Information Release

ST 1979-01 - Application to Fungible Goods - July 23, 1979

The Ohio Supreme Court in B.F. Goodrich v. Lindley, 58 Ohio St. 2d 2586, June 13, 1979 states:

"The primary use test does not apply to a sale of fungibles used for both taxable and non-taxable purposes where such use is apportionable before or after the sale. (Richardson-Merrill v. Porterfield, 32 Ohio St. 2d 281, overruled; Emery Industries v. Kosydar, 43 Ohio St. 2d 34, modified.)"

B.F. Goodrich filed a refund claim for the tax which they paid under their direct payment permit on a portion of fuel oil not used in an exempt manner. The claim for refund was denied by the Tax Commissioner's Hearing Board but was granted by the Board of Tax Appeals. The Supreme Court reversed the decision of the Board of Tax Appeals in the B.F. Goodrich case. The Supreme Court also overruled their previous Richardson-Merrill decision and modified their Emery decision.

In both the Richardson-Merrill and Emery decisions, the court had extended the primary use concept (previously applied to non-fungible items only) to the purchases of fungible goods. The effect was to exempt the entire purchase amount of fungible goods when the primary use of the goods was in an exempt manner.

The Court, in overruling their previous decisions (which determined the taxable status of fungible goods purchased on the primary use basis), said that the primary use test cannot be used to permit a consumer, merely by failing to separate or apportion fungibles used for mixed taxable and non-taxable purposes, to escape payment of tax clearly contemplated by the statute when any reasonable means can be used to apportion the purchases of fungible goods between taxable and non-taxable purposes.

Although the B.F. Goodrich case involved a direct payment permit holder, the elimination of the primary use test for fungible goods is a decision applicable to all consumers. The taxable portion of fungible goods will be determined and will be subject to the application of the proper rate of sales or use taxes.

If you have any questions regarding this matter, you should call us at 1-888-405-4039.

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