[Cite as Bay Mechanical & Elec. Corp. v. Testa, 133 Ohio St.3d 423, 2012-Ohio-4312.]




   BAY MECHANICAL & ELECTRICAL CORPORATION, APPELLANT, v. TESTA,
                                 TAX COMMR., APPELLEE.
                   [Cite as Bay Mechanical & Elec. Corp. v. Testa,
                         133 Ohio St.3d 423, 2012-Ohio-4312.]
Sales tax—R.C. 5739.01—Taxpayer burden—Decision affirmed.
  (No. 2011-1197—Submitted August 22, 2012—Decided September 26, 2012.)
             APPEAL from the Board of Tax Appeals, No. 2008-K-1687.
                                  ____________________
        Per Curiam.
        {¶ 1} In this case, Bay Mechanical & Electrical Corporation, a specialty
mechanical contractor, challenges a sales-tax assessment issued by the tax
commissioner with respect to Bay’s purchase of allegedly taxable “employment
services.” During the audit period, which extends from January 1, 2003, through
December 31, 2005, Bay purchased the services from two entities. Bay treated
the personnel supplied by Tradesmen International, Inc. and Construction Labor
Contractors (“CLC”) as “permanent-assignment” employees and therefore
regarded the attendant employment services as exempt pursuant to R.C.
5739.01(JJ)(3).1
        {¶ 2} On audit, the commissioner overruled Bay’s exempt treatment of
the transactions on the primary ground that Bay had failed to supply “facts and
circumstances” evidence in relation to the assignment of individual employees.


1. After the audit period at issue, the General Assembly amended the definition of “employment
service” at R.C. 5739.01(JJ) and added an exception at paragraph (5). Sub.H.B. No. 293, 151
Ohio Laws, Part V, 8842, 8864. The amendment is not material to the analysis of the statute in
this opinion, and it did not change the language of paragraph (3) at all. In this opinion, however,
R.C. 5739.01(JJ) and 5739.01(JJ)(3) refer to the version in effect during the audit period. 145
Ohio Laws, Part III, 4009, 4297.
                             SUPREME COURT OF OHIO




On appeal, the BTA found that the testimony and the summary exhibits offered by
Bay were insufficient to prove entitlement to the exemption, with the result that
the BTA affirmed the commissioner’s denial of the exemption. Bay Mechanical
& Elec. Corp. v. Levin, BTA No. 2008-K-1687, 2011 WL 2446198, *3-4 (June
14, 2011).
       {¶ 3} Before this court, Bay renews its contention that the language of its
contracts and the testimony offered satisfy the one-year and permanent-
assignment criteria of R.C. 5739.01(JJ)(3). We disagree, and we therefore affirm
the decision of the BTA.
                             I. Course of proceedings
       {¶ 4} Bay Mechanical & Electrical Corporation is a construction
contractor that provides various services such as plumbing, piping, HVAC,
electrical wiring, and maintenance work.            Bay directly employed “core
employees” to carry out its projects, but additionally relied on labor supplied by
third parties—in other words, Bay purchased “employment services,” which are
generally subject to sales tax unless specifically excepted.
       {¶ 5} During the audit period, which stretches from January 1, 2003,
through December 31, 2005, Bay held a direct-payment permit. Although the
sales-tax law usually requires vendors to charge the tax to their consumers and
then remit the collected tax to the state, see R.C. 5739.03 and 5739.29, another
section—R.C. 5739.031—empowers the commissioner to issue direct-payment
permits to consumers. Under such a permit, the consumer files monthly sales-tax
returns that ascertain its own liability to pay the tax on its own purchases.
                            1. The audit and assessment
       {¶ 6} The tax commissioner commenced his audit of Bay’s purchases
with a notification letter dated February 13, 2006. Over the course of several
months, the tax agent worked out the method for the audit with Bay.             On
December 20, 2006, Bay representatives met with the tax agent at Bay’s Lorain




