[Cite as Gallenstein v. Testa, 138 Ohio St.3d 240, 2014-Ohio-98.]




         GALLENSTEIN, APPELLANT, v. TESTA, TAX COMMR., APPELLEE.
        [Cite as Gallenstein v. Testa, 138 Ohio St.3d 240, 2014-Ohio-98.]
R.C. 5741.02(C)(4)—Boat owner qualified for transient-use exception to use
        tax—BTA       acted    unreasonably       and    unlawfully   in   affirming   tax
        commissioner’s assessment of use tax.
   (No. 2012-1971—Submitted October 8, 2014—Decided January 22, 2014.)
             APPEAL from the Board of Tax Appeals, No. 2008-A-1340.
                                 ____________________
        Per Curiam.
        {¶ 1} Cheryl Gallenstein appeals from a decision of the Board of Tax
Appeals that determined that her “use of the subject boat does not qualify as an
exempt use, pursuant to R.C. 5741.02(C)(4), because the boat is required to be
registered, pursuant to the provisions of R.C. 1547.531.” Gallenstein v. Levin,
BTA No. 2008-A-1340, 2012 WL 5465162, at *5 (Oct. 23, 2012). However,
because Gallenstein does qualify for the transient use exception contained in R.C.
5741.02(C)(4), the decision of the Board of Tax Appeals is unreasonable and
unlawful and is therefore reversed.
                              Facts and Procedural History
        {¶ 2} In June 2002, Cheryl and John T. Gallenstein—Kentucky
residents—purchased a 44-foot Sea Ray Sundancer with twin inboards from a
private owner in Indiana for $205,000. The Gallensteins did not pay any taxes on
the boat in Kentucky or Indiana. Neither did they register the boat in either of
those states. They docked their boat at Lighthouse Point Yacht Club in Aurora,
Indiana, and titled it in Cheryl’s name.              With the assistance of Ruthann
Eichelberger—a consultant recommended by the seller of the boat—Cheryl
obtained a certificate of documentation from the United States Coast Guard that
                            SUPREME COURT OF OHIO




lists her as the owner and managing owner, lists Cincinnati as the hailing port, and
includes an “operational endorsement[]” of “recreation.” They chose Cincinnati
as the hailing port because they thought it would be recognized if they cruised to
Florida on vacation.
        {¶ 3} The evidence shows that on one occasion, John Gallenstein used
an Ohio business to repair a diesel engine that he removed from the boat. It also
shows that the Gallensteins primarily operated their boat in Kentucky and Indiana
waters, downriver from Cincinnati, because the water there was cleaner and less
crowded. Operating the boat downriver also provided them with a more family-
friendly boating experience. Between June 2002 and the end of the 2004 boating
season, they crossed into Ohio waters between five and ten times when operating
the boat. In 2005, they operated the boat in the Ohio River once or twice, but it is
not apparent from the record whether they operated it in Ohio waters during that
year.   On occasion, the Gallensteins cruised upriver with guests to see the
Cincinnati skyline, watch Cincinnati Reds and Bengals games from the boat, and
view Cincinnati fireworks displays. During these trips, Cincinnati police stopped
their boat, boarded and inspected it, reviewed documents, and then permitted
them to continue boating.
        {¶ 4} John Gallenstein contacted Eichelberger to inquire why the
Cincinnati police had been stopping his boat and testified that Eichelberger told
him, “You’re just being harassed by the Cincinnati police. If you don’t want to
have any problems, I recommend you get an Ohio sticker.”              As a result,
Gallenstein applied for an Ohio watercraft registration and indicated on the
application that the boat would be principally used in Kentucky and Indiana
waters. On May 21, 2003, the Division of Watercraft of the Ohio Department of
Natural Resources (“ODNR”) issued a sticker and a three-year registration
certificate, listing the boat’s type of use as “Pleasure.” John Gallenstein affixed




                                         2
                                January Term, 2014




the sticker to the boat, and afterward, they experienced no more instances of
police boarding their boat.
       {¶ 5} In 2005, however, the Ohio Department of Taxation audited
Gallenstein, inquiring about her purchase of the boat. Agent Dennis Woolley
asked Gallenstein for verification that she paid sales or use tax for the boat in
Ohio or another state and for copies of various documents. Gallenstein responded
that she did not believe that Ohio taxes were due and provided some of the
requested documents. She also noted:


               The vessel carries an Ohio watercraft sticker only as a
       precaution. Although the vessel has never been housed or moored
       in Ohio, several times a year I do operate the boat from its housing
       in Indiana to the Cincinnati central riverfront area. In this area,
       part of the Ohio River is within Ohio and part is in Kentucky. As
       boats operated in this area are often boarded and inspected by the
       Port of Cincinnati water officials, I obtain[ed] the Ohio sticker to
       be safe in operating in the area.


