*1
WATERTOWN
SOCIATION, No. 05-004833- License 14-006274-ST, 14-005973-ST, 14-
ST, 14-007590-ST,
006572-ST, 18-003130- 18-003131-ST, Appellee,
ST,
v. DEPARTMENT DAKOTA
SOUTH REVENUE, Appellant.
OF (Wecota/Faulk Co. Union Oil
Farmers 25-001-46-215815E-ST-001, ton/Onaka) License No. 021581E-ST
25-002-46
-001, Appellee, Dakota
South
Revenue, Appellant.
No. Dakota. of South
Supreme Court 8, 2001. on Briefs Jan.
Considered 2,May
Decided 8, 2001.
Rehearing Denied June *2 Riter, Riter,
Robert C. Mayer, Jr. of Hofer, Brown, Pierre, Wattier & South Dakota, for appellees. Barnett, General, Pierre,
Mark Attorney Dakota, Crow, Jr., South Harvey M. Spe- General, cial Attorney Assistant Depart- ranchers, making contact with farmers and Dako- Rapid City, South ment of ta, appellant. attempting agronomy products. to sell Orders taken
KONENKAMP, Justice.
retail
through
taxpayers’
cessed
busi-
*3
proceeding,
In this administrative
[¶ 1.]
Specialists advocate the sale of
nesses.
(1)
appeal,
review the timeliness
we
only
particular
products.
their
distributor’s
(2)
charges
providing
for
whether
decide
field, they gather
information
While
may
taxed as
concerning soil or livestock and make rec-
10-
for “services” under SDCL
payments
particular products.
ommendations about
(3)
46-2.1,
finding by
a
and
examine
They may also monitor the use
these
arbitrary the
classifying
circuit court
visits,
make
and assist a
products,
return
decision. We con-
Secretary of Revenue’s
manage-
rancher in
a
developing
farmer or
timely,
is
and we
appeal
that
clude
including
profit analysis.
ment
a
program,
that the
ruling
circuit court’s
reverse the
taxpayers
charge
The
do not
their custom-
taxable.
charges were not
these services.
In-
separate
ers a
fee for
Background
stead,
produc-
maintaining
the cost
Elevator Associ-
Coop.
2.] Watertown
[¶
into the
program
tion
is built
specialist
(the tax-
Farmers Union Oil Co.
ation and
products.
of their
purchase price
products to farmers
sell
payers)
taxpayers
having
The
benefit
products include
and ranchers. These
salespeople highly trained
seed, feed, fertilizer,
“professional
and chemicals. Ce-
Agronomy Company
help
products
them sell their
at
O’Lakes
that [can]
nex/Land
”
distribute
Cooperative
and Harvest States
production
the local
Since the
[level]....
taxpayers.
at wholesale to the
products
job objective is to increase
specialist’s
with the
separate
a
contract
part
As
products,
specialist
works
provide
distributors
taxpayers, these
base and
taxpayers’
customer
enlarge
taxpayers’
to advise the
duction
and service current accounts.
to maintain
buy
which
and
customers on
program
of this
sell
emphasis
The
them. The contract states
how best to use
which,
product,
benefits
higher volume
“assign
Crop
the distributor will
and the distributors.
taxpayers
(CPS)
Specialist
taxpay-
to [the
Production
con-
Department
The
Revenue
At all times
services.”
provide
ers]
use tax audit of
ducted a sales and
Specialist or Live-
Crop
Production
The audit
books and records.
taxpayers’
remains an em-
Specialist
stock Production
cov-
Coop. Elevator’s books
of Watertown
taxpayers
The
ployee of the distributor.
through August
September
all actual
the distributors for
ered
reimburse
Afterwards,
in-
production specialists,
issued
expenses
Department
security, income tax
cluding salary, social
finding a use
of assessment
certificate
equip-
withholding,
compensation,
workers’
Coop, paid
tax due on fees Watertown
leases, travel,
other incidental
and
ment
The audit
specialist services.
production
expenses.
covered the
of Farmers Union Oil Co.
Both
with the same result.
period
same
specialists spend
production
The
but
the entire assessment
companies paid
of their time in the field
eighty percent
and Cenex
testimony
States
excerpted
the Harvest
particular
language is
1. This
specialist programs were “carbon
Crop Production
O’Lakes
the Cenex/Land
copies”
of one another.
Agreement.
offered
Specialist
validity of
contested the
the use tax.2 As
Appeal
1. Timeliness of
issues,
appeals
these
have similar facts and
moved the
they were consolidated.
an
Following
ad-
circuit court to
taxpayers’
dismiss the
ap
ministrative
hearing,
hearing examiner
peal, claiming
perfected
it was not
a ruling
taxpayers.3
issued
favorable to the
thirty-day
within the
period provided for
findings
The examiner’s
were submitted to in SDCL 1-26-31. Specifically, the De
of Revenue for
partment
practice
review.
asserted that
Secretary rejected
charging
filing fee to a
proposed findings
law firm’s
account at the clerks’ office
per
does not
as authorized
SDCL 1-26D-6 and sub-
an appeal
payment
fect
unless
actually
conclusions,
findings,
stituted his own
*4
within
thirty day appeal
made
period.
final decision.
