COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 67885 L.J. MINOR CORPORATION : : Plaintiff-appellant : : JOURNAL ENTRY -vs- : AND : OPINION CAROL BREITENBACH, TAX : ADMINISTRATOR, CITY OF : CLEVELAND : : Defendant-appellee : : DATE OF ANNOUNCEMENT OF DECISION: JULY 13, 1995 CHARACTER OF PROCEEDING: Civil appeal from Court of Common Pleas Case No. 265141 JUDGMENT: Affirmed. DATE OF JOURNALIZATION: APPEARANCES: For Plaintiff-Appellant: For Defendant-Appellee: ROGER F. DAY, ESQ. SHARON SOBOL JORDAN, ESQ. JONES, DAY, REAVIS & POGUE Cleveland City Law Director 1900 Huntington Center DEBRA D. ROSMAN, ESQ. 41 South High Street Room 106 - City Hall Columbus, Ohio 43215 601 Lakeside Avenue Cleveland, Ohio 44114 For Amicus Curiae, City of Brecksville: PAUL A. GRAU, ESQ. Brecksville City Law Director Castleton Building 5306 East 98th Street Garfield Heights, Ohio 44125 - 2 - DYKE, J.: Appellant corporation is a manufacturer of food products which owns a manufacturing facility in Cleveland and a shipping warehouse in Brecksville. Appellant applied for a refund in municipal income tax from the Cleveland tax administrator for the years 1984-88 because appellant claimed that it misconstrued which of its sales were subject to the Cleveland tax. Appellant considered sales which were shipped from its Brecksville warehouse to be Cleveland sales, subject to Cleveland tax. For the tax years in question, appellant paid tax to both Cleveland and Brecksville on those sales. The Cleveland tax administrator denied appellant's application for a refund. Appellant appealed to the Board of Review which found that the sales which were shipped from the Brecksville warehouse were still Cleveland sales, as the warehouse "was little more than a way station" from the Cleveland-based manufacturing plant to the purchasers. (Board of Review Decision, p.7). The Board of Review's finding that the sales at issue were made in Cleveland for purposes of figuring the Cleveland municipal income tax was affirmed by the Court of Common Pleas on August 26, 1994. Appellant filed a timely appeal with this Court, asserting three assignments of error. - 3 - I THE COURT OF COMMON PLEAS FAILED TO LAWFULLY CONSTRUE AND APPLY R.C. 718.02 AND CLEVELAND ORDINANCE SECTION 191.0702 WHICH ARE DESIGNED TO IDENTIFY THAT PORTION OF A BUSINESS' NET PROFIT WHICH IS PROPERLY SUBJECT TO THE CITY'S MUNICIPAL INCOME TAX. II IN IDENTIFYING THAT PORTION OF APPELLANT'S NET PROFIT SUBJECT TO CLEVELAND INCOME TAX, THE COURT OF COMMON PLEAS ERRONEOUSLY CONSIDERED SALES OF GOODS PHYSICALLY SHIPPED TO CUSTOMERS FROM APPELLANT'S BRECKSVILLE WAREHOUSE AS CONSTITUTING SALES MADE IN CLEVELAND. THIS INFLATES THE CLEVELAND "SALES FACTOR" AND OVERSTATES THE AMOUNT OF APPELLANT'S NET PROFIT LAWFULLY SUBJECT TO THE CLEVELAND INCOME TAX. Appellant argues the first two assignments of error together. As they are interrelated we will treat them together as well. Appellant states that R.C. 718.02 and Cleveland Codified Ordinance 191.0702 do not permit shipments of goods from the Brecksville warehouse to customers outside of Cleveland to be considered "Cleveland sales" for purposes of Cleveland municipal income tax. Appellant argues that the Board of Review's interpretation is incorrect because the statute and ordinance require that the sales must be physically shipped from the city imposing the municipal income tax. We are not persuaded by appellant's argument. R.C. 718.02(B) reads as follows: As used in division (A) of this section, "sales made in a municipal corporation" mean: * * * (3) All sales of tangible personal property which is shipped from a place within such municipal corporation to purchasers outside such municipal corporation regardless of where title passes if the taxpayer is not, - 4 - through its own employees, regularly engaged in the solicitation or promotion of sales at the place where delivery is made. Cleveland Codified Ordinance 191.0702 mirrors R.C. 718.02(B)(3). The following analysis of this language applies to both provisions. The interpretation of the language, "shipped from a place within such municipal corporation to purchasers outside such municipal corporation" by the Board of Review determined that the shipments of appellant's food products from the Cleveland manufacturing plant to the Brecksville warehouse, then to customers outside of Cleveland qualified as sales made in Cleveland. This interpretation is not unreasonable, arbitrary