Personal Property Tax

County Bulletin

TO: All County Auditors - Bulletin No. 82

DATE: December 27, 1954

FROM: Stanley J. Bowers, Tax Commissioner

RE: Farm Implements and Equipment in the Possession of Ohio Resident Dealers

In many instances, farm implement dealers have not returned for taxation items of farm equipment in their possession under "conditional sales contracts" wherein are stipulated provisions that title will be vested with either the manufacturer of the article or a financing agency until full payment is received from the dealer.

Under these contracts the dealer is not obligated to pay for any portion of the merchandise received by him until such time as he makes a sale to his customer and the argument has been advanced by the dealer that by reason of this stipulation he is not the owner and therefore should not be required to list the inventory for purposes of personal property tax.

We have found manufacturers who are engaged quite extensively in supplying great quantities of farm implements to Ohio dealers under conditional sales contracts and the examiners of this department have been led to believe that the goods are on consignment to the dealer and should therefore be listed by the manufacturer.

We have examined copies of contracts entered into by several of these manufacturers and it is our notion that reservation of title by the manufacturer is for security purposes only.

A situation somewhat similar to this was considered by the Board of Tax Appeals in the case of Atwell Auto Service Company vs. The Tax Commission, case No. 8430. In this case an auto distributor sold new cars to a dealer and the title to such cars was placed in a financing agency until full payment was made by the dealer. The Board of Tax Appeals held that while legal title to the cars was vested in another until such cars were sold, the dealer had a beneficial interest therein, had possession and control thereof with authority to sell the cars, and therefore such cars should be returned for personal property tax purposes by the dealer.

We would suggest that a copy of the contract agreement entered into by the dealer with the supplier of the farm equipment be obtained in those questionable cases in order to determine if the merchandise was acquired under conditional sales contract or under a consignment agreement. It may be said generally that where goods are consigned to another with the understanding that the consignee shall either sell the property for the consignor, and remit to him the price, or, if he does not sell the property, return the same to such consignor, the transaction is not a sale but a consignment relationship.

Farm implements under the consignment agreement would then be returned for taxation as provided under Rule No. 208 wherein the supplier or manufacturer would be required to list such property unless he be a non-resident not authorized to engage in and not engaged in business in Ohio or not otherwise required to file a personal property tax return in this state.