*1 Dakota, Plaintiff of South STATE Appellant, DORHOUT, Appellee. Defendant

Ivan 18249.

No.

Supreme Court

Argued 1993. Nov. 9, 1994.

Decided March

Rehearing April Denied

formed that he needed to file back tax re- turns. Dorhout filed a sales tax return for January through August, peri- 1989 time began filing od and bi-monthly then sales tax Department returns. After the received nu- sales, merous indicating gross returns zero Department investigation. commenced an Department The T audited & C for the period 1,1988 January from through Decem- 31, ber 1990. audit alleged The identified 36 sales and equipment deliveries farm buyers South Dakota and the sale within South Dakota of one trade-in. Barnett, Gen., Wiest, Atty. Mark David D. charged by Dorhout was indictment with Gen., Pierre, Atty. plaintiff Asst. for and one count of failure to file a sales tax return appellant. (SDCL 10-45-48.1(4)), one count of failure to Miller, Falls, Todd C. Sioux for defendant (SDCL pay 10-45-48.1(2)), sales tax and six appellee. and filing counts of a false or fraudulent return in attempting to defeat or evade sales tax SABERS, Justice. (SDCL 10-45-48.1(1)). Dorhout filed a Mo- appeals the State dismissal of sales tax tion for Dismissal of the Indictment as a charges against Defendant. We reverse. violation of the Commerce Clause United States Constitution. Dorhout’s mo- Facts granted. Department tion was filed a Mo- Defendant Dorhout owns Town and Coun- for Rehearing tion on Dorhout’s Motion to (T C), try Implement implement & a farm Dismiss, granted. which was After the re- dealership Valley, in Rock Iowa. On March hearing, the trial court denied Dorhout’s Mo- 10, 5,1989, Department and June of Revenue tion Dismiss. Dorhout filed a Renewal of (Department) sent letters to Dorhout inform- Motion for Dismissal of the Indictment on ing him that engage he must be licensed to grounds. granted. new His motion was De- business in South Dakota and remit sales tax partment appeals. respond to the State. Dorhout did not alleged Dorhout in his Renewal of Motion letter, either letter. A third known as the that, for Dismissal Depart- liable to was letter,” “last chance August was sent on tax, tax, ment for it awas use not a sales It informed Dorhout that the matter Department proceeding and that was being assigned Department’s Ac- under a new law. The trial court counts Receivable Division failure to agreed granted Dorhout’s Motion to Dis- comply Felony could him to Class 6 miss because charges. responded Dorhout and acknowl- warning Dorhout did have fair that his edged receipt previous of the two letters. criminal; addition, conduct even if Jury testimony Grand indicates that at this by correct, position chance the State’s time, Deputy Dorhout told Director Alan Dorhout could not have ascertained the thought paying Morris that he he could avoid legal applicable standards to his conduct. including South Dakota sales tax de- Therefore, proceeding a criminal is not the livery charges on the invoice. proper proceed forum to with this case as October, 1989, charged. applied for a part Dakota sales tax license. As provides SDCL 23A-8-2 nine Department procedure, routine it was ex- grounds under which an indictment be plained to Dorhout that he was liable for dismissed on motion of defendant.1 State v. sales tax on deliveries made Schladweiler, (S.D. into the state 436 N.W.2d rule). 1989). (point possession He was in- statutory grounds also These are exclu- (1), (2) (3) 23A-8-3, 1. SDCL 23A-8-2 § to subdivision Upon pursuant motion of a defendant made whatsoever, Hoekstra, a consider- means

