Narrative Opinion Summary
This case involves Producers Service Corporation's appeal against the Board of Tax Appeals' decision denying them classification as a manufacturer under R.C. 5711.16 and the associated franchise tax credit under R.C. 5733.061. Producers, a hydraulic fracturing service provider, argued that their process of creating fracturing fluid from raw materials qualifies as manufacturing. The Board, however, ruled that Producers merely provided a service, as the fluid is not sold but used in oil and gas extraction. The case was consolidated from applications for tax review pertaining to the years 1984-1987. The court found the Board's determination unreasonable, noting similarity with the Stoneco, Inc. precedent, where the Ohio Supreme Court recognized the transformation of limestone into aggregate as manufacturing. The court concluded that Producers' activities meet the statutory definition of manufacturing since they convert materials into a valuable product for profit. Consequently, the court reversed the Board's decision, upholding Producers' assignments of error, and remanded the case for proceedings consistent with this opinion, thereby granting Producers eligibility for the tax credit.
Legal Issues Addressed
Appellate Review under R.C. 5717.04subscribe to see similar legal issues
Application: The appellate court reviewed the reasonableness and legality of the Board's decision, ultimately finding it to be erroneous and reversing it in favor of Producers.
Reasoning: The appeal is governed by R.C. 5717.04, which examines the reasonableness and legality of the Board's decision, alongside applicable appellate rules.
Definition of Manufacturing under R.C. 5711.16subscribe to see similar legal issues
Application: The court determined that the process of creating a high-viscosity fracturing fluid from raw materials constitutes manufacturing, as it involves converting materials into a more valuable product for profit.
Reasoning: Producers argues that its process clearly converts raw materials into a valuable product for profit, framing the appeal as a legal question rather than a factual dispute.
Eligibility for Franchise Tax Credit under R.C. 5733.061subscribe to see similar legal issues
Application: The court found Producers eligible for the tax credit as their activities qualify as manufacturing, overturning the Board's conclusion that Producers are merely providing a service rather than selling a product.
Reasoning: The board's determination that Producers does not qualify as a manufacturer under R.C. 5711.16 is deemed unreasonable and unlawful, as it closely resembles the situation in Stoneco.
Interpretation of Case Law in Determining Manufacturing Statussubscribe to see similar legal issues
Application: The court emphasized the precedent set in Stoneco, Inc. v. Limbach, which defines manufacturing as converting materials into a more valuable commodity for sale, thereby supporting Producers' classification as a manufacturer.
Reasoning: In the case of Stoneco, Inc., the Ohio Supreme Court ruled that the process of converting raw limestone into aggregate for construction constitutes manufacturing, countering a previous board determination.