Berdahl v. Gillis

• Decision Date: 02 September 1965
• Docket Number: No. 10266,10266
• Parties: James O. BERDAHL, Petitioner-Appellant, v. Bruce D. GILLIS, as Commissioner of Revenue of the State of South Dakota, Respondent.
• Court: South Dakota Supreme Court

Page 633

136 N.W.2d 633

81 S.D. 436

James O. BERDAHL, Petitioner-Appellant, v. Bruce D. GILLIS, as Commissioner of Revenue of the State of

South Dakota, Respondent.

No. 10266.

Supreme Court of South Dakota.

Sept. 2, 1965.

Christopherson, Bailin, Wilds & Bailey and Mead Bailey, Sioux Falls, for petitioner-appellant.

Frank L. Farrar, Atty. Gen., John Dewell, Asst. Atty. Gen., Pierre, for respondent.

RENTTO, Judge.

The legislature in its 1965 session broadened the base of our sales tax by extending it to certain services and professions. The petitioner, a citizen, resident and taxpayer of the state, licensed to practice law therein and engaged in the active practice thereof, claiming that such act is unconstitutional, on May 13, 1965, instituted this proceeding for a writ of prohibition to restrain the respondent from taking any action thereunder. His right to maintain the proceeding is not questioned. On June 17, 1965 the trial court held the law to be constitutional and denied his application. This appeal is from that action.

The act in question, H.B. 743, now Ch. 296, Laws of 1965, approved on March 18th and effective on July 1st provides:

'Section 1. There is hereby imposed a tax at the same rate as that imposed upon sales of tangible personal property in this state upon the gross receipts of any person from the engaging or continuing in the practice of any profession or of any business in which the service rendered is of a professional, technical or scientific nature and is paid for on a fee basis, or by a consideration in the nature of a retainer except it shall not apply to those persons engaged in the practice of the healing arts and veterinarians as the same are defined in SDC 1960 Supp. 27.0401 and SDC 40.0201, and who are licensed by an examining board under the laws of the state of South Dakota.

'Section 2. There is hereby imposed a tax at the same rate as that imposed upon sales of tangible personal property in this state upon the gross receipts of any person from engaging or continuing in any of the following businesses or services in this state: Abstractors; accountants; architects; barbers; beauty shops; blacksmith shops; car washing; dry cleaning; dyeing; exterminators; garage and service stations; garment alteration, cleaning and pressing; janitorial services; laundry and laundromats; linen and towel supply; photography; photo developing and enlarging; tire recapping; welding and all repair services; provided, however, that the specific enumeration of businesses and professions made in this section is not intended to, in any way, limit the scope and effect of section 1 of this Act.

'Section 3. The exemptions from sales tax relative to sales of tangible personal property shall apply to services included in this Act.

'Section 4. Those persons whose services are taxed herein may add the tax under this section, or the average equivalent thereof, to his price or charge.

'Section 5. All of the persons subject to the tax imposed by this Act shall be deemed retailers as defined in South Dakota Code 57.31 and the definitions and applications provided in that chapter and the amendments thereto, shall apply to this Act, together with all of the provisions of South Dakota Code 57.33 as amended, relating to the Retail Occupational Sales Tax ascertainment, collection, and adjustments.'

His claim here is that the law is unconstitutional on its face for these reasons:

(1) It unlawfully delegates legislative power to the Commissioner of Revenue

(2) Its language is so vague as to deny due process of law

(3) The classifications thereunder are arbitrary, unreasonable and constitutionally offensive

While his reply brief mentions a letter by the Commissioner in the nature of an interpretation of the act it should be noted that nothing of this kind was before the trial court. Consequently, it is not before us. Our function is limited to a review of the case presented to the trial court.