sive, 286 N.W.2d v. State (S.D.1979); Bingen, generally State see ation. (S.D.1982) (grounds for Department stated in Reve As this court forth in are set dismissing an indictment Coop., a stat “[w]hether nue v. Sanborn Tel. 23A-8-2), cannot “the trial court *3 given a factual situa imposes ute a tax under sufficiency legality or of the inquire into the no question an indictment is based a of law and thus defer upon which tion is evidence under considering a dismissal SDCL when any reached given is conclusion ence Schladweiler, 436 at 854 N.W.2d 23A-8-2.” the circuit Department of Revenue or the 127). Hoekstra, trial The (citing (S.D.1990). 223, 225 court.” 455 N.W.2d Motion to granting Dorhout’s court’s letter Supreme Court dis- The United States ground upon specify the fails to Dismiss granted. Because the motion was a sales tax and which cussed the difference between exclusive, and statutory grounds are these tax in McLeod v. J.E. Dilworth Co. a use appear question does not indictment “[t]he many a tax in instanc- A sales tax and use any grounds the con- vulnerable But may bring about the same result. es statute,” Bingen, 326 N.W.2d at in the tained conception, they [and] different in are are dismissing order the the trial court’s upon transactions[.] different assessments for this reason could be reversed indictment continue, however, We, to the merits. a tax on the freedom of alone. A sales tax is A tax is a tax on the purchase^] use provides: 10-45-2 enjoyment pur- that which hereby imposed upon a tax the There is Though sales and use taxes chased.... engaging in as a re- privilege of business tailer, upon gross percent tax of four the a revenues and serve secure the same tangible personal receipts of all sales of are, purposes, they as we complementary wares, consisting goods, or property indicated, on transac- have taxes different merchandise, by § except as taxed 10-45-3 opportunities afford- tions and for different except provided in this as otherwise by a ed State. chapter, at retail in the state of South sold 1025-26, 327, 330-31, 64 S.Ct. 322 U.S. Dakota to consumers or users.2 (1944). also, Karen R. 88 L.Ed. 1304 See 10-45-1(8) provides: And SDCL Twitchell, Duty to Imposition the Collect barter, transfer, “Sale,” exchange any or Prohibi- otherwise, Taxes: Constitutional any manner or State Use conditional or jurisdiction of the of- informa- the court was without must dismiss an indictment or court charged; fense following cases: tion in of the (8) pres- person permitted to be When found, endorsed, (1) pre- When it is not grand jury during while ent the session of the title; prescribed by this sented or filed as charge embraced in the indictment was (2) are not the names of the witnesses When consideration, except provided as under § or infor- inserted at the foot of the indictment 23A-5-11; or thereon; mation or endorsed (9) charged by informa- When a defendant (3) substantially conform When it does preliminary did not have or waive a hear- tion ing title; requirements of this filed. before the information was (4) charged than one offense is When more machinery per- three tax rate on farm is 2. The count; single in a 10^15-3, under SDCL which cent (5) public not describe a of- When it does imposed per- hereby three is There fense; gross receipts sale or from the cent on which, true, (6) matter When it contains machinery and attachment units resale of farm legal justification or excuse would constitute a irrigation replacement parts; than or other equipment charged, other bar to the of the offense or exclusively agricultural used prosecution; retailers; purposes by licensed South Dakota (7) grand jury the in- which filed When however, provided, that whenever trade-in authority inquire legal into no dictment had machinery exchange is in- of used farm transaction, charged only not within because it was be the offense the tax shall volved in difference. grand jury and collected on the cash jurisdiction or because due Longer passes buyer no in Mail Order tions are Valid at the time and (1987).3 Sales, 94-95 S.D.L.Rev. shipment; but McLeod, As indicated in a sales tax and a (b) If requires delivery the contract at use tax are “assessments different destination, passes title on tender McLeod, transactions.” 322 U.S. there. added). (emphasis re S.Ct. at 1025 While In determining whether a taxable Liability the State Sales or Use Tax Web event occurred South Dakota for Furniture, sales tax (S.D.1980), ber purposes, question is: where was the appears support sale Dorhout’s contention that Sturtz, by delivery? consummated delivering an out-of-state retailer merchan- Compare Royal N.W.2d at 134. dise in Dakota is liable for use In re Plas tics, distinguish Request rather than Inc.’s sales Webber State and *4 for Refund of Municipal Tax, in able. The issue Webber was whether the Sales and Use 471 N.W.2d (S.D.1991) appellant maintaining place 582, a “retailer receipts 586 “Gross from the in in of business the state” as defined SDCL tangible personal sale of property in South 10-46-1(7) and SDCL 10-46-20. The issue subject Dakota are not to sales if the of whether Webber was liable for sales tax obligation seller has an under the sales (rather tax) than use was not before the agreement tangible personal to deliver the Revenue, Dept. court. v. Iowa Sturtz property property out of state and the will of (Iowa 1985), State, by cited the N.W.2d (citing be returned to this state.” ARSD persuasive authority. is more 64:06:01:24). If the out-of-state retailer does state, not deliver the merchandise into Sturtz, the