Department
anchors its claim on our
The taxpayers
received notice of holding in Hansen v. South Dakota Board
entry
Secretary’s
July
decision on
Paroles,
135,
Pardons and
1999 SD
601
of
12,
4,
August
1999.
taxpayers’
On
N.W.2d 617. We
grant
review the
or denial
counsel filed a
appeal
notice of
of a motion to dismiss
a legal question,
as
County
Hughes
Circuit Court and charged
asking, “is
pleader
entitled
judg
to
filing
fee to the account counsel’s firm ment
a matter of
Eagle
law?” White
v.
¶
maintained with the clerk’s office. The
Pierre,
City
34, 4,
Fort
2000 SD
606
of
(citations
clerk of courts
926,
later billed
firm.
counsel’s
N.W.2d
928
and internal
omitted).
billing
completed beyond
quotations
was
the thir-
ty-day deadline allowed for appeals. The
In
Hansen an inmate mailed his
dismiss,
Department moved to
arguing
notice
appeal
of
County
Minnehaha
that the appeal
perfected
was not
within
of
Clerk Court’s Office. The notice did not
thirty days of
entry
notice of
under SDCL
filing
include the
fee or an application for
1-26-31. The motion was denied. The
Hansen,
135,
waiver of the fee.
1999 SD
¶
court heard the case on its
2,
merits and
171 question factual situation is a along given his notice law waiver” with propriate ¶ 8, Hansen, given no is to any 601 and thus deference 1999 SD appeal. reached distinguish- conclusion [the] This at 619. case N.W.2d Dep’t. Revenue] or the circuit court.” [of law firms practice for able. It is common Co-op., Tel. Revenue Sanborn 455 clerk and an account with the maintain (S.D.1990) (citing N.W.2d Mid- charge account. A to that charge fees Broadcasting Dept. continent Co. v. filing equiv- at the firm’s account time of (S.D.1988)) depositing We decline alent to fee. (bracketed text in al original). Statutes attorneys to requiring Hansen as interpret lowing exemptions exactingly tax an time deposit check each draw and narrowly construed in favor of the taxing Thus, filing of is filed. appeal Matter entity. City State & Sales Tax 4, 1999, along on appeal August notice Liability Quality Railcar Re Service charge perfected account with the (S.D. Corp., 437 pair thirty-day appeal within the taxpayers’ deadline. The Department identifies Subject Tax to Use 2. Services *5 separate between the dis two transactions in review Our standard of and the one taxpayers: providing tributors by administrative appeal governed an is special assignment production for the give 1-26-36. We deference SDCL fee, a for a taxable service under ists matters, the applying on factual agency 10-45-4, involving and another the SDCL of review. clearly standard erroneous exempt products tax for agronomy Co., Inc., 1998 v. C & R Sopko taxpayers this inter dispute resale.4 Transfer ¶ (citations 225, 8, 6, SD 575 N.W.2d 228 is insisting that the service an pretation, omitted). When factual determinations exempt part” the sale of “inextricable documentary the are made on basis of products. See SDCL 10-45-4.1. agronomy evidence, however, matter we review the a use Department impose seeks to tax unhampered by clearly de the errone 10- novo service as authorized SDCL on the ¶37, 10, SCI, v. It the distribu argues ous rule. Kurtz 1998 SD that since 46-2.1.5 878, provid 15- 882. But see SDCL did not collect tax when 576 N.W.2d tors sales 6-52(a) (as 1, July taxpayers production special with ing amended effective the services, subject under a such services are to imposes a statute a tax ist “Whether “help production specialist sup- provides: 4. services SDCL 10-45-4 Major Group We will ply in not hereby services” imposed tax at same There is the imposed tangible applicability the of this section be- upon that sales of address rate as personal property upon in this state argued it was never before the adminis- cause gross receipts any the en- person from agency. addressing We refrain from trative continuing any gaging practice of or appeal. brought on for the first time matters in which a rendered. business service is Woods, Fuller, Property, State Inc. v. Grand § Any as defined 10-45-4.1 shall service 19, ¶ Shultz, Smith, 139, SD 556 & 1996 taxable, specifically unless the service Likewise, (citations omitted). 88 provisions chapter. from of this specific Department propose a failed to produc- finding circuit court that Department argues also in its brief position specialist was taxable under tion activity specifically under this taxable 10-45-5.2. The burden was on De- SDCL This enumerates SDCL 10-45-5.2. section ruling on this issue. partment to demand a in the Standard certain services described Jameson, 1999 SD specifical- Jameson Industrial Classification Manual as (citations omitted). these ly taxable. The claims that Sanborn, generally tax. or providing spe- use See in cialist services to farmers and N.W.2d at 225. ranchers. record, review [¶ 13.] From our imposed A tax is the taxpayers distributors and were gross any person “upon receipts engaged in two distinct transactions. The in engaging continuing or from “crop production signed spe- in any which a practice business service cialist program agreement” participate is rendered.” 