Ohio Admin. Code 5703-29-13 Commercial Activity Tax Definition of "Agent"

• Library: Ohio Administrative Code
• Edition: 2023
• Currency: Current through all regulations passed and filed through December 25, 2023
• Citation: Ohio Admin. Code 5703-29-13
• Year: 2023

(A) An "agent" is defined in division (P) of section undefinedundefined5751.01 of the Revised Code to include a person authorized by another to act on its behalf to undertake a transaction for the other. In certain circumstances, portions of the amounts received by a person defined as an "agent" are excluded from the definition of "gross receipts" under division (F) of section undefinedundefined5751.01 of the Revised Code. The agent is only required to report as a "gross receipt" the portion of the amount received that it retains as a commission or fee rather than the entire amount.

(B)

(1) The supreme court of Ohio has held that an agency relationship "exists only when one party exercises the right of control over the actions of another, and those actions are directed toward the attainment of an objective which the former seeks." See Hanson v. Kynast (1986), 24 Ohio St.3d 171, 173, citing Baird v. Sickler (1982), 69 Ohio St.2d 652, 654, Councell v. Douglas (1955), 163 Ohio St. 292, and Bobik v. Indus Comm. (1946), 146 Ohio St. 187, 191-192. Also see Memorial Park Golf Club, Inc v. Lawrence, 2000 Ohio Tax LEXIS 471 (BTA No. 99-K-633). An agency relationship is defined as a "consensual fiduciary relationship between two persons where the agent has the power to bind the principal by his actions, and the principal has the right to control the actions of the agent." See Evans v. Ohio State Univ. (1996), 112 Ohio App.3d 724, 744, citing Funk v. Hancock (1985), 26 Ohio App. 3d 107, 110, in turn citing Haluka v. Baker (1941), 66 Ohio App. 308, 312 In a principal-agent relationship, the agent has the legal authority to act on behalf of the principal, and generally the principal is bound by and is liable for those actions. See N&G Construction, Inc. v. Lindley (1978), 56 Ohio St.2d 415, 418, citing Gulf Oil Corp. v. Kosydar (1975), 44 Ohio St.2d 208 (paragraph two of the syllabus) and Canton v. Imperial Bowling Lanes, Inc (1968), 16 Ohio St.2d 47 (paragraph four of the syllabus). The party asserting the existence of an agency relationship bears the burden of proof in that regard. See Gardner Plumbing, Inc. v. Cottrill (1975), 44 Ohio St.2d 111, 115 citing Union Mutual Life Ins. Co. v. McMillen (1873), 24 Ohio St. 67. Also see Memorial Park Golf Club, Inc, supra. In determining whether an agency relationship exists, the rules of statutory construction applicable to exemptions from taxation must be followed. Ohio law in this regard is well-established; exemptions from taxation are strictly construed against the claim of exemption and in favor of the taxing authorities. See Natl. Tube Co. v. Glander (1952), 157 Ohio St. 407, 409; Beckwith & Assoc. v. Kosydar (1977), 49 Ohio St.2d 277, 279, and Canton Malleable Iron Co. v. Porterfield (1972), 30 Ohio St. 2d 163, 166. Also see Memorial Park Golf Club, Inc., supra. Thus, in determining whether an agency relationship exists, the facts must be determined under a strict, narrow reading of the definition. Absent proof of an agency relationship, the entire gross receipt must be reported by the person receiving the gross receipt for purposes of the commercial activity tax.

(2) The commissioner will look beyond the wording of the contract to the actual facts and circumstances of the situation to determine whether an agency relationship actually exists. See H.R. Options, Inc. v. Zaino (2004), 100 Ohio St.3d 373.

(C) Division (P) of section undefinedundefined5751.01 of the Revised Code defines "agent" to include certain individuals acting on behalf of another. Each of the following individuals is included in the list in that division and qualifies as an "agent" for purposes of this rule:

(1) (a) In the case of a person enumerated in division (P)(1) of section undefinedundefined5751.01 of the Revised Code who receives a fee to sell financial instruments, only the fee received to perform this service shall be a gross receipt of the agent pursuant to division (F)(2)(l) of section undefinedundefined5751.01 of the Revised Code. (b) For example, an out-of-state dealer (i.e., a person without an office or other place...