In a manufacturer of modular passes buyer title the before merchan homes was held liable for Wisconsin Iowa dise enters the state and the sales tax because the sales to a wholesale seller is not liable for distributor Iowa consummated when sales tax. See SDCL 57A-2-401. were Conversely, the manufacturer delivered the homes on if its the out-of-state retailer deliv support holding, state, trucks to the site. In of its ers the merchandise into the title Supreme the Iowa Court relied Iowa passes when completes delivery the retailer 554.2401(2)(b). 57A-2-401(2) § Code SDCL in the state and the seller is liable for sales provides: is identical and 57A-2-401; Sturtz, tax. SDCL 373 N.W.2d explicitly agreed words, Unless otherwise title at 134. other the determination of passes buyer at the the time and whether the sale is taxable for sales tax completes perfor- at which the seller his purposes complete, is made when the sale is physical mance with reference to the deliv- McLeod, or “consummated.” 322 U.S. Cf. ery goods, despite any reservation of 327, (Tennessee 64 S.Ct. L.Ed. security though interest and even a docu- vendors not liable for Arkansas sales tax ment of title is to be delivered at a differ- because “we are here concerned with sales place; particular ent time or and in by made Tennessee vendors that are con despite security reservation of a inter- delivery summated in Tennessee for the of by lading est the bill of Arkansas.”). goods in (a) requires If the contract or authorizes Sturtz, As in sales T & to goods