or unsupported by the evidence. The Board of Review found that appellant had only four or five employees working in the Brecksville warehouse, "none of whom are involved in sales or administration or have direct customer contact. In response to customer orders received and approved in Cleveland, they forward the ordered products on to purchasers." (Bd. of Review Decision, p.2). When read in the context of R.C. 718.02(B)(1)-(3) this interpretation by the Board of Review is well supported by the organization of the code provision. Subsection (B)(1) allows taxation of sales delivered within Cleveland and shipped or delivered from a stock of goods within Cleveland. Subsection (B)(2) contemplates the taxation of sales delivered within Cleveland, even though shipped from a point outside of Cleveland, - 5 - if the solicitation and resulting sale occur in Cleveland. Finally, (B)(3) can clearly be read to pertain to sales shipped from Cleveland. The emphasis in this legislation is plainly upon the sales aspect of the activity, not upon the physical act of loading the goods upon a truck or train whose final destination is the customer. Appellant's first and second assignments of error are overruled. The Court of Common Pleas' ruling to affirm the Board of Review's decision is not arbitrary, unreasonable or unsupported by the evidence. III THE COURT OF COMMON PLEAS WRONGFULLY REFUSED TO REFUND EXCESSIVE INCOME TAX PAID BY APPELLANT FOR TAX RETURN YEARS 1984 THROUGH 1988. Appellant's third assignment of error is a request of this Court to order a refund of the tax paid under the alleged misinterpretation of R.C. 718.02(B) and Cleveland Codified Ordinance 191.0702. Because we failed to find a misinterpretation of these tax provisions, we do not find appellant's third assignment of error to be well taken. The third assignment of error is overruled and the Court of Common Pleas' decision to affirm the Board of Review's ruling is affirmed. - 6 - It is ordered that appellee recover of appellant its costs herein taxed. The Court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this Court directing the Court of Common Pleas to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. KARPINSKI, J., CONCURS. NAHRA, J., DISSENTS (SEE ATTACHED DISSENTING OPINION) ANN DYKE PRESIDING JUDGE N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announce- ment of decision (see Rule 26). Ten (10) days from the date hereof, this document will be stamped to indicate journalization, at which time it will become the judgment and order of the court and time period for review will begin to run. - 2 - COURT OF APPEALS OF OHIO EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 67885 : L.J. MINOR CORPORATION, : : : Plaintiff-Appellant : : D I S S E N T I N G vs. : : O P I N I O N CAROL BREITENBACH, TAX ADMINI- : STRATOR, CITY OF CLEVELAND, : : : Defendant-Appellee : DATE: JULY 13, 1995 NAHRA, J., DISSENTING: Respectfully, I dissent. R.C. 718.02(B)(3) clearly and unambiguously requires that sales must be shipped from the city imposing the tax to the purchasers in order for the sales to be included in the numerator of the sales allocation fraction. The location where the goods are shipped to the customers controls. Here, the goods were not shipped from Cleveland to the purchasers. The goods were shipped from Brecksville to the purchasers. When the language of a statute is clear and unambiguous, the statute must be applied as written. Storer Communications, Inc. v. Limbach (1988), 37 Ohio St.3d 193. Courts are not permitted to expand a statutory definition by including a situation not provided for in the statute. Id. The statute does not include as "sales" - 3 - items shipped to customers outside the city from a warehouse outside the city, even if the items were manufactured inside the city. The legislature chose place of shipment as the determining factor, not place of manufacture. Nor did the legislature mandate that sales be allocated to the city where the most "sales activity" takes place. While place of solicitation may be a consideration, the statute clearly provides that only items delivered in the city or shipped from the city to customers can be included as sales within the city. See R.C. 718.02(B). The allocation of the sales in question to the City of Cleveland was unreasonable and in violation of statute. I would reverse the decision of the Municipal Income Tax Board of Review, City of .