personal property for ultimate sale, to encourage the manufacture and production of more valuable personal property upon the sale of which a greater amount of tax could be collected from the consumer because of the enhanced value of the ultimate product. The purpose of excepting intermediate sales of integral items mailing up the final product is to avoid double taxation and to prevent the increase of ultimate sales price to the consumer, for, after all, the consumer pays the whole tax reflected in the price which he pays for the finished product. ’ ’

In Athens Home Telephone Co. v. Peck, Tax Commr., 158 Ohio St., 557, 110 N. E. (2d), 571, it is said by Weygandt, C. J., at pages 560 and 561:

“The instant cases do not involve the production of property. Instead it is the rendition of service.

“ * * * This court is of the opinion that the contrast is significant and may not be disregarded. It seems unnecessary to labor the point that ‘production of property’ and ‘rendition of service’ are not synonymous terms.

“But it is urged that in 1935 the word ‘directly’ was inserted in both provisions by amendment and must be considered. This, of course, is true. However, it does not follow that the common use of this one word renders the remainder of the two terms synonymous. * * * J ?

Again in Erie Rd. Co. v. Peck, Tax Commr., 160 Ohio St., 322, 116 N. E. (2d), 304, it is said by Weygandt, C. J., at page 325:

“In the opinion in that case, comment was made on the difference in the significance of the statutory language relating to material used or consumed ‘directly in the production of tangible personal property for sale’ and that used or consumed ‘directly in the rendition of a public utility service.’ There is nothing in the context to indicate that the General Assembly intended to use the two expressions synonymously; and in their ordinary acceptation the broader words ‘rendition of * * # service’ mean something different from ‘production of * * * property.’ This was observed in the opinion in the Athens case.”

I am in general agreement with the conclusions stated in Judge Bell’s opinion, except with respect to the crude oil service tanks, oil additive tanks and product oil tanks. As he points out, most of the items involved in the instant case are clearly included within the broad statutory terms “use * * * directly in making retail sales.” However, the problem with respect to the foregoing-mentioned tanks involves the narrower terms “used directly in the production * * * by manufacturing, processing, refining.” In my opinion, the record will support a reasonable conclusion that their use was principally in storage rather than in production.

Bell, J.,

dissenting. In my opinion the items in-7 eluded in the first group involved herein, i. e., the tanks and roustabout crane, are used “directly in the production of tangible personal property for sale by * * * processing, refining,” and under the rule of Mead Corp. v. Glander, Tax Commr., 153 Ohio St., 539, 93 N. E. (2d), 19, their sale or use should be held as nontaxable.

In discussing the items included in the second class of property, consisting of articles and equipment used at and in connection with gasoline and service stations, the following grouping has been resorted to:

Advertising Devices or Display Equipment.

Included in this group are Sohio neon signs, cloth or canvas pennants, curb stands, desks, workbenches and display shelves. All these articles are intended to bring, and are doubtless effective in bringing, customers into the service stations and presenting to them visually the articles which may be purchased there. Their sole purpose is to induce a sale. Such a use is certainly a direct one in making a sale.

Items Used in “Package Sales” of Gasoline and Oil.

Included in this group are air hose and reels, air meters, towers, standards and tire flators, windshield tissues, white wipers and hoodsup napkins, windshield service cabinets, radiator fill pails, battery service kits and tools and gauge sticks.

Although most of these items may be considered “service” items, they are nevertheless items of service which the customer has learned to expect and now demands and without which he would take his business elsewhere. To say that they are indirect in the making of sales of gasoline, oil and tires is to blink one’s eyes at the reality of modern-day merchandising necessities.

Items Used in Sale of Oil and Grease.

■ Included in this group are drain oil cans, lubricating equipment, lifts and parts, air compressors and parts, fender covers, transmission heaters, transmission tools, and oily waste cans.

Before new oil can be put into the crankcase of an automobile the old oil must be drained out. Hence, the drain can is directly used in the sale of new oil. It is rare that oil or grease is sold by a filling station and not immediately put into an automobile. The lubricating equipment, lifts and air compressors are indispensable in getting oil and grease into the automobile and so must be considered as being used directly in making the sale of the oil and grease. Fender covers are used directly in the consummation of any sale that requires the lifting of the hood of an automobile. Few customers would return to a service station for a second purchase if their automobiles had been returned to them previously with the fenders covered with oil or grease.

A transmission heater is essential in cold weather to heat old gear oil in a transmission prior to replacing it with new, and the transmission tools are specially designed to permit the placing of new gear oil in the transmission. Consequently, both are directly used in the sale of gear oil for transmissions.

After the cheeking of the oil level in a crankcase to determine the quantity of oil to be sold, the cloth or waste used to wipe off the oil gauge stick is thrown into the oily waste can. Oil and grease cannot be sold without some spillage and the waste is used to wipe up such spillage. A receptacle for this waste thus is tied in directly with the sale of oil and grease.

Items Used in Sales off the Premises.

Included in this group are the fuel oil tank trucks, Yentalarm signals and aircraft refueler tank trailers and parts.

The Yentalarm signal is a whistling device put on a customer’s fuel oil tank and is used to determine when the tank is approaching full capacity. It is directly used in making a sale of fuel oil at a customer’s home. The fuel oil tank trucks and the aircraft refueler tank trailers and parts are not different from the tanks, pumps, nozzles and hoses used at the service stations and under Rule 44 of the Tax Commissioner their sale or use should be held to be excepted from the sales and use tax.

Items Used in Sales of Tires.

Included in this group are hydraulic jacks, pit lift jacks, axle stands, jacks and trestle jacks, tire tools and air and tire gauges.

Rare would be the customer buying a tire who would not want it mounted on a wheel, inflated and put either on or in his automobile. To accomplish that sale at one time or another, all these items would be used. They are thus used directly in making a sale of tires.

Items Used to Determine Needs of Customers.

Included in this group are underhood record cards and cardholders, mystic check tabs, fast battery chargers, battery safety meters, spark plug testers and current testers.

The last four of these items may also be placed in the “package sale” group. They are, however, also directly connected with a sale in that they are devices used by the filling stations to determine the customer’s need to purchase new equipment. The fast battery charger has the added function of maintaining' a charge in new batteries so that they are in a condition to be sold. Tbe cards, cardholders and mystic check tabs are used to advise the customer of his need for oil change and lubrication, and thus are used directly in the sale of oil and grease.

The decision of the Board of Tax Appeals should be reversed.

Stewart, J., concurs in the foregoing dissenting opinion.  