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headquarters, and during that meeting, the taxability of the purchases from
Tradesmen and CLC was a principal subject of discussion. A second meeting on
February 20 resolved several issues but not the disagreement regarding the
taxability of the employment services that Bay had purchased. Bay argued that
the Tradesmen and CLC transactions were exempt as “permanent assignment”
sales under R.C. 5739.01(JJ)(3). The parties agreed that Bay would produce
additional information for the tax agent’s review. That additional information
would have included employment-service invoices from Tradesmen and CLC as
well as “job cost summary sheets and supporting accrual information.”
       {¶ 7} By letter dated March 7, 2007, Bay’s controller announced that
Bay had decided not to produce the additional information. The letter recited that
Bay had furnished to the tax agent the employment-service contracts between it
and Tradesmen and CLC and that Bay had paid sales tax on employment services
as to specified temporary employees supplied by other vendors. Bay took the
position that it had “followed the intent and the letter of the law with regard to
leased construction labor” and asked the tax agent to proceed to issue his
preliminary report without the benefit of additional documentation.
       {¶ 8} The tax agent’s audit remarks reveal the department’s own
position.   After reviewing the two CLC contracts and the three Tradesmen
contracts, the tax agent concluded that two of the Tradesmen contracts were
disqualified as a basis for exemption because they referred to nonpermanent
assignments.   In reviewing the other contracts, the agent first confirmed the
existence of clauses that established that the contracts were “for at least one year”
as required by R.C. 5739.01(JJ)(3). Next, the agent stated that although the
remaining three contracts referred to indefinite or permanent assignment of the
employees, they did not qualify as a basis for exemption because they failed to
specify those employees or positions subject to such permanent or indefinite
assignment. With respect to Tradesmen, the additional question arose whether



                                         3
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employees had been assigned pursuant to the temporary-service contract or the
permanent-assignment contract.
        {¶ 9} As a result of the audit, the tax department issued a use-tax
assessment against Bay on May 25, 2007, calling for payment of $105,078.77 of
use tax, of which $74,574.65 related to employment services. 2 In addition to the
tax, penalties and interest were assessed.
                                2. Petition for reassessment
        {¶ 10} On July 17, 2007, Bay filed its petition for reassessment, which
challenged the employment-services portion of the assessment and stated that Bay
was not requesting a hearing. An attorney with the tax department’s Office of
Chief Counsel wrote to Bay’s counsel, noting that the audit agent had requested
“additional information, including comprehensive invoice and time sheet
information for employees supplied to the petitioner by Tradesmen International,
Inc. and Construction Labor Contractors.”                   The attorney stated that the
information was “necessary in order to determine whether or not the employees
were placed with the petitioner on a permanent basis per H.R. Options, Inc. v.
Zaino (2004), 100 Ohio St.3d 373, 800 N.E.2d 740,” and requested that Bay
supply it. After receiving a second, similar letter, Bay’s counsel responded that
Bay “has declined to submit any additional information, including comprehensive
invoice and time sheet information for employees supplied to Bay Mechanical by
Tradesmen International, Inc. and Construction Labor Contractors,” while also
asserting that “[t]he information was provided to the auditor during the course of
the audit.” The record does not support the latter statement.



2. The commissioner assessed the tax owed as use tax, not as sales tax. The distinction has no
practical significance in this context, because the undisputed realization of the benefit of the
employment services within Ohio means that the purchases entail a taxable “use” as long as the
separate sales-tax obligation remains unpaid. See R.C. 5741.02(C)(1) (transactions subject to the
sales tax are exempted from the use tax, but only if the sales tax has been paid). Moreover, if the
purchases are excepted from sales tax, there is no use tax, either. R.C. 5741.02(C)(2).




