Summary
The Ohio Supreme Court held that canned application software is tangible personal property subject to Ohio’s personal property tax when used in business. The court affirmed the Board of Tax Appeals’ decision upholding the Tax Commissioner’s assessment for tax years 1996 through 1998.
Topics
Practice areas
Questions Presented
- Whether canned or off-the-shelf application software is tangible personal property subject to Ohio's personal-property tax when used in business.
- Whether the Board of Tax Appeals reasonably and lawfully affirmed the Tax Commissioner's assessment.
Holdings
- Canned application software is tangible personal property subject to Ohio's personal-property tax when used in business.
- The Board of Tax Appeals' decision affirming the Tax Commissioner's assessment was reasonable and lawful and is affirmed.
Key quotations
“Jergens's canned application software is tangible personal property subject to personal property tax for property used in business.” (at 399)
“Thus, the encoded instructions are always stored on a tangible medium that has physical existence.” (at 399)
Factual background
Andrew Jergens Company used canned or off-the-shelf application software during tax years 1996 through 1998 but did not report the software's value on its personal property tax returns. Following an audit, the Tax Commissioner assessed the software as tangible personal property used in business. The software consisted of encoded computer instructions recorded on a tangible medium such as a tape or disc and transferred to the purchaser's computer for storage and use.
Procedural history
After an audit, the Tax Commissioner assessed the value of Andrew Jergens Company's canned or off-the-shelf application software as tangible personal property subject to business personal-property tax for tax years 1996 through 1998. The Commissioner denied Jergens's reassessment claim, and the Board of Tax Appeals affirmed, relying on Community Mut. Ins. Co. v. Tracy. Jergens appealed to the Supreme Court of Ohio as of right.