       {¶ 6} In reply, Woolley informed her that the fact that she had docked
and stored the boat at Lighthouse Point Yacht Club “would require you to have an
Indiana registration and not an Ohio registration.       A registration should be
obtained in the state where you are principally using the waters of that state.” He
further stated, “[Y]ou will be required to cancel your Ohio Watercraft
Registration” and provide proof of its cancellation, and he informed her that if she
failed to provide proof of cancellation, the state would pursue the use tax due.
Gallenstein tried to cancel the boat’s Ohio registration without success. She
informed Woolley that staff at ODNR’s headquarters advised her that “the only




                                           3
                             SUPREME COURT OF OHIO




way to cancel a registration is not to renew the registration upon its expiration”
and she did not intend to renew the registration after it expired.
       {¶ 7} Woolley replied that Gallenstein’s response “does not satisfy the
State of Ohio request for proof of tax paid,” and he recommended that the
department assess a use tax, plus pre-assessment interest and a penalty, based on
the boat’s having been registered in Ohio.
       {¶ 8} On November 8, 2005, the tax commissioner issued a notice of
assessment for the audit period of May 1, 2003, through June 30, 2003, assessed a
use tax of $12,000, imposed an $1,800 penalty, and assessed $1,252.93 in pre-
assessment interest.     Gallenstein petitioned for reassessment and requested
remission of the penalty and the interest, asserting, among other things, that any
use of the boat in Ohio constituted transient use pursuant to R.C. 5741.02(C)(4).
       {¶ 9} On June 12, 2008, the commissioner issued a final determination
affirming the use tax, penalty, and interest assessment.             The commissioner
determined that Gallenstein’s use of the boat in Ohio, combined with her
declaration of Cincinnati as the boat’s hailing port and her registration of the boat
in Ohio, “created nexus between the boat and Ohio” and that she did not qualify
for the transient use exception.
       {¶ 10} Gallenstein appealed to the BTA, asserting that the commissioner
erred by assessing the use tax because she “had no substantial nexus with Ohio”
and by not applying the transient use exception in R.C. 5741.02(C)(4) and that the
penalty was improper because the underlying assessment was invalid.
Gallenstein, 2012 WL 5465162, at *1-2. The BTA affirmed the commissioner’s
decision, concluding that Gallenstein’s use of the boat in Ohio satisfied the
definition of use in R.C. 5741.01(C) and that she did not qualify for the transient
use exception pursuant to R.C. 5741.02(C)(4).
       {¶ 11} Gallenstein has now appealed to this court, urging that her
registration of the boat in Ohio is not sufficient to create a taxable nexus, that she