10-45^4. Services SDCL contract, in program. In this the dis- in are defined SDCL 10—45-4.1 and are “recruit, hire, agreed tributors and train specifically taxable unless presumed ex ton, each the taxpayers agreed CPS.” empted. Id. to reimburse the distributors for one hun- engaged “Service” means all activities in percent specialists’ dred salaries and fee, retainer, persons for other for expenses. A representative of the distrib- commission, monetary or charge, other utors an testified that reason such predominantly which activities involve arrangement cooperatives was local of a service as distin- “couldn’t attract kind of personnel property. guished selling de- compete marketplace.” [needed] to service, termining what is a the intended Furthermore, he conceded that use, objective or principle ultimate ob- gram very was similar an em- the, jective contracting parties shall ployment may These agency. activities be controlling. purposes For of this sales, they increase but product are suffi- chapter by an employ- services rendered ciently distinct from the sale of employer ee for his are not taxable. products to a separate be classified as *6 service. required 10-45-4.1. by SDCL As this stat
ute, we predominant activity use the test [¶ contend that 14.] be- subject if deciding in were to services cause specialist the cost of the See tax. Nash Finch Co. South Dakota program through is recovered their profit Revenue, 470, Dept. 312 N.W.2d 472 margin that it only constitutes one transac- of (S.D.1981). G, Accord & Inc. EG v. Di Yet, tion. business expenses countless Revenue, 143, rector 94 N.M. 607 P.2d may through be a recovered retailer’s of 1161, 1164 (N.M.App.1979) (“predominant profit margin, wholly to some unrelated test).6 ingredient” have also empha We the tangible personal property. that taxability sized “determinations of production specialist We conclude that the focus on should the transaction.” Sioux program “predominantly per- involves the Newspapers, v. Secretary Falls Inc. distinguished formance of a as service (S.D.1988). from selling property.” See SDCL 10-45- Here, dispositive the 4.1. Consequently, may transaction occurred use tax properly be the taxpayers, imposed with distributors and the payments on the for those ser- not with the sale ultimate vices under 10-46-2.1. SDCL operative pose language “Crop crop production specialist of the pro- Pro- of the Specialist Program Agreement" duction states gram agronomy prod- is to sales of maximize specialist “provide that the will services.” every ucts. But that be said of can almost statute, 10-45-4.1, governing pro- SDCL provided service a business: maximize service, determining “In vides: what is a apparently why Legislature sales. That is use, objective principal intended or ultimate objective directed that "ultimate objective contracting parties shall not contracting parlies controlling." controlling.” Assuredly, pur- be ultimate AMUNDSON, and Hearing Examiner’s Rejection of GILBERTSON, Justices, dissent.
Findings
GILBERTSON,
(dissenting).
Justice
court found
The circuit
failed
Secretary
of Revenue
provided
The services
that
rejecting the
predominantly
for
are
con-
reasons
duction
specific
give
agrono-
fact and
the sale of
promoting
cerned with
findings
hearing examiner’s
such,
As
Moreover,
my
SDCL 10-45-4.1.
products.
the court
law.
conclusions
from use tax
those
services
was
Secretary’s decision
found
Therefore, I re-
10-45-4.
under SDCL
analysis,
clearly erroneous
any
devoid
conclu-
dissent from the court’s
spectfully
give
Secretary
failed
indicating that
contrary on Issue 2.
sion to the
credi
examiner’s
hearing
deference
of our stan
light
bility determinations.
provides:
10-45-4
[¶ 21.] SDCL
review,
court’s decision
dard of
hereby
tax at
imposed
There is
arbitrarily is of no
acted
upon sales of
imposed
rate as that
same
appeal,
In an administrative
consequence.
in this state
personal property
tangible
decision the
Department’s
we review
gross receipts
any person
upon the
court,
by any
unaided
the circuit
same as
continuing
or
engaging
from the
was correct.
the court
presumption
in which a ser-
any
business
practice
¶
Kurtz,
service.”
Therefore, expense related incurred should
those
use tax under SDCL 10-45-4. AMUNDSON, Justice, joins this
[1Í27.]
dissent. SD the Matter of the ESTATE B. CATRON.
OF John 21310, 21376.
Nos. Court of South Dakota.
Supreme on Briefs
Considered Nov. 9,May
Decided