Boggero v. S.C. Dep't of Revenue

• Decision Date: 30 September 2015
• Docket Number: No. 5356.,Appellate Case No. 2014–000214.,5356.
• Citation: 414 S.C. 277,777 S.E.2d 842
• Parties: Eugenia BOGGERO, d/b/a Boggero's Portable Toilets, Appellant, v. SOUTH CAROLINA DEPARTMENT OF REVENUE, Respondent.
• Court: South Carolina Court of Appeals

414 S.C. 277

777 S.E.2d 842

Eugenia BOGGERO, d/b/a Boggero's Portable Toilets, Appellant

v.SOUTH CAROLINA DEPARTMENT OF REVENUE, Respondent.

Appellate Case No. 2014–000214.

No. 5356.

Court of Appeals of South Carolina.

Heard May 12, 2015.

Decided Sept. 30, 2015.

Burnet Rhett Maybank, III, of Nexsen Pruet, LLC, of Columbia; and Roy R. Hemphill and Hannah Khristin Metts, both of McDonald Patrick Poston Hemphill & Roper, LLC, of Greenwood, for appellant.

Carol I. McMahan, of Anderson; and Milton Gary Kimpson, Ann Marie Thompson, and Harry T. Cooper, Jr., all of Columbia, for respondent.

Opinion

LOCKEMY, J.

Eugