In Re the State Sales & Use Tax Liability of Townley

Roseth v. St Paul Ins., Liability Property & J., (S.D.1985) (Henderson, dissenting); Williams,

In re Estate of

(S.D.1984); Rapid City Area Dist. v. Sch. Inc., Tours,

Black Hills & Western (S.D.1981). The author’s state-

N.W.2d 811 is, my writings, rigid per previous

ment too my comport, does not my beliefs and

opinion, concept born in conscience. with a

My application equitable estoppel is sim- I have

ply springy more than flexible writings of this Court.

read in some of the conceptual matters of the ma-

In all other my general approba-

jority opinion, it has

tion. the Matter of the State Sales Use TOWNLEY, Liability Page

Tax Jr. J. Rapid City Rental Car

d/b/a

Regional Airport.

No. 15547.

Supreme Court of South Dakota. April

Considered on Briefs 1987. Dec.

Decided Woodle, Gen., Pierre, R. Atty.

Gene Asst. appellant Dept, South Dakota of Reve- nue; Gen., Meierhenry, Mark V. Atty. brief. Varilek, Rapid City, appel-

Robert L. Townley. lee SABERS, (on reassignment). Justice Department (Department) of Revenue appeals a circuit court decision that Nation- al no sales owed tax on reimburse- ments and accident (PAI) receipts.

Facts Page Townley, J. National Car d/b/a (National), operates a na- Rental owns and (1) in that sions of law. The court determined with branches rental franchise car tional relating Na- to National's activities City, South Dakota. Rapid Pierre and April predominately and insurance sales involve records books and tional’s opposed perform- De- audited sales of those items as to through April 1985 were services; (2) and use city sales ance and state statutes A state and of partment. $2,348 were $5,537 of exempted interest sales from further tax. De- of and such $7,885. partment appeals. for a total of We assessed reverse. National that Department determined Scope Review of received as funds to sales tax on failed recently clarified the standard This court of the cost for reimbursement cases. of review in administrative law Per during rental customers by National’s used Labor, Dept. Unemployment mann v. renting an auto- customer periods. Each of Division, fuel. Ins. a full tank of it with mobile receives Guardianship see also Matter Vier period, a customer of the rental At the end of eck, (S.D.1987) and Lee v. a service the tank at may choose to refill Health, choice, Dept. 411 N.W. and return the South Dakota her of his or station tank, reviewing ques to 2d or elect When with a full fuel vehicle fact, a full with less than tions we determine whether the vehicle return event, agency clearly If the issue National was erroneous. In the latter tank. law, approxi- which an amount under review is one of decisions of the customer refueling. fully When mately agency the cost of and the circuit court are covers tank, Permann, (quot a full fuel supra is returned with at 116 a car viewable. charged Department Co., is ing Skelly customer Johnson Oil (S.D.1984)). agrees that no tax is owed. PAI to customers. case, also offers undisputed. the facts are custom- optional as rental purchase dispute depends upon the Resolution of this rely on their own insur- may prefer to