the seller to send the C its the buyer require but does not him to South Dakota customers were consummated destination, deliver them at title when T & tracks C’s delivered the farm Imposition Duty 3. As stated pur- Twitchell in the would have been to sales tax if of to Collect State Use Taxes: pur- chased within the state. The incentive to imposed upon privilege A use tax is using, storing, paying chase out-of-state and avoid local sales personal consuming prop- purpose tax is removed. The second is to erty taxing impose within the state. States prevent a drain on the revenues available to purchaser, duty tax on the not the seller. The purchaser's state. The state receives collecting placed the tax is on the out-of- regardless property same revenue of where the purposes, state seller. tax The use has two purchased locally through is the sales tax or — equalize first ers. The in-state and out-of-state sell- .is through out-of-state the use tax. compensatory use tax is levied on Id. property property used within the state if that agree- or tion in this state. Contracts customers South machinery to the shipment Delivery purporting require Dako South ments 373 N.W.2d which, property event Dakota do the taxable outside South ta constituted 10-45-1(8), 45—2, SDCL tax would other- exempt sellers SDCL 10— 57A-2-401, triggered Dakota regardless apply. applies wise Sales especially one so when tax. This sales through made solici- whether the sales are s admonition considers Schladweiler1 tation, mail, through catalogs. direct inquire legali into the cannot “the trial court together, the statutes and administra Read ... sufficiency of the evidence when ty or liability clearly impose a sales tax on tive rule 23A-8- considering a dismissal under SDCL Administrative rules have the Dorhout. (cita Schladweiler, at 854 436 N.W.2d 2.” presumed Hope force of law and are valid. omitted). tion Dept. Evangelical Lutheran Church v. Iowa Additionally note that ARSD we (Iowa 1990) Revenue, 76, 84 463 N.W.2d 64:06:01:25 Revenue, (citing Dept. Richards v. Iowa Originating in other Interstate 1985)). sales — (Iowa also, See Duf states. (S.D. Mortenson, 437, 439 fy v. liability when a sale is incurred Sales 1993) (citations omitted) (administrative rules consumption in for use or at retail is made adopted by Board of Elections are the State *5 paid tax must be even this state. Sales law). And, binding have the force of as and transported is though property sold below, presumed to know noted Dorhout is buyer from a outside directly to the 797, Opp, 801 the law. Hieb v. engaged in the if the seller is this state (S.D.1990) (citing Graff, Johnson S.D. tangible personal prop- selling business of (1942)). applies “This law possession erty in and this state (cit by departments.” Id. adopted to rules buyer residing to a property is transferred 1-1-23(8)). 1-1-22, ing SDCL in this state. or located argues that if he is liable for Dorhout may purchase or contract either The tax, any 10-46-20 it is a use tax under SDCL shipment. precede or follow interstate imposition liability is and that the of sales tax transaction wheth- applies to the Sales tax point of law for which he cannot be a new shipment is made free on board er the imposes 10-46-204 liabili held liable. SDCL (f.o.b.), origin or f.o.b. destination point of ty tax a retailer for the collection of use goods trans- how the are and no matter maintaining place in this state a of business ported. exempted retailer is under the unless the doing in this state All retailers business to 10-46-15. provisions of SDCL 10-46-6 maintaining a business office this and liability exempts from for SDCL KM6-65 maintaining agents or or solicitors state or in this gross receipts from the sale use through independent order doing business property or servic tangible personal state of tax on subject to the retail sales takers are subject tax. Because es which are to sales at retail when all sales of merchandise by consummated deliv- consump- Dorhout’s sales were made for use and such sales are amended, part: substi- provides In SDCL 10-46-20 SDCL 10-46-20 tuting in the "10-46-17.5” for “10-46-15” maintaining Any a of business retailer state, tangible per- making sentence. sales of first in this and storage, property use or or services for sonal state, exempted consumption other in this 5. SDCL 10-46-6 provisions §§ to 10-46- 10-46-6 tangible personal use in this state of The 15, inclusive, shall, making the time of such services, gross receipts property from state, sale, col- whether within or without included in the the sale of which are to be by chapter imposed from the lect the tax purchaser, this 10-45, imposed by chapter measure of the tax purchaser receipt give and may or which amendments made prescribed by therefor in the manner and form thereto, hereby specifical- be made revenue, hereafter secretary secretary the revenue, shall, if the imposed by chap- ly exempted this from the tax promulgated pursuant by rule 1-26, chapter require receipt. ter. such to subject to T ery in Dakota and sales sales tax. & C delivered the beanhead apply. 10-46-20 does not according signed by to the retail order Uher- ka, paid sales tax in the amount of $66.75 argues Dorhout also that the law is delivery and a fee of The sales tax $25.00. ambiguous and the determination of whether by return filed Dorhout September- for the

