TRM ATM Corp. v. South Dakota Department of Revenue & Regulation
793 N.W.2d 1
S.D.2010Background
- TRM ATM Corporation provides ATM services to sponsor banks and core-data companies in South Dakota.
- Sponsor banks and core-data companies contract with TRM to provide and service ATMs; they pay TRM for its services.
- The SD Department of Revenue assessed sales tax on TRM’s transaction processing and surcharge fees.
- TRM argues intermediaries (sponsor banks/core-data) should pay use tax, not TRM sales tax.
- Record includes stipulations that TRM’s fees are for services taxable under SDCL 10-45-4 and 10-45-4.1.
- TRM contends some fees were pass-through to third-party merchants, potentially excluding them from gross receipts; court rejects this argument.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether TRM’s ATM services are subject to sales tax or use tax | TRM—use tax should apply to intermediaries using services | Department—services rendered by TRM are taxable sales to those who receive services | Sales tax applies to TRM’s services |
| Whether TRM’s pass-through payments to third-party merchants affect gross receipts | Pass-through amounts should not count as TRM’s gross receipts | Gross receipts include all consideration received for services, regardless of pass-throughs | Gross receipts include pass-through amounts; tax applies to all receipts |
| Whether the predominant activity test governs taxing of intermediary ATM transactions | Predominant activity is not TRM’s service; use tax should apply | Predominant activity in the transaction is TRM’s ATM services | Predominant activity test does not negate sales tax; TRM’s services taxable under SDCL 10-45-4 |
Key Cases Cited
- Watertown Coop. Elev. Ass'n v. S.D. Dep’t of Revenue, 627 N.W.2d 167 (2001 S.D. 56) (predominant activity focus in transaction analysis in use-tax context)
- Shopping News, Inc. v. Dep’t of Revenue and Regulation, 749 N.W.2d 522 (2008 S.D. 34) (focus on transaction; use tax not exclusively determined by intermediary status)
- Choice Hotels Int’l, Inc. v. S.D. Dep’t of Revenue and Regulation, 711 N.W.2d 926 (2006 S.D. 25) (exemption analysis; travel-agent commission exemption not dispositive here)
- State v. Dorhout, 513 N.W.2d 390 (S.D. 1994) (use tax complement to sales tax; statutory interplay; framework for tax type selection)
- Coop. Agronomy Serv. v. S.D. Dep’t of Revenue, 668 N.W.2d 718 (2003 S.D. 104) (applies predominant activity framework in service-tax analysis)