ers statutes. application Republic Insurance policies. law, ance we ac- question this is a Because Dakota, within South Company, licensed the conclusions cord no deference to retains the PAI. National 75% Department underwrites the circuit reached and sends the premiums Permann, collected supra of all at 117. court. Valley Agency of remaining 25% to Green LIABILITY 1. TAX National) (a subsidiary of Minneapolis imposes a tax at the rate 10-45-5 portion of the in turn submits 25% which per- upon the of 4% company re- Republic, the to Old received continuing engaging or son paying sponsible in this following or services businesses charge sales tax on National does not tax. tangible per- (including) rentals state ... or PAI. fuel reimbursement either sonal National is Department claims that Action When renting automobiles. business on hearing was held An administrative they go to rent public goes to National Findings of fact and 1985. October PAI buy gas or They go do not a car. entered Janu- of law were conclusions gas or not sell them National does It was determined ary 1986. them a car. National rents PAL refueling paid to National amounts of rent in the business were includable vehicles and for PAI rental prop tangible ing cars which receipts therefore gross therefore, is, sales tax subject to erty and tax. that busi by gross receipts from measured to the circuit appealed was This decision ness. The circuit February court on 10-45- receipts is defined SDCL Gross decision and Department’s court reversed 1(2) as: findings of fact and conclu- its own entered credits, charge or lease money, that a received in amount [T]he charges, specifically includ applied to money’s in con- all worth or other property, ing “personal accident insur charge at retail within of sales sideration ance,” everything and that included account state, any deduction on without “If it without deduction. The court stated: sold, the cost property the of the cost of lease, charge by clear is a contained in the used, labor or the cost of materials of ” meaning charge.’ Reve that is a ‘lease paid for in- purchased, amounts nue, supra, at 202. In addi 704 S.W.2d discounts, ex- any or other terest or tion, the themselves South Dakota statutes penses whatsoever[.] dispositive. of the are The obvious intent in by National charged The amounts legislature impose South Dakota is to a 4% business of leas- part of the case are all a gross receipts of or upon business the above definition ing and under cars renting tangible personal property. service deducted from may not be amounts those phrases their We these words and determining in tax due. plain meaning and effect. Petition Fa of National’s own apparent from It is 882, Brands, Inc., 347 885 mous for fuel amounts received contract Carter, (S.D. 1984); Regents v. Board of con and PAI were cost reimbursement 46, 621, (1975). 40, 89 625 S.D. gross receipts from car part of sidered Therefore, PAI the cost of and 4(a)(i)of the contract sets rentals. Section charge subject in to included the rental and Charges.” Included within “Rental out gross receipts tax. the by National are “... charges 2. EXEMPTIONS FROM TAX fueling and other services.” LIABILITY Industries, Keystone In Consolidated National claims that it is 714, Ill.App.3d 4 Ill.Dec. Allphin, 45 Inc. v. sales tax on fuel cost reimbursement 250, (1977), 1202 the court con- 359 N.E.2d under 10-45-11 and for PAI under “selling price” al- sidered a definition of 10-44-8. either SDCL 10-45-12.1 or SDCL definition to Dakota’s most identical South Under Northwestern Public Service Co. receipts. held that the gross of The court Housing Redevelopment and Aberdeen clear. “No meaning the statute was of (S.D.1982), Comm’n, 320 N.W.2d 515 seller’s ex- of of the reimbursement Dept. Corp., K Mart Inc. v. Dakota South penses may deducted from whatsoever be Revenue, (S.D.1984), selling price computing in use tax liabil- the strictly exemption statutes are construed ity.” Id. 359 N.E.2d at claiming exemption. person the a similar result The courts have reached legislative Exemptions are a matter of * many dealing with the costs of cases grace and are resolved favor of doubts delivery. claims transportation cases, many the tax taxation. dispositive.” These these are “not separate cases payer claims to be business relevant, closely point, PAI, transportation, cases such as the sale Although they not be taxpayers well reasoned. gasoline. the sale of These substantially completely dispositive, they legally engaged in their busi could have support principles types involved. Reve those nesses and avoided tax because However, exempt. Budget nue Rent-A-Car of businesses were Cabinet Cincinnati, Inc., (Ky.App. taxpayers 199 courts refused to allow these to 704 S.W.2d — -, small, 1986), split portions of the U.S. off nontaxable app. Dist. dis. 687, you engaged If in a taxable the court held business. S.Ct. 90 L.Ed.2d * Blackmon, Heath, (1979); Rich’s, N.W.2d 625 Inc. v. Co. v. 259 Ark. Belvedere Sand & Gravel (1975); (1976). Ga.App. East claims 211 S.E.2d 916 National’s 536 S.W.2d 312 Materials, Dept. taxpayer Reve Brewton Inc. v. State are similar to the claims made nue, (1970); Belvedere, indepen Ala.App. So.2d 751 costs for which included Materials, Equaliza taxpayer separate Inc. v. Board Select Base dent haulers hired tion, Meyer taxpayer ly 51 Cal.2d 335 P.2d billed customer Equalization, Cal.2d Agency, receipts. Inc. v. v. State Board Harold W. Fuchs Dept. 267 P.2d Wis.2d Wisconsin business, your receipts all of from that HENDERSON, (dissenting). Justice business are to tax. cases cit- I respectfully dissent. This circuit ined footnote. If the courts do not allow court’s decision should regard- be affirmed taxpayers split legitimate, off related (1) ing National’s fuel (2) activity, surely taxpayer business funds it retained from the sale of PAI. split pieces should not allowed to off proceeds These fit exemp- legally business which National is not li- tions in the South Dakota sales tax law. operate. censed to legal- not ly Department, sell fuel or insurance because National is and the majority of this to do Court, licensed either. argue that National is in the busi- ears, renting ness of receipts of apparent legislature It is that the intend- which subject are to sales tax under SDCL ed to from only sales tax those 10-45-5. It is by contended the receipts upon premium which insurance opinion that receipts paid. by are defined is Because tax exemptions are strict- 10-45-1(2) SDCL ly construed as the amount person received in claiming exemption, National consideration of has the burden retail sales without deduc- proving premium that insurance tion for tax was other expenses costs or paid on amounts received for PAI. There the fuel charges and PAI part are proof no such this record. The insur- leasing cars, business of hence these company ance received or less of the 25% charges fall within the taxable re- by amount received National for PAI. Na- ceipts. As National is unlicensed to sell tional retained If the 75%. insurance com- gasoline insurance, either or it cannot fall pany paid any tax receipts on these at all exemptions to the sales paid only tax was on the or less 25% tax because it fails to meet the letter of the that the insurance company received. law, it is further advocated. These conten- tions are met exemption