he is liable for sales or use tax should not be October, however, period, reports time proceeding. sup in criminal addressed (or tax) zero sales to sales for use Harris, port, Dorhout cites United States v. period. that time (7th Cir.1991). 942 F.2d 1126 Harris held part points that new of tax not be law Clearly, ambiguous. the law was not the basis of a criminal conviction for willful understood, early Sep at least as as failure to tax returns or for file willful tax tember, 1990, that he was liable for South evasion. Dakota sales tax if the sale was consummat ed South Dakota. prior As sales Initially, that we note Harris was decided time, we that “[i]ndividuals reiterate are Appeals the United States Court of presumed to know the therefore, law.” Hanson v. the Seventh Circuit we are not (S.D. Brookings Hosp., 469 N.W.2d Additionally, the result. bound Harris 1991) (citations omitted). no states that: “We need cita ignorance tion reaffirm that of tax laws is If defendants in a tax case could not have non-compliance.” not a valid defense for legal applicable ascertained the standards Revenue, Cotten v. Collector 579 So.2d conduct, proceedings may to their criminal (La.Ct.App.1991). appears It from the punish alleged not be used to define and an present record that Dorhout violated a know failure conform to those standards. legal duty, payment able and known This rule is based on the Constitution’s Harris, tax. sales 942 F.2d at 1131. requirement process prohibi- of due and its laws; post government tion on ex *6 facto Because indictment the was not vulnerable provide must reasonable notice of what grounds contained in SDCL subject punishment. conduct is to criminal 23A-8-2, dismissing the order the indictment cases, statutory The rule is also in tax is reversed and the case is remanded the only because “willful”violations are proceedings. circuit court for further See area, punishment. to criminal In the tax Transit, generally Complete Auto Inc. v. wrongdoing “voluntary, “willful” means the 274, 281, 1076, 1080, Brady, 430 U.S. S.Ct. intentional violation of a known” —and (1977) (“[T]he 51 L.Ed.2d 326 consis Court “legal duty.” therefore knowable — tently has indicated that ‘interstate com added) (citations (emphasis Id. at 1131 omit- pay way,’ merce be made to its and has ted). permissibility moved toward a standard of Dorhout could have ascertained whether taxation state based its actual effect by reviewing he was liable for sales tax legal terminology.”). rather than its statutes and administrative Testimo- rules. Reversed. ny thought indicated that Dorhout he could liability by delivering avoid sales MILLER, C.J., and WUEST and machinery including delivery AMUNDSON, JJ., concur. charges appears on It the invoice. also from Jury transcript a review of the Grand HENDERSON, J., specially. concurs completely Dorhout understood the condi- tions under which he was tax.' liable sales HENDERSON, (specially Justice concur- Jury testimony Sep- Grand indicates that ring). (Uher- tember, 1990, when Norman Uherka ka) purchased C, paucity majority a beanhead from T Due of facts & up opinion, oblige told that if the reader with the back- picked was he came and himself, charge ground beanhead T & C would not this case for better understand- But, him ing, supplemented by sales tax. if T & C delivered the the facts are this writ- beanhead, T charge ing. & C would have to him

(cid:127) ally observed in Dakota with a red Valley, approximately South Iowa Rock Fairview, Country Implement pickup Town and straight South east

miles truck. operates a farm Dorhout Dakota where (cid:127) ap- extensively advertised his busi- dealership with sales of Dorhout

implement through newspa- ness in Dakota per year. South million proximately $4 radio, pers, As a result and television. (cid:127) Complaints were filed with the South investigation thorough of a of Dorhout’s officials, taxing that Dorhout was Dakota Dakota, doc- business activities South Dako- making substantial sales South by specific sold such as a umented items paying and was not sales ta residents cultivator, mower, tractors, disc tax. taxing fit planter, the authorities saw to (cid:127) investigation conducted the De- An charges against bring criminal Dorhout. of Revenue of this state deter- partment granted the trial court its Motion for When Dorhout had sold farm ma- mined that Dismissal, grand jury the trial court had a farmers, chinery these to South Dakota available, transcript together with exhibits being principally Dakota farmers South jury. presented grand Let there be along the located South Dakota/Iowa no that the trial court had an exten- mistake border. background when the decision sive factual (cid:127) by telephone informed Dorhout was Essentially, was made to dismiss this case. correspondence that he was liable for 21,1993, January trial court’s decision on equipment. of farm sales tax (1) subject held that Dorhout was to use tax (cid:127) Notwithstanding attempt an to educate (2) tax and a new of law and not sales responsibility, both Dorhout as to his being lodged against Dorhout. correspondence of by phone calls and 10-45-1(6), certainly there is Under authorities, taxing the South Dakota jury question as to whether Dorhout is a paid no sales tax. Dorhout retailer. (cid:127) fact, testily told the taxation 10-45-1(8), jury there is a authorities of South Dakota that there Under SDCL question way as to whether Dorhout made no that South Dakota could Dakota. sales within State South into trace the sales made (cid:127) Dorhout, evidence, when confronted with allegation Each criminal of an avoidance of $30,000 admitted to a sale South Da- below, jury tax must tried in a a sales be