                                          4
                               January Term, 2014




met all the requirements of the transient use exception in R.C. 5741.02(C)(4), and
that the tax commissioner should not have assessed the penalty, because the
underlying assessment is improper.
       {¶ 12} The tax commissioner asks this court to affirm the decision of the
BTA, asserting that Gallenstein’s use and enjoyment of the boat in Ohio waters,
the rebuilding of the boat’s engine in Ohio, and her registering of the boat in Ohio
constitute use as defined in R.C. 5741.01(C), and therefore, the boat is subject to
Ohio taxation. He maintains that Gallenstein does not satisfy the requirements of
the transient use exception in R.C. 5741.02(C)(4) because she has “actively and
within her discretion operated [her] yacht on Ohio waters, resulting in such a
presence within the State that the yacht must be registered with the Ohio Division
of Watercraft.” (Emphasis added.) And the commissioner claims that her boat
does not satisfy the requirements of R.C. 1547.531(B)(3), which exempts certain
watercraft from Ohio registration.
       {¶ 13} Accordingly, the issue in this case is whether the BTA properly
imposed a use tax on Gallenstein.
                                Law and Analysis
       {¶ 14} We review a decision of the BTA to determine whether it is
reasonable and lawful, and we will reverse a decision that is based on an incorrect
legal conclusion. Satullo v. Wilkins, 111 Ohio St.3d 399, 2006-Ohio-5856, 856
N.E.2d 954, ¶ 14.    “Any claimed exemption from taxation ‘must be strictly
construed,’ and the taxpayer ‘must affirmatively establish his or her right’ to the
exemption.” Id. at ¶ 15, quoting Campus Bus Serv. v. Zaino, 98 Ohio St.3d 463,
2003-Ohio-1915, 786 N.E.2d 889, ¶ 8. In Satullo, we stated that “ ‘[t]he BTA is
responsible for determining factual issues and, if the record contains reliable and
probative support for these BTA determinations,’ this court will affirm them.” Id.
at ¶ 14, quoting Am. Natl. Can Co. v. Tracy, 72 Ohio St.3d 150, 152, 648 N.E.2d
483 (1995).



                                         5
                               SUPREME COURT OF OHIO




          {¶ 15} R.C. 5741.02(A)(1) establishes a use tax and authorizes an excise
tax “on the storage, use, or other consumption in this state of tangible personal
property or the benefit realized in this state of any service provided.” Pursuant to
R.C. 5741.02(B), “[e]ach consumer, storing, using, or otherwise consuming in
this state tangible personal property or realizing in this state the benefit of any
service provided, shall be liable for the tax * * *.”
          {¶ 16} R.C. 5741.02(C), however, provides exceptions to the tax and
states:


                 The tax does not apply to the storage, use, or consumption
          in this state of the following described tangible personal property
          or services, nor to the storage, use, or consumption or benefit in
          this state of tangible personal property or services purchased under
          the following described circumstances:
                 ***
                 (4) Transient use of tangible personal property in this state
          by a nonresident tourist or vacationer, or a nonbusiness use within
          this state by a nonresident of this state, if the property so used was
          purchased outside this state for use outside this state and is not
          required to be registered or licensed under the laws of this state.


          {¶ 17} R.C. 5741.01 does not define the term transient use. Pursuant to
R.C. 1.42, this term should be read in context and construed according to common
usage unless this term has acquired a technical or particular meaning.             See
Cincinnati School Dist. Bd. of Edn. v. State Bd. of Edn., 122 Ohio St.3d 557,
2009-Ohio-3628, 913 N.E.2d 421, ¶ 15. In common usage, the term transient
means “passing through or by a place with only a brief stay or sojourn,” and the




                                            6
                                 January Term, 2014




term use means “the act or practice of using something.” Webster’s Third New
International Dictionary 2428, 2523 (2002).
         {¶ 18} In its decision, the BTA, relying on its own precedent, determined
that the term transient use “ ‘connotes a use of a short or temporary duration’ ”
and that a period of 60 consecutive days “would seem to be an appropriate and
reasonable guideline” for determining whether an owner’s use of a boat in Ohio
had been transient. Gallenstein, 2012 WL 5465162 at *4, quoting Steenrod v.
Tracy, BTA Nos. 1991-A-1108 and 1991-A-1109, 1993 WL 186521, *3 (May 21,
1993). The BTA further determined that the record “clearly establishes appellant
resides in the state of Kentucky and therefore, is a nonresident of the state of
Ohio.”    Id.   The BTA also rejected the tax commissioner’s contention that
Gallenstein was not a tourist or vacationer in this state because of the proximity of
her residence to her husband’s business in Ohio, stating:


                While the proximity of appellant’s residence to Ohio and
         the location of appellant’s husband’s business in Ohio may
         contradict a characterization of appellant as an out-of-town
         “tourist,” we disagree with the commissioner’s generalization that
         appellant cannot be considered a “vacationer” in Ohio; on the
         contrary, since it is undisputed that the boat is only being used for
         recreational purposes, appellant, when using the boat, can be
         considered a “vacationer” in any location, in any state. A person
         can be designated a “vacationer,” regardless of the proximity of the
         vacation destination to one’s home. Further, appellant and her
         husband testified that the boat had been docked in Indiana since its
         purchase and that they preferred to take the boat to locales other
         than Ohio because of the boat traffic and other environmental
         concerns in Ohio and, as a result, the total number of days in Ohio



                                          7
                              SUPREME COURT OF OHIO




       waters since the boat’s purchase in June 2002 was less than sixty
       days. * * * In addition, appellant’s Ohio Division of Watercraft
       registration application acknowledges appellant’s intention to
       principally use the boat in Kentucky and Indiana.


(Emphasis added.) Id.
       {¶ 19} Based on this reasoning, the BTA concluded that Gallenstein met
the statutory requirements of the first part of R.C. 5741.02(C)(4)’s test, i.e.,
“[t]ransient use of tangible personal property in this state by a nonresident tourist
or vacationer, or a nonbusiness use within this state by a nonresident of this state,
if the property so used was purchased outside this state for use outside this state.”
However, the BTA determined that Gallenstein did not establish that she was not
required to register her boat in Ohio. Gallenstein at *4-5.
       {¶ 20} R.C. 1547.531 sets forth the registration requirements for
watercraft in Ohio. It provides:


                 (A)(1) Except as provided in division (A)(2) or (B) of this
       section, no person shall operate or give permission for the
       operation of any watercraft on the waters in this state unless the
       watercraft is registered in the name of the current owner in
       accordance with [R.C. 1547.54], and the registration is valid and in
       effect.
                 ***
                 (B) All of the following watercraft are exempt from
       registration:
                 ***
                 (3) Those that have been documented by the United States
       coast guard or its successor as temporarily transitting, whose




                                          8
                                January Term, 2014




       principal use is not on the waters in this state, and that have not
       been used within this state for more than sixty days.


       {¶ 21} Registering a boat in Ohio is not the same as being required to
register a boat in Ohio because R.C. 1547.531(B)(3) exempts from registration
watercraft that have been documented by the United States Coast Guard or its
successor as “temporarily transitting.” Despite this exemption provision, the term
“temporarily transitting” does not appear in federal regulations governing the
United States Coast Guard’s documentation of vessels, see 46 C.F.R. 67.1 et seq.,
and it is not referred to as an endorsement in the federal regulations, see 46 C.F.R.
67.17 (registry endorsement), 46 C.F.R. 67.19 (coastwise endorsement), 46
C.F.R. 67.21 (fishery endorsement), 46 C.F.R. 67.23 (recreational endorsement).
When the General Assembly enacts a statute, a just and reasonable result and a
result feasible of execution is intended. R.C. 1.47(C) and (D). In this case,
because the term “temporarily transitting” does not appear in federal regulations
governing the United States Coast Guard’s documentation of vessels, the BTA
unreasonably and unlawfully interpreted R.C. 1547.531(B)(3) when it stated:


               While the appellant’s boat arguably meets the principal use
       and maximum day provisions of the statute, we find no evidence in
       the record that the U.S. Coast Guard has documented the boat as
       “temporarily transitting.” * * * Accordingly, we find appellant’s
       use of the subject boat does not qualify as an exempt use, pursuant
       to R.C. 5741.02(C)(4), because the boat is required to be
       registered, pursuant to the provisions of R.C. 1547.531.


(Footnote omitted.) Gallenstein, 2012 WL 5465162, *5.




                                         9
                            SUPREME COURT OF OHIO




       {¶ 22} To require Gallenstein to show that her boat has been documented
as temporarily transitting by the United States Coast Guard when it does not
appear that the United States Coast Guard issues a temporary transitting
endorsement is unreasonable because no one could qualify for this exemption.
And the fact that Gallenstein arguably could have registered her boat in Kentucky
or Indiana, see Kentucky Rev.Stat.Ann. 235.010 et seq.; Indiana Code Ann. 9-31-
3-1 et seq., militates against the conclusion reached by the BTA that boat is
required to be registered in Ohio pursuant to R.C. 1547.531. Gallenstein at *5.
Despite her best efforts, Gallenstein was not able to cancel her Ohio registration
as ordered by the tax department, and assessment of a use tax on that basis is also
unreasonable.   The fact remains that from 2002 through 2004, Gallenstein
operated her boat in Ohio waters fewer than a dozen times, and her principal use
was not on the waters of this state. It is unreasonable and unlawful to assess a
$12,000 use tax, an $1,800 penalty, and $1,252.93 in pre-assessment interest on a
Kentucky resident who purchased a boat in Indiana and who harbors it there and
who chose to register that boat in Ohio to reduce the chances of police boarding it
on the few occasions she operated it in Ohio waters.
                                   Conclusion
       {¶ 23} Because the BTA acted unreasonably and unlawfully in affirming
the tax commissioner’s use tax, penalty, and pre-assessment interest, its decision
is reversed.
                                                                Decision reversed.
       PFEIFER, O’DONNELL, KENNEDY, and O’NEILL, JJ., concur.
       O’CONNOR, C.J., and LANZINGER, J., dissent.
       FRENCH, J., dissents and would affirm the decision and analysis of the
BTA.
                              __________________




                                        10
                                January Term, 2014




        LANZINGER, J., dissenting.
        {¶ 24} Because I believe that Gallenstein was required to register her 44-
foot Sea Ray in Ohio and has not satisfied the requirements of transient use as set
forth in R.C. 5741.02(C)(4), I dissent. I would hold that the BTA properly upheld
the imposed use tax, and I would affirm the decision of the BTA.
        {¶ 25} It is presumed that “every sale or use of tangible personal property
in Ohio is * * * taxable.” Std. Oil Co. v. Peck, 163 Ohio St. 63, 65, 125 N.E.2d
342 (1955). As a result, statutes relating to the exemption or exception from sales
or use taxes are to be strictly construed, and one must affirmatively show a right
to a claimed exemption or exception. Canton Malleable Iron Co. v. Porterfield,
30 Ohio St.2d 163, 166, 283 N.E.2d 434 (1972) (cataloguing cases); see also
Campus Bus Serv. v. Zaino, 98 Ohio St.3d 463, 2003-Ohio-1915, 786 N.E.2d 889,
¶ 8; R. Wantz & Sons Constr. Co. v. Kosydar, 38 Ohio St.2d 277, 280, 313 N.E.2d
360 (1974).
        {¶ 26} I do not believe that Gallenstein has met her burden of
“affirmatively proving [her] entitlement” to the transient-use exception. Bay
Mechanical & Elec. Corp. v. Testa, 133 Ohio St.3d 423, 2012-Ohio-4312, 978
N.E.2d 882, ¶ 16. The fourth of R.C. 5741.02(C)’s nine exceptions to the use tax
is at issue here. It states:


                (4) Transient use of tangible personal property in this state
        by a nonresident tourist or vacationer, or a nonbusiness use within
        this state by a nonresident of this state, if the property so used was
        purchased outside this state for use outside this state and is not
        required to be registered or licensed under the laws of this state.


        {¶ 27} To be entitled to the use-tax exemption, Gallenstein was required
to prove four things: First, that her use of the Sea Ray in Ohio was “transient,”



                                          11
                            SUPREME COURT OF OHIO




second, that she, as a user of the personal property in Ohio, was a nonresident
tourist or vacationer or a nonresident who was using the property for nonbusiness
purposes, third, that the Sea Ray was purchased outside Ohio for use outside
Ohio, and finally, that the Sea Ray was not required to be registered or licensed
under Ohio law.
       {¶ 28} I agree with the BTA’s determination that Gallenstein and her
husband were nonresident tourists or vacationers, Gallenstein v. Levin, BTA No.
2008-A-1340, 2012 WL 5465162, at *4 (Oct. 23, 2012), and that they
undisputedly had purchased the boat for use primarily outside Ohio, id. at *5.
The open questions are confined to the first and fourth requirements.
The use of the Sea Ray was not “transient”
       {¶ 29} The Revised Code does not define “transient use.”            But for
purposes of use tax, R.C. 5741.01(C) broadly defines “use” to include “the
exercise of any right or power incidental to ownership of the thing used.”
(Emphasis added.)     The Gallenstein Sea Ray was registered with the Ohio
Department of Natural Resources (“ODNR”) from May 2003 until March 2006.
The right to register a watercraft is certainly an incident of ownership, and that
right was exercised by Gallenstein here in Ohio.
       {¶ 30} Consistent with Webster’s Third New International Dictionary
2428 (2002), which defines “transient” as “passing through or by a place with
only a brief stay or sojourn,” the BTA concluded that “transient use” “ ‘connotes
a use of a short or temporary duration.’ ” Gallenstein at *4, quoting Steenrod v.
Tracy, BTA Nos. 1991-A-1108 and 1991-A-1109, 1993 WL 186521, *3 (May 21,
1993). After examining statutes on watercraft registration, the BTA chose 60
days as “an appropriate and reasonable guideline” for determining whether an
owner’s use of a boat in Ohio is transient. Id. But one “use” that triggers the use
tax in Ohio is a boat’s registration in Ohio. When a boat is registered in Ohio,
that registration is effective every single day from the date it is issued until the