                                                4
                                     January Term, 2012




         {¶ 11} On July 22, 2008, the tax commissioner issued his final
determination, which denied the exemption on the ground that Bay had failed to
supply “facts and circumstances” evidence in the form of “comprehensive invoice
and time-sheet information” and that Bay had failed to submit the tax
department’s employment-services questionnaire. The commissioner additionally
faulted Bay for not supplying contracts with individual employees.                             The
commissioner concluded that he could not grant the exemption because Bay had
“not supplied information regarding the employees’ contracts or the facts and
circumstances regarding the employees’ assignments.”
                                      3. The BTA appeal
         {¶ 12} Bay appealed to the BTA and, at the BTA hearing, presented the
testimony of Bay’s controller along with four summary exhibits. The exhibits (1)
identified the assigned employees by name, (2) associated each employee with
either Tradesmen or CLC, (3) set forth the precise duration of each employee’s
assignment, and (4) stated the reason each employee had stopped working for
Bay. The controller testified that she had prepared the documents by referring to
the employment-service invoices received from Tradesmen and CLC—documents
that the tax agent had requested during the audit but that were not produced.3
         {¶ 13} The tax commissioner objected to the introduction of the exhibits
on the grounds that the invoices themselves constituted the evidence, but the
board received the exhibits and made them a part of the record.
         {¶ 14} On June 14, 2011, the BTA issued its decision. The BTA stated
that Bay had the burden to prove that each employee covered under the contracts
was assigned to Bay on a permanent basis—meaning that the personnel were
assigned for a indefinite period and not assigned either as a substitute for an

3. In its reply brief, Bay argues that its production of the invoices in discovery at the BTA should
substitute for its failure to produce them during the audit. We address this contention in the legal
analysis below.




                                                 5
                              SUPREME COURT OF OHIO




employee who was on leave or to meet seasonal or short-term workload
conditions. Bay Mechanical, BTA No. 2008-K-1687, 2011 WL 2446198, *2,
citing H.R. Options, Inc. v. Zaino, 100 Ohio St.3d 373, 2004-Ohio-1, 800 N.E.2d
740, ¶ 21-22.     The BTA found that the controller’s testimony and exhibits,
presenting as they did information “gleaned from records not before us,” did not
rise to the level of proof required by H.R. Options. Accordingly, the board
affirmed the final determination of the commissioner, and the cause is now before
us on an appeal of right.
                                 II. Legal Analysis
       {¶ 15} In a claim for tax exemption, the “onus is on the taxpayer to show
that the language of the statute ‘clearly express[es] the exemption’ in relation to
the facts of the claim.” Anderson/Maltbie Partnership v. Levin, 127 Ohio St.3d
178, 2010-Ohio-4904, 937 N.E.2d 547, ¶ 16, quoting Ares, Inc. v. Limbach, 51
Ohio St.3d 102, 104, 554 N.E.2d 1310 (1990). And when a decision issued by
this court furnishes a definitive construction of the exemption statute, we typically
reject an exemption claim that would expand the exemption beyond the scope
described in that decision. See id. at ¶ 22.
       {¶ 16} Also significant are two settled propositions that govern,
respectively, the BTA’s review of the tax commissioner’s determinations and our
review of a BTA decision. First, before the BTA, “[t]he Tax Commissioner’s
findings ‘are presumptively valid, absent a demonstration that those findings are
clearly unreasonable or unlawful.’ ” A. Schulman, Inc. v. Levin, 116 Ohio St.3d
105, 2007-Ohio-5585, 876 N.E.2d 928, ¶ 7, quoting Nusseibeh v. Zaino, 98 Ohio
St.3d 292, 2003-Ohio-855, 784 N.E.2d 93, ¶ 10. It was therefore Bay’s burden to
rebut the presumptive validity of denying the exemption by affirmatively proving
its entitlement to it.      Second, under R.C. 5717.04, the question for our
determination is whether the BTA’s decision is reasonable and lawful, and
because “[t]he function of weighing evidence and determining credibility belongs




