Great American Insurance v. Limbach

639 N.E.2d 36, 70 Ohio St. 3d 357

• Court: Ohio Supreme Court
• Decided: September 28, 1994
• Docket: No. 93-792
• Status: Published

Opinions

Pfeifer, J.

We hold that the Tax Commissioner lacks authority to issue an assessment against a taxpayer pursuant to R.C. 5739.13 where the taxpayer has fully paid the tax deficiency prior to the issuance of the assessment.

The Tax Commissioner, as well as other state officers, have only those powers conferred by statute. Ohio Util. Co. v. Collins (1976), 48 Ohio St.2d 169, 2 O.O.3d 370, 357 N.E.2d 1077. The only implied powers the commissioner possesses are those necessary to carry out her statutory functions. See Dreger v. Pub. Emp. Retirement Sys. (1987), 34 Ohio St.3d 17, 516 N.E.2d 214.

In this situation, the Tax Commissioner’s duties were made clear by statute. R.C. 5739.02 and 5739.03 require consumers to pay the proper sales tax on any transaction subject to such tax. The tax is required to be paid and collected when the sale is made. R.C. 5739.02 and 5739.03. The Tax Commissioner may make an assessment against the consumer if the consumer fails to pay the tax imposed on the transaction. R.C. 5739.13.

R.C. 5741.12 requires every taxpayer storing, using, or consuming tangible personal property, the storage, use, or consumption of which is taxable, to file a return and pay a use tax within a prescribed period. The Tax Commissioner may make an assessment against anyone who fails to file the applicable return and pay the use tax. R.C. 5739.13.

R.C. 5739.133 permits the Tax Commissioner to impose penalties and preassessment interest on taxpayers who have tax assessments made against them for failure to pay the proper amount of sales tax; R.C. 5741.14 grants the Tax Commissioner the same power for failures in the payment of use tax. R.C. 5739.133 provides in pertinent part:

“(A) A penalty shall be added to every amount assessed under section 5739.13 or 5739.15 of the Revised Code as follows:

«Q) * * *

«(2) * * *

“(3) In the case of all other assessments, fifteen per cent of the amount assessed.

it * * *

“(B) All assessments issued under section 5739.13 and 5739.15 of the Revised Code shall include preassessment interest * * *.”

R.C. 5739.133 gives the Tax Commissioner the power to add a penalty and interest to amounts that the commissioner assesses. Thus, penalties and interest charges are valid only when the assessment is valid.

The Tax Commissioner’s authority to issue an assessment is set forth in R.C. 5739.13. R.C. 5739.13 provides in pertinent part that:

“The commissioner may make an assessment against * * * any consumer who fails to pay the proper amount of tax required by this chapter.”

Therefore, the Tax Commissioner has the power to issue an assessment against someone who has not paid the proper amount of taxes. When the Tax Commissioner made her assessment against Great American, Great American had already paid the amount owed. Since it had no outstanding owed taxes, the assessment was invalid, pursuant to R.C. 5739.13. Thus, the penalty and interest charges were also invalid.

Had the legislature intended that the penalty and preassessment interest provisions of R.C. 5739.133 take effect immediately upon a failure to timely pay, it could have done so. Ohio’s franchise tax provisions, for example, automatically impose penalties on taxpayers who fail to file their reports timely, fail to pay their tax within the time prescribed, or fail to pay their estimated tax within the time prescribed. Those penalties apply without the necessity of an assessment. R.C. 5733.28. Likewise, Ohio’s income tax provisions do not require an assessment before the imposition of a penalty on taxpayers who fail to file their returns within the time prescribed, or who fail to pay any amount of tax owed. R.C. 5747.15.

Every tax code has loopholes. It is not the job of the courts to close them. The presence of a loophole may reflect legislative intent as much as an airtight provision might reflect that intent. In this instance, the legislature made assessments applicable only against persons who had not paid their taxes in full. Great American paid its taxes before an assessment against it was issued. Therefore, the assessment, penalty, and interest charges were invalid. We accordingly affirm the BTA’s decision.

Decision affirmed.

Moyer, C.J., A.W. Sweeney and Wright, JJ., concur. Douglas, Resnick and F.E. Sweeney, JJ., dissent.