                                        12
                                January Term, 2014




date it expires. The Gallenstein watercraft was registered from May 2003 until
March 2006.
       {¶ 31} I would hold that no matter how often an owner actually operates a
boat in Ohio, the operation cannot qualify for the transient-use exception while
the boat is registered with the ODNR. In other words, the notion of “transient
use” is incompatible with the holding of an active Ohio registration. Gallenstein’s
registration of the Sea Ray prevents her use of the boat in Ohio from being
labeled as “transient,” and she accordingly fails to satisfy the first requirement of
the transient-user exception.
The Sea Ray was required to be registered or licensed under Ohio law
       {¶ 32} Furthermore, even if Gallenstein’s use were transient, this would
satisfy only one requirement under R.C. 5741.02(C)(4). She still must show that
her Sea Ray was not required to be registered—and this she did not do. The
statute setting forth the registration requirements for watercraft in Ohio, R.C.
1547.531, provides:


                 (A)(1) Except as provided in division (A)(2) or (B) of this
       section, no person shall operate or give permission for the
       operation of any watercraft on the waters in this state unless the
       watercraft is registered in the name of the current owner in
       accordance with [R.C. 1547.54], and the registration is valid and in
       effect.


(Emphasis added.) The exception mentioned in division (A)(2) is inapplicable,
relating as it does to a temporary registration following the sale of a watercraft.
Among the exemptions in division (B) is a provision relating to temporary use:




                                         13
                             SUPREME COURT OF OHIO




               (3) Those that have been documented by the United States
       coast guard or its successor as temporarily transitting, whose
       principal use is not on the waters in this state, and that have not
       been used within this state for more than sixty days.


       {¶ 33} The majority emphasizes that the United States Coast Guard does
not issue any documentation that endorses watercraft as “temporarily transitting.”
And it concludes that because Gallenstein could not qualify for this exemption,
she was not required to register her boat in Ohio. Nevertheless, the inability to
meet the documentation portion of the exemption merely means the exemption
itself does not apply. It does not invalidate R.C. 1547.531’s clear requirement
that no person shall operate watercraft in Ohio waters unless the watercraft has
proper registration. I agree with the BTA’s determination that Gallenstein failed
to establish that she was not required to register her boat in Ohio. Gallenstein,
2012 WL 5465162, at *4-5. R.C. 1547.531 clearly requires that watercraft used
in Ohio must carry valid registration. She has not satisfied the fourth requirement
of the transient-user exception.
       {¶ 34} Because Gallenstein failed to show both that her use of the Sea
Ray was transient and that the Sea Ray was not required to be registered or
licensed under Ohio law, she failed to show that she is entitled to the transient-use
exception set forth in R.C. 5741.02(C)(4).        Accordingly, I would affirm the
BTA’s determination that the transient-use exception does not apply in this case
and that Gallenstein is subject to the use tax.
       O’CONNOR, C.J., concurs in the foregoing opinion.
                              ____________________
       Lindhorst & Dreidame Co., L.P.A., James H. Smith III, and Bradley D.
McPeek, for appellant.




                                          14
                               January Term, 2014




       Michael DeWine, Attorney General, and Melissa W. Baldwin, Barton A.
Hubbard, and Julie Brigner, Assistant Attorneys General, for appellee.
                          ________________________




                                       15