kota. case, jury if Dorhout demands a trial. One *7 (cid:127) key questions in Did Having secured a sales tax license this therein will be: file,

state, delivery place in Dakota? This is began to in take South South possession” as “the of rule. Dakota, returns, also known reflecting that he zero Plastics, 582, Royal 471 See In re N.W.2d no sales in Dakota. Further had South (S.D.1991). 585-86 place. investigation took Dorhout ad- Revenue, having mitted to three customers Reviewing Dept. Sturtz v. Iowa South Dakota. (Iowa 131, 1985), 132 it N. W.2d (cid:127) investigation, further numerous After appears that in Iowa is the definition sale other delivered sales to South Dakota of sale in South identical the definition Sturtz, 133-134, were uncovered. In at Dakota. 373 N.W.2d Supreme of Iowa discussed sale (cid:127) Court to a Numerous exhibits were submitted Iowa, delivery delivery. In 15, 16, 17, 13, 14, grand jury; Exhibits key determining where the sale is the 19, *, 18, and 21 all reflected sales to and sales tax to be This applied. occurred residents, pre South Dakota which were this appears to be the same focus as Court grand jury. sented Royal had Plastics. (cid:127) produced reflected Dorhout’s Evidence being salesmen in the state of South Dorhout’s contention that he was not sub- Dorhout, himself, person- ject to sales tax but was to use was * 20, example, Wagner, Dakota. The invoice also reflects an invoice for a South Exhibit as an $2,200 charge delivery. $25.00 bean head sold to Norman Uherka be, 10-46, appears to ch. provisions SDCL cited a mistake law. aboye, Dakota,

under the facts STATE of South Plaintiff Labor, Dept. 411 N.W.2d 113 Permann v. Appellee, (S.D.1987). However, I caution that Dorhout v. trial, jury, before a entitled to a fair is still brought out. all of the facts South have Philip HEFTEL, Ross Defendant Dakota, passed by Legis our the use tax was Appellant. tax, not to complement lature to the sales displace it. Northwestern Nat. Bank Gil No. 18327. (1967). lis, 293, 82 S.D. Supreme Court of South Dakota. 10-46-6, quite Reading it becomes that if there exists a retail sale under obvious Considered on Briefs Jan. 1994. 10-45, Chapter ap 10-46 not Chapter does Gillis, also ply. See 148 N.W.2d at 298. See Decided March Markets, Inc. v. Pioneer Commissioner of (1970). Revenue, 24, 176 N.W.2d 477 85 S.D.

Explicitly, the trial court ruled that “Dorh- warning fair that his con-

out’ did have and, also, that “Dorhout

duct was criminal” legal stan-

could not have ascertained the (Emphasis applicable to his conduct.”

dards mine.)

supplied all, essentially arguing

First of he is and, vague are and uncertain

the statutes

therefore, statutorily a crime has been certainty.

defined with definiteness and filing charged with a false or

Dorhout was attempting escape

fraudulent return 10-45-48.1(1).

evade sales tax under SDCL in mind that this defendant was ex-

Bear

plained the Dakota sales tax law on trying to us

several occasions. He is now tell legitimate

that he has a defense because ignorant made to of the law. Reference is (S.D.1989). Dale,

State v. 439 N.W.2d 98 Martin,

Therein, 107, citing page State v. (1971), ex- we S.D.

pressed: that it incum-

The court determined *8 defendant, if he does not

bent law, to learn its content

understand the meaning. charges every man The law pre- knowledge of the standards

with the (Emphasis supplied

scribed the law.

mine.)

Thus, join reversing I the trial court’s

granting for the Dorhout’s Motion to Dismiss writing. forth in this

rationale set