National cannot claim this dissent in an effort to PAI, judge’s sustain the ruling. because National circuit correct does not fit within exemption. Nation- Resolutions of these issues mandate an gas, al does not sell it rents cars. Because analysis seemingly of several contradictory National is not an agent insurance or an state “seeming- statutes. Notice the word company pays which the insur- ly.” nothing It is novel this Court to tax, ance it not claim that appear consider statutes that inbe con- exemption either. exemp- One who claims belief, however, flict. We have held the tion from taxation must show that his ex- that harmony. statutes should be read in emption clearly within the letter and multiple Where there are covering statutes spirit Sutherland, of the law. 3A Statu- subject matter, the same they should be Construction, (rev. tory 1986) 66.09 ed. § construed to effect to each statute. at 328. National has failed to establish This is the decisional law of this state. exemptions clearly that its claimed Mines, re King Silver spirit within the letter and law. Id. Nacey, Kinzler v. conclusion, National is in the car rent- (S.D.1980). “harmony For the subject al business and to tax on re- all statutory concept,” Woods, see State v. rentals, ceipts from regardless those N.W.2d While numer- receipts categorized how those Na- proposition ous cases are cited tional in its own business records. In sum- monies received for activities (e.g., trans- mary, gross everything includes without costs) portation delivery which are inte- deduction. gral parts being of businesses as includable Reversed and remanded. “gross within various definitions of re- ceipts,” dispositive. these cases are not WUEST, C.J., and MORGAN and Transportation charges separately billed MILLER, JJ., concur. from rental necessarily are not HENDERSON, J„ “gross proceeds” dissents. from lease or questions, On tax courts look to the McNamara

tangible (La. substance, Services, Inc., just form, 382 So.2d 971 of a transac- Patterson just to a determina Federal App.1980). Savings Cardinal tion. Midwest & Loan interpreta is a of this case reasonable tion Ass’n v. Commissioner (Minn.1977). Dakota statutes. pertinent tion of South respect- It is exactly that this is fully suggested what 10- Regarding charges, fuel SDCL should done under this factual scenario. pro “specifically exempt[s] from 45-11 vehicles. The customer is National rents compu chapter and from the visions of fuel he responsible for the uses. Where it, imposed tation of the amount of tax tank, properly -the customer returns a full the sale Only the tax issue never arises. where the chapter 10- subject to tax under ... ... to refill his own tank does customer fails added.) 10-45- (Emphasis 48....” My cry the State “TAX!” This is unfair. 4.1, subject subject on the “ reading also involves a case taxation, means all ac provides: ‘Service’ Contractors, styled Inc. v. Dona- persons Material engaged in for other tivities fee, retainer, commission, hue, other mone St.2d 235 N.E.2d 525 Ohio pre (1968), appears a case tary charge, which activities involve and it to be closest dominantly performance of a service as us. In on its facts to scenario before selling property....” Contractors, distinguished taxpayer from Material leased my opinion, party In National’s fuel tractor trailers to a third who via gas closely approximate more the sale of agreement Taxpayer fueled the machines. oline, by tax exempted from the sales party fuel. reimbursed third for cost of 10-45-11, performance than of a ser SDCL question before the court was: Should (SDCL integral of a vehicle vice to rental taxpayer be assessed a sales tax based 10-45-4.1). specific A is control statute upon paid party the full amount from third D.H., ling general over a statute. In re taxpayer or should be entitled to subtract 185, 192(S.D.1984);Hartpence 354 N.W.2d “price” taxpayer from received the amount 292, Forestry Camp, v. 325 N.W.2d Youth party reimburses to third for fuel? The (S.D.1982).* 295 The circuit court was a Ohio Court considered statute similar to correct, law, therefore as a matter of when essentially 10-45-11 and held under SDCL exempt it ruled that National was from exempting gasoline a statute sales of from paying gasoline tax reimburse sales tax, sales that the lessee of tractor trailers receipts. judge ment circuit did not This costs, lessor for fuel who reimbursed was of law” or “mistake in make “mistake sales tax on liable costs of fuel. impression legal principles” or a “conclu Id., at Ohio St.2d 235 N.E.2d at 528. as a matter of of law ... error sion[] Copeland Corp. Lindley, See also v. Viereck, 411 Guardianship law.” In re Ohio St.2d 361 N.E.2d 1344 (S.D.1987)(Henderson, J., N.W.2d Similarly, majority’s inclusion tax- Therefore, specially concurring). the cir gross receipts of able the amounts National judge ruling. cuit should be affirmed in his received from its sale PAI to rental otherwise, i.e., To hold that National is customers is incorrect. business, fundamentally is to Companies conducting busi- an insurance misperceive the nature of National’s busi to a ness South Dakota are Here, upon judge ness. tne circuit relied 10-44. premium tax ch. under SDCL specific exemption, and this Court is provides: SDCL 10-44-8 versing absolutely precise his decision. language, pay a tax “gross receipts Every company required from the sale of gasoline” exempted.” exempt “specifically chapter under this from * State, historically Independent S.D. This refused to "read more Point Dist. Court has Sch. by legisla 600, 605, into a statute than is written there Ex Parte Dombush, Agency 515, 519, ture." F 353, 402 N.W.2d Brown, & M 114 N.W. 21 S.D. Brands, (S.D.1987) (citing In re Famous (1907)). Inc., (S.D. 1984); Elk 884-85 10-16, imposed chapter under Technically, statutes. tax be un- taxes, local, licensed, all other state and but this does not alter the fact tangible per- upon real and except by taxes that monies earned National result from by such property be owned sonal the sale of PAI to rental customers. Na- occupational retail company and the tional, not, holding whether a license or tangible personal and the use tax on tax agent Republic, acts as the earning of Old annui- policy An insurance policies commissions on sales of insurance intangible per- ty contract is considered exempted from taxation 10-45- SDCL purposes of this property for the sonal Republic, 12.1. Old licensed to sell insur- added.) (Emphasis section. Dakota, pays appropriate ance in South provides: premium premi- tax. Relatedly, 10-45-12.1 To National on ums, following ... paid “The when a is also chapter (The provisions Republic, of this duplicative. from the would be [“Retail ... commissions Sales and Service duplication same effect taints the taxation Tax”]: paid by an insurance or service fees earned gasoline receipts of National’s when the agent representative company to an purchased National from a Therefore, it policy....” of a the sale seller.) Therefore, taxpaying the State these two statutes in us to read behooves reaps through a windfall these mental I earlier. harmony, as have mentioned gymnastics. Rationale: The these tax statutes becomes unreason- rule of con A fundamental able, struction, notes, unnatural, contrary impractical, is to as the Veith, plain meaning and phrases holding their to the 261 N.W.2d at 426. words Brands, Inc., Famous effect. Petition of summary, I would affirm the circuit Board gas- to include National’s court’s refusal Carter, 40, 46, Regents v. 228 N.W. 89 S.D. and PAI funds in taxable re- oline (1975). Again, multiple statutes 2d ceipts. legislature did not intend the The subject matter should be covering the same whip tax to a cracked on the back each statute. construed to effect company like National for failure to Nacey, 296 N.W.2d Kinzler v. National, appropriate licenses. obtain (S.D.1980). taxation, exemp In the area of Republic’s agent, is relieved from sales Old against generally construed tions liability. K Mart taxpayer. assertions of Dep’t Dakota Corp. v. South Veith, In re it is While exemption provisions must be true that taxing agency, in favor of the

construed taxpayer, a construc such Dakota, fair, Plaintiff regard for the of South tion must be with due STATE language. Kaiser Appellee, meaning ordinary County, Cal.App.3d Corp. v. Solano Steel English Cal.Rptr. ANDERSON, Alan L. Defendant County, Cal.App.3d Alameda Appellant. Cal.Rptr. natural, reasonable, practical. must be No. 15756. Veith, re 426. How does 261 N.W.2d at of South Dakota. Supreme Court fit within this framework? Argued Nov. out, points As the premium tax required neither 6, 1988. Decided Jan. (SDCL 10-44-8) agent of it a licensed nor is 10-45-12.1). (SDCL It con- Republic cludes, therefore, preclud- that National of those experiencing the benefits

ed from

Case Details

Case Name: In Re the State Sales & Use Tax Liability of Townley

Court Name: South Dakota Supreme Court

Date Published: Dec 30, 1987

Citation: 417 N.W.2d 398

Docket Number: 15547

Court Abbreviation: S.D.