Harsco Corp. v. Tracy

Per Curiam.

Harsco, first, argues that the assessment process overstates the value of the inventory at the Astro Metallurgical division location and that the Tax Commissioner has authority under R.C. 5711.18 to adjust the assessments. Harsco claims that it does not challenge applying the averaging principle; however, it claims that averaging by the two taxpayers in the special circumstances of'this case overstates the average value of the inventory. The Tax Commissioner replies that, under the current statutes and case law, he correctly valued the inventory of both taxpayers. We agree with the Tax Commissioner.

R.C. 5711.16 sets forth how a manufacturer lists its inventory for the personal property tax:

“When [a manufacturer] is required to return a statement of the amount of his personal property used in business, he shall include the average value, estimated as provided in this section, of all articles purchased, received, or otherwise held for the purpose of being used, in whole or in part, in manufacturing, combining, rectifying, or refining, and of all articles which were at any time by him manufactured or changed in any way, either by combining, rectifying, refining, or adding thereto, which he has had on hand during the year ending on the day such property is listed for taxation annually, or the part of such year during which he was engaged in business. * * *

“The average value of such property shall be ascertained by taking the value of all property subject to be listed on the average basis, owned by such manufacturer on the last business day of each month the manufacturer was engaged in business during the year, adding the monthly values together, and dividing the result by the number of months the manufacturer was engaged in such business during the year. The residí shall be the average value to be listed. * * * ” (Emphasis supplied.)

In Rick Case Motors, Inc. v. Tracy (1994), 71 Ohio St.3d 380, 382, 643 N.E.2d 1137, 1138, a case interpreting R.C. 5711.15, which directs the averaging of inventory held by a merchant, we stated:

“[W]e have long and consistently held that a merchant must include in the calculations any inventory it held even if it did not hold inventory for a full year. In United Eng. & Foundry Co. v. Bowers (1960), 171 Ohio St. 279, 282, 13 O.O.2d *192240, 241-242, 169 N.E.2d 697, 699, we held that these inventory valuation statutes may draw on the antecedent fact of holding inventory for a criterion in the operation of the statutes. In Beerman Stores, Inc. v. Bowers (1962), 173 Ohio St. 59, 18 O.O.2d 258, 179 N.E.2d 521, we noted that inventory is taxable if it is used in business in Ohio. At 62, 18 O.O.2d at 258 [259], 179 N.E.2d at 522, we stated:

“ ‘The language of Section 5711.15, Revised Code, is clear that, where a merchant has an inventory in existence in the taxing district for some part of a year, such inventory must be included in the valuation of tangible personal property for tax purposes. There is no requirement in such section that the inventory be in existence on tax listing day.

“ ‘ * * * As we have noted, such section does not require the property to be in existence on any specific day, it requires only that such property shall have been used in business during the tax year.’ ”

Despite Harsco’s argument that this averaging process unfairly measures its inventory value as of tax listing date on inventory it no longer holds, R.C. 5711.16 states that “[t]he result [of the averaging process] shall be the average value to be listed.” We apply clearly written statutes; we do not employ interpretive methods to discern their meaning. Lancaster v. Fairfield Cty. Budget Comm. (1998), 83 Ohio St.3d 242, 244-245, 699 N.E.2d 473, 475-476. Accordingly, the statutes do not empower the Tax Commissioner to adjust a taxpayer’s average of monthly inventory values; the average value that Harsco calculated “shall be the average value to be listed.”

Next, Harsco contends that this averaging method violates its federal right to equal protection because its property is not valued at its true value. The Tax Commissioner denies this claim. Again, we agree with Tax Commissioner.

The United States Supreme Court explained the review of equal protection claims in Nordlinger v. Hahn (1992), 505 U.S. 1, 10, 112 S.Ct. 2326, 2331-2332, 120 L.Ed.2d 1, 12:

“The Equal Protection Clause of the Fourteenth Amendment, § 1, commands that no State shall ‘deny to any person within its jurisdiction the equal protection of the laws.’ Of course, most laws differentiate in some fashion between classes of persons. The Equal Protection Clause does not forbid classifications. It simply keeps governmental decisionmakers from treating differently persons who are in all relevant respects alike. F.S. Royster Guano Co. v. Virginia, 253 U.S. 412, 415 [40 S.Ct. 560, 561, 64 L.Ed. 989, 990-991] (1920).

“As a general rule, ‘legislatures are presumed to have acted within their constitutional power despite the fact that, in practice, their laws result in some inequality.’ McGowan v. Maryland, 366 U.S. 420, 425-426 [81 S.Ct. 1101, 1105, 6 L.Ed.2d 393, 399] (1961). Accordingly, this Court’s cases are clear that, unless a *193classification warrants some form of heightened review because it jeopardizes exercise of a fundamental right or categorizes on the basis of an inherently suspect characteristic, the Equal Protection Clause requires only that the classification rationally further a legitimate state interest. See, e.g., Cleburne v. Cleburne Living Center, Inc., 473 U.S. 432, 439-441 [105 S.Ct. 3249, 3254-3255, 87 L.Ed.2d 313, 320-321] (1985); New Orleans v. Dukes, 427 U.S. 297, 303 [96 S.Ct. 2513, 2517, 49 L.Ed.2d 511, 517] (1976).”

Further, Driscoll’s statement at page sixteen of his report undermines Harsco’s claim. Driscoll states:

“If the goal of a fair tax system is the equal treatment of equals, then the system can fail for two reasons. It can treat similarly situated persons in dissimilar ways. Or, it can treat dissimilarly situated persons with inappropriate uniformity. In the current case, the treatment of the sale of an entire division of the business results in the latter kind of unfair treatment.”

Thus, Driscoll contends that the averaging process of this case treats “dissimilarly situated persons with inappropriate uniformity.” The Equal Protection Clause, however, “keeps governmental decisionmakers from treating differently persons who are in all relevant respects alike.” Nordlinger v. Hahn, supra. If persons are dissimilarly situated, they are not in the same class, and the Equal Protection Clause does not shelter them.

Nevertheless, we conclude that Harsco is within a class of similarly situated persons, i.e., personal property taxpayers whose inventory value is averaged differently depending on business circumstances. Chicago Pacific Corp. v. Limbach (1992), 65 Ohio St.3d 432, 437, 605 N.E.2d 8, 12. We rule, however, as we did in Chicago Pacific Corp., that “the state has a legitimate interest in levying a tax on average business inventory and avoiding the inequality of fluctuating inventories” and “discourages strategic mergers to avoid personal property tax.” Id. Leveling inventory fluctuations and discouraging strategic mergers provide rational bases for inventory averaging under R.C. 5711.16.

Accordingly, we hold that the BTA’s decision is reasonable and lawful, and we affirm it.

Decision affirmed.

Moyer, C.J., Douglas, Resnick, F.E. Sweeney and Cook, JJ., concur. Pfeifer and Lundberg Stratton, JJ., dissent.