Decent semantic debates translate to crappy court rulings. And you know something odd is coming out of a legal opinion when a judge cites to that tautological quote from Scalia & Garner’s “Reading Law:The Interpretation of Legal Texts”: “The words of a governing text are of paramount concern, and what they convey, in their context, is what the text means.”
But all that translates to some wacky fun when the difference between calling a beer line cleaning a cleaning as opposed to calling it something different might force a beer line cleaning service like Great Lakes Bar Control Inc., to pay $102,347.91 in uncollected taxes for failing to pay taxes on a taxable “cleaning” service.
Here’s what happened.
A state law required collection of taxes on “cleaning the interior or exterior of a building and any tangible personal property located therein or thereon, including any services incidental to such cleaning for which no separate charge is made.” R.C. 5739.01(II)
Great Lakes provides services to bars such as selling, installing and servicing beer dispensing systems (removing accumulated sediment like bacteria and yeast that clog tap lines).
An audit of Great Lakes showed that they had not collected the sales tax under the cited statute on the money they collected for the beer line service that their technicians performed. The assessment from the Ohio Department of Taxation for the seven years that Great Lakes didn’t collect taxes amounted to $102,347.91. Great Lakes appealed arguing that cleaning the beer lines wasn’t cleaning under the statute and the Board of Tax Appeals reversed. The Department appealed that reversal to the Ohio Supreme Court. And it agreed with the Board.
But the Ohio Supreme Court’s opinion is an oddity. What’s odd here is that the opinion from the Board of Tax Appeals that found in Great Lakes’ favor (link to opinion) succinctly handled the issue by showing that in tax board opinions under this statute, there was a recognized and defined difference between cleaning and maintenance and that because the beer line service extended the life of of the beer lines and improved or maintained their function and operation, it was considered maintenance (even if it was called cleaning). This type of “cleaning” under the tax board opinions is different than “cleaning” (just removing dirt with no impact on function) which is taxable under the statute:
Based upon the foregoing, we conclude that it is reasonable to draw a distinction between the act of removing dirt/contaminants from tangible personal property simply for purposes of making it “clean” or“fresh,” i.e., cleaning, and the act of removing dirt/contaminants from tangible personal property so that it will continue to operate properly, i.e., preventative maintenance.
The oddity arises because, this easy, well reasoned, supported and simple distinction apparently was insufficient for the Justices of the Ohio Supreme Court, and instead the court bent over backwards to say a cleaning wasn’t a cleaning without referencing this maintenance/cleaning distinction supported by tax case precedent.
So the court’s opinion goes on about the “hyperliteral” (quoting Garner and Scalia again) reading of “cleaning” overlooking the “natural connotation” of cleaning as it applies to janitorial services. And how such a hyperliteral reading of “cleaning” would render things such as “cleaning computer hardrives, a professional data-cleansing service that scrubs database errors, or a business that dry-cleans clothes. Even a fish-cleaning house on Lake Erie—whose service involves the ‘cleaning’ (scaling, gutting) of ‘tangible personal property’ (the fish)—might be considered a janitorial service.”
None of that makes as much sense as saying “cleaning of tangible property isn’t really cleaning when it’s maintenance of that tangible property.”