We think it proper to first set out some of the general principles in the light of which we must approach the specific problems here presented. As was stated by this court in State of rel. Botkin v. Welsh, 61 S.D. 593, 251 N.W. 189:

'This case, of course, falls under the general rule, so axiomatic as doubtless to be unnecessary of statement, that every presumption is in favor of the validity and propriety of legislative action, and that no statute should be held unconstitutional by any court unless its infringement of constitutional restrictions is so plain and palpable as to admit of no reasonable doubt. * * * As has been so well said by Mr. Justice Holmes: 'Great constitutional provisions must be administered with caution. Some play must be allowed for the joints of the machine, and it must be remembered that legislatures are ultimate guardians of the liberties and welfare of the people in quite as great a degree as the courts.' * * *

'The application of this salutary doctrine to the consideration of legislation in the tax field is of peculiar importance. The taxing power inheres in sovereignty and, as we have previously taken occasion to emphasize * * * the existence and exercise of that power are absolutely essential to the preservation of the state. The exercise of the taxing power is vested, under our governmental structure, in the legislative department, and its conduct in that field should be sustained and supported by the courts to the utmost possible limits, and restricted or denied most cautiously and only in the clearest cases. No state can exist without the provision of adequate revenues, and the need for revenue and the practical possibility of securing it from various and sundry sources are conditioned by the social and economic situation of the state and not by constitutional theory. The courts should, and they do, go a great way to sustain the validity of legislative action intended to raise revenue.

"The power to impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is subject to any restrictions whatever, except such as rest in the discretion of the authority which exercises it. It reaches to every trade or occupation; to every object of industry, use, or enjoyment; to every species of possession; and it imposes a burden which, in case of failure to discharge it, may be followed by seizure and sale or confiscation of property. No attribute of sovereignty is more pervading, and at no point does the power of the government affect more constantly and intimately all the relations of life than through the exactions made under it.' * * * 'The state courts likewise, as revealed even by the most cursory examination of their decisions, have universally been diligent to sustain the validity of tax legislation wherever the possibility existed. Such also has been the language and the trend of our own decisions.'

As is made clear in the above quoted statements the power to tax is essentially a legislative function. However, there are circumstances under which there may be delegated to an administrative officer, goard or tribunal, some aspects of the taxing process, if, in making such delegation, the legislature retains sufficient and proper control over those aspects which are not delegable, and if a sufficient guide or standard is laid down by the legislature for the guidance of the administrative officials. 51 Am.Jur., Taxation, Sec. 144 and Sec. 148; 84 C.J.S. Taxation Sec. 8.

By SDC 57.0101(16) it was made the duty of the Secretary of Finance and he was given power:

'To construe the tax laws of the state whenever requested by any officer acting under such laws; to see that all taxes due the state, counties, municipalities, and other local subdivisions are collected, and to perform such other duties and exercise such other powers as may be provided by law.'

In SDC 1960 Supp. 57.01A05 these duties and powers were transferred to the Commissioner of Revenue.

In accordance with the general rule we have often held that the legislature may delegate to an administrative body or officer the duties of carrying out its enactments if it adopts a clearly declared legislative policy and lays down understandable standards to guide the administrative action. Affiliated Distillers Brands Corp. v. Gillis, S.D., 130 N.W.2d 597. The petitioner apparently does not claim that the act does not contain a clearly declared legislative policy, but he does urge that section 1 of the act does not contain sufficient standards as to the gross receipts which are taxable nor as to those that are exempt. From this he proceeds to argue that the Commissioner in carrying out the act would be legislating. We do not agree.

As is so common in many areas of the law the rule as to understandable guidelines is easy of statement, but more difficult in its application. In the fairly recent past we have held rather generalized and imprecise statements to be sufficiently definite standards for the administrative action authorized. The following are indicative of our attitude in applying the rule: Relieving an employer of requirements of the Workmen's Compensation Law on proof of his solvency and financial ability to pay the compensation required by the act, Utah Idaho Sugar Co. v. Temmey, 68 S.D. 623, 5 N.W.2d 486; disapproving articles of incorporation of a bank if public convenience and necessity to not justify its organization, Wall v. Fenner, 76 S.D. 252, 76 N.W. 722; permitting the issuance of revenue bonds by the Board of Regents for the construction of dormitory or apartment housing where the same are necessary and feasible. Boe v. Foss, 76 S.D. 295, 77 N.W.2d 1. In Affiliated Distillers Brands Corp. v. Gillis, supra, relied on by petitioner, we struck down the Commissioner's administrative action not because of the insufficiency of standards, but because of the absence of any standards.

Section 1 of the act imposes the tax upon 'the gross receipts of any person...