                                          6
                                January Term, 2012




to the BTA, * * * our review of that aspect of its findings” applies the highly
deferential abuse-of-discretion standard. HealthSouth Corp. v. Testa, 132 Ohio
St.3d 55, 2012-Ohio-1871, 969 N.E.2d 232, ¶ 10.
       {¶ 17} With these preliminaries in mind, we turn to the exemption claim
at issue. Effective January 1, 1993, Ohio imposes sales and use tax on the
provision of “employment services.” Am.Sub.H.B. No. 904, 144 Ohio Laws, Part
IV, at 6598, 6688-6689, 6698, and 6797, codified at R.C. 5739.01(B)(3)(k) and
5739.01(JJ). We have held that a service, to be taxable pursuant to the definition
of employment services at R.C. 5739.01(JJ), must meet three requirements: “(1)
it must provide or supply personnel on a temporary or long-term basis, (2) the
personnel must perform work or labor under the supervision or control of another,
and (3) the personnel must receive their wages, salary, or other compensation
from the provider of the service.” Moore Personnel Serv., Inc. v. Zaino, 98 Ohio
St.3d 337, 2003-Ohio-1089, 784 N.E.2d 1178, ¶ 14. There is no dispute that these
elements are present in the transactions at issue.
       {¶ 18} Shortly after enactment of the sales tax on employment services,
the General Assembly decided to create an additional exception for “permanent
assignment” employees. Am.Sub.H.B. No. 152, 145 Ohio Laws, Part III, at 4297,
codified at R.C. 5739.01(JJ)(3). Under that provision, “employment service” did
not include “[s]upplying personnel to a purchaser pursuant to a contract of at least
one year between the service provider and the purchaser that specifies that each
employee covered under the contract is assigned to the purchaser on a permanent
basis.” In H.R. Options, 100 Ohio St.3d 373, 2004-Ohio-1, 800 N.E.2d 740, ¶ 21,
we explained that “permanent” in the context of (JJ)(3) means that an employee is
“assign[ed] to a position for an indefinite period,” which in turn means that (1) the
assignment has no specified ending date and (2) the employee is not being
provided either as a substitute for a current employee who is on leave or to meet
seasonal or short-term workload conditions. Id., ¶ 21. We also held that R.C.



                                          7
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5739.01(JJ)(3) was to be treated as an exception or exemption from taxation, with
the result that it must be strictly construed against the taxpayer’s claim for tax
relief. H.R. Options, ¶ 17, clarified by H.R. Options, Inc. v. Wilkins, 102 Ohio
St.3d 1214, 2004-Ohio-2085, 807 N.E.2d 363, ¶ 2.
          {¶ 19} H.R. Options is additionally significant because we construed the
exemption as turning on the facts of each employee’s assignment rather than on
the presence of “magic words” in the employment-service agreements themselves.
H.R. Options, 100 Ohio St.3d 373, 2004-Ohio-1, 800 N.E.2d 740, ¶ 21. Instead
of requiring that the contracts recite “permanent” (or “indefinite”) assignment,4
we viewed the language of the contracts as one element that, along with the facts
and circumstances of the individual assignments, established whether the provider
was truly “supplying personnel” in an exempt manner.                       Indeed, instead of
requiring the commissioner to focus on contract language in H.R. Options, we
directed that official to look at two types of evidence when auditing a claim of
exemption:      (1) the employment-services contract itself, to see whether it is
consistent with the requirements set forth at (JJ)(3), and (2) the facts and
circumstances of the assignment, in order to ascertain whether in actual practice
the assignment of the particular employees was “indefinite” in character, or
whether the assignments were seasonal, substitutional, or designed to meet short-
term workload conditions. Id., ¶ 22.
          {¶ 20} These legal standards furnish the basis for our analysis of Bay’s
appeal.




4. As Bay points out, the H.R. Options contracts contained no such language themselves. The
contract language in that case was significant to the extent that it provided a contract term of at
least one year and that it did not otherwise conflict with the conclusion that the personnel were
assigned on a permanent basis.




                                                8
                                 January Term, 2012




       1. Bay’s argument that its contract language entitles it to exemption
                without regard to the facts and circumstances is wrong
          {¶ 21} Bay argues that “the plain language of the [employment service
contracts] alone is sufficient” to establish the exemption with respect to the
purchase of employment services associated with employees assigned under those
contracts. In Bay’s view, the mere presence of “permanent” and “indefinite”
assignment terminology in its contracts is dispositive: no inquiry into facts and
circumstances of the assignment of individual employees is necessary.
          {¶ 22} The foregoing discussion establishes that Bay is mistaken. In H.R.
Options, 100 Ohio St.3d 373, 2004-Ohio-1, 800 N.E.2d 740, the claim for
exemption was potentially viable even though the contracts did not contain the
magic words. Id. at ¶ 21. That was so because H.R. Options viewed contract
language as merely one important element of establishing entitlement to the
exemption. Id.
          {¶ 23} Just as the absence of magic words is not dispositive of a
permanent-assignment claim, neither does the presence of those words establish
entitlement to the exemption as a matter of law. In this regard, H.R. Options
adopts a consistent theme sounded by the BTA itself when reviewing exemption
claims:     when “determining whether an exception or exemption to taxation
applies, it is not just the form of a contract that is important,” but instead, the
“crucial inquiry becomes a determination of what the seller is providing and of
what the purchaser is paying for in their agreement.” Excel Temporaries, Inc. v.
Tracy, BTA No. 97-T-257, 1998 WL 775284, *2 (Oct. 30, 1998) (applying the
permanent-assignment exception before H.R. Options); see also Stein, Inc. v.
Tracy, BTA No. 92-T-1388, 1997 WL 704479, *16 (Nov. 7, 1997) (“not just the
form of the contract” is important in determining whether [the sale-for-resale]
exception applies, but also “what actually is being done by the parties involved”),
84 Ohio St.3d 501, 705 N.E.2d 676 (1999).           Despite R.C. 5739.01(JJ)(3)’s



                                          9
                             SUPREME COURT OF OHIO




explicit reference to contract language, the statute justifies the focus on “what
actually is being done” by requiring that the provider actually “supply[ ]
personnel” on a permanent-assignment basis.
        {¶ 24} Accordingly, H.R. Options teaches that supplying personnel on an
exempt basis under R.C. 5739.01(JJ)(3) means that the employees are actually
provided to work for an indefinite period—i.e., that they are not serving as
seasonal workers, as substitutes for regular employees on leave, or as labor
needed to meet a short-term workload. It follows that a contract can contain all
the right language, but if a particular employee is seasonal, substitutional, or on a
short-term-workload assignment, the provider is not “supplying” that employee
“pursuant to” the agreement for purposes of qualifying for exemption under R.C.
5739.01(JJ)(3).
      2. The existence and production of contracts with individual employees
       is not a necessary condition for exemption under R.C. 5739.01(JJ)(3)
        {¶ 25} In his final determination, the commissioner faults Bay for not
producing contracts with individual employees.        Although the commissioner
appears to have abandoned this contention, we think it prudent to address and
dispose of it.
        {¶ 26} In H.R. Options, 100 Ohio St.3d 373, 2004-Ohio-1, 800 N.E.2d
740, the commissioner audited and assessed against a vendor of employment
services and, as it happened, that vendor had written agreements with the
personnel that it supplied to the consumers of its employment services. Those
contracts with individual employees became important pieces of “facts and
circumstance” evidence in determining the case. By contrast, the present case
presents an audit and assessment of a consumer of employment services. As a
result, the taxpayer would not in the ordinary course have possession of such
contracts, even if they existed. Nor is there any reason why such contracts are a
necessary element for claiming exemption, especially given the statute’s explicit




                                         10
                                     January Term, 2012




focus on the employment-services contracts and its omission of any mention of
employee contracts.
        {¶ 27} We hold that the existence of contracts with individual employees
was not a necessary condition for exemption under R.C. 5739.01(JJ)(3).5
         3. Claiming an exemption in the context of a direct-payment audit
              calls for producing appropriate documentation on request
        {¶ 28} It is significant that the present claim for exemption from the sales
tax arises in the context of an audit of purchases made by a taxpayer that holds a
direct-payment permit under R.C. 5739.031. As noted, that section authorizes the
issuance of permits that allow the taxpayer to avoid paying sales tax to vendors
and instead report and remit tax on its purchases directly to the state.
        {¶ 29} Under R.C. 5739.031(D), the holder of a direct-payment permit
has the duty to “keep and preserve suitable records of purchases together with
invoices of purchases, bills of lading, asset ledgers, depreciation schedules,
transfer journals, and such other primary and secondary records and documents in
such form as the commissioner requires.” As for the tax auditor, R.C. 5703.19(A)
authorizes the commissioner and his agents to “inspect books, accounts, records,
and memoranda of any person or public utility subject to [the] laws” that the tax
commissioner is required to administer. Additionally, H.R. Options, 100 Ohio
St.3d 373, 2004-Ohio-1, 800 N.E.2d 740, unequivocally establishes that “both the
contract and the facts and circumstances of the employee’s assignment * * * must
be reviewed to determine whether the employee is being assigned on a permanent
basis.” Id. at ¶ 21.
        {¶ 30} In this case, the commissioner fulfilled his duty by specifically
requesting facts-and-circumstances evidence—notably, the employment-service
invoices. But Bay made a deliberate decision to refuse to honor that request.

5. If such contracts do exist and are in the possession of the taxpayer, however, they ought to be
produced on request.




                                               11
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Under these circumstances, the commissioner acted reasonably and lawfully when
he denied the exemption because of Bay’s failure to produce the requested
pertinent documentation.
       {¶ 31} In so holding, we acknowledge that cases may arise where a
taxpayer’s good-faith efforts to produce documentation could lead to failure. In a
given case, for example, a fire may have destroyed the relevant records or the
records may be in the possession of someone other than the taxpayer and
unattainable by the taxpayer. Such circumstances might in a proper case justify
suspending the requirement that facts-and-circumstances evidence be produced
and reviewed.    Nor do we hold that a taxpayer must comply with arbitrary
requests by the commissioner—indeed, the commissioner’s power to require
production is constrained by the principle that the information request be
reasonably calculated to lead to the production of matter relevant to whether
personnel have been permanently assigned within the intendment of R.C.
5739.01(JJ)(3) as construed by H.R. Options.
       {¶ 32} This case, however, presents a straightforward refusal by Bay to
produce clearly relevant documents on request, some of which the taxpayer itself
later used to prepare summary exhibits at the BTA. The commissioner therefore
acted appropriately in denying the exemption.
              4. The BTA acted reasonably and lawfully in affirming
                   the commissioner’s denial of the exemption
       {¶ 33} As discussed, at the BTA, Bay took a step beyond its reliance on
the employment-service contracts when it presented not only the testimony of its
controller, but also four summary exhibits concerning the individual assignments
that were referable to the contracts at issue. The summary exhibits purport to
show the names and periods of employment of particular employees pursuant to
the employment-service contracts. The testimony establishes that their foundation
lies partly in invoices that the tax agent had previously requested without success.




                                        12
                                January Term, 2012




The BTA held that the evidence was not sufficient because of its summary nature,
with the primary documentation not before the board. Bay Mechanical, BTA No.
2008-K-1687, 2011 WL 2446198, *3-4. In other words, the BTA decided not to
accord evidentiary weight to the exhibits.
       {¶ 34} Because (as already discussed) the BTA’s determinations of the
credibility of witnesses and its weighing of the evidence are subject to a highly
deferential abuse-of-discretion review on appeal, we will reverse only if we find
an abuse of discretion. HealthSouth Corp., 132 Ohio St.3d 55, 2012-Ohio-1871,
969 N.E.2d 232, ¶ 10. In two respects, the HealthSouth decision is instructive in
applying the abuse-of-discretion standard in this context.
       {¶ 35} First, although the taxpayer’s evidence in HealthSouth showed
substantial evidential weaknesses, we nonetheless affirmed the BTA’s decision to
order the commissioner to issue a reduced assessment based on the totality of the
record. The same broad deference that we exercised toward the BTA’s judgment
in HealthSouth is merited in this case as well.
       {¶ 36} Second, HealthSouth was a case in which the record contained not
only the taxpayer’s summary exhibits presented at the BTA, but other
documentation to support the taxpayer’s claim that had been submitted
contemporaneously with the original tax returns on which the commissioner had
predicated his assessment. HealthSouth, ¶ 23, 25-26. By contrast, the underlying
facts-and-circumstances evidence in the present case was neither shown to the tax
agent during the audit, nor presented in support of Bay’s petition for
reassessment, nor offered as an exhibit at the BTA hearing. Accordingly, the
record in this case was devoid of documentation that would corroborate the
summary exhibits on which Bay chose to rely.
       {¶ 37} Bay suggests that by producing the underlying documentation to
the tax commissioner’s counsel on CDs during discovery at the BTA, it cured its
earlier failure to produce it during the audit or in connection with the petition for



                                         13
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reassessment. According to Bay, it “should not be penalized for producing the
requested information for the first time during proceedings before [the BTA].”
But imposing a penalty is completely beside the point. The issue is: did the
primary documentation ever become part of the record so that the BTA could
review it in deciding Bay’s appeal? It did not. Neither Bay nor the commissioner
presented the documentation as a hearing exhibit. And because Bay had the
burden of rebutting the commissioner’s determination, it was not the
commissioner’s responsibility to offer the documents as evidence, even if he did
obtain them through discovery. Moreover, a taxpayer at the BTA is not entitled to
relief merely because the commissioner adduces no evidence contra his claim.
Higbee Co. v. Evatt, 140 Ohio St. 325, 332, 43 N.E.2d 273 (1942).
       {¶ 38} To show that the BTA abused its discretion by according no
weight to the hearing exhibits, Bay must prove that the BTA’s “attitude is
unreasonable, arbitrary, or unconscionable.” J.M. Smucker, L.L.C. v. Levin, 113
Ohio St.3d 337, 2007-Ohio-2073, 865 N.E.2d 866, ¶ 16. Given that H.R. Options
calls for the consideration of facts-and-circumstances evidence, that the
documentation was completely withheld on audit, and that it was not offered as an
exhibit at the BTA hearing, we conclude that the BTA did not act unreasonably,
arbitrarily, or unconscionably when it disregarded the summary exhibits in spite
of the controller’s foundational testimony.
       {¶ 39} Finally, Bay suggests that by virtue of admitting the summary
exhibits under Evid.R. 1006, the BTA was constrained to accord them some
evidential weight. We disagree. The Rules of Evidence are not binding at the
BTA, even though they may be consulted for guidance. Plain Local Schools Bd.
of Edn. v. Franklin Cty. Bd. of Revision, 130 Ohio St.3d 230, 2011-Ohio-3362,
957 N.E.2d 268, ¶ 20.       When a determination of the tax commissioner is
appealed, the BTA convenes an evidentiary hearing, see R.C. 5717.02(D) (“upon
the application of any interested party the board shall order the hearing of




                                        14
                                January Term, 2012




additional evidence”), and at the hearing evidence is received. But just as the
BTA’s discretion to receive evidence is unconstrained by the Rules of Evidence,
so also is its discretion to accord no weight to the evidence so received.
                                  III. Conclusion
       {¶ 40} For the foregoing reasons, the BTA acted reasonably and lawfully
when it upheld the tax commissioner’s sales-tax assessment against Bay. We
therefore affirm the decision of the BTA.
                                                                  Decision affirmed.
       O’CONNOR, C.J., and LANZINGER, CUPP, and MCGEE BROWN, JJ., concur.
       PFEIFER and LUNDBERG STRATTON, JJ., dissent.
       O’DONNELL, J., not participating.
                               __________________
       PFEIFER, J., dissenting.
       {¶ 41} The issue before us is a close one. It boils down to whether Bay
Mechanical & Electrical Corporation has submitted evidence of its claim for an
R.C. 5739.01(JJ)(3) exclusion from sales tax.       Bay Mechanical believes that
submitting the contracts and a summary of the work assignments at issue to the
Board of Tax Appeals (“BTA”), having its controller testify regarding the
contracts and work assignments before the BTA, and submitting the underlying
documentation to the tax commissioner’s counsel are sufficient to establish its
claim. I agree.
       {¶ 42} It would have been better if Bay Mechanical had submitted the
information earlier—to the tax commissioner before the necessity of an appeal to
the BTA.     It would have been better if Bay Mechanical had submitted the
underlying documentation to the BTA as well as the tax commissioner. But the
bottom line is that the information is now readily available, was available at the
time of the appeal to the BTA, and is sufficient to establish Bay Mechanical’s
entitlement to the tax exclusion. I dissent.



                                         15
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       LUNDBERG STRATTON, J., concurs in the foregoing opinion.
                              __________________
       Brouse McDowell, L.P.A., Joseph T. Dattilo, Thomas J. Ubbing, and
Caroline L. Marks, for appellant.
       Michael DeWine, Attorney General, and Sophia Hussain, Assistant
Attorney General, for appellee.
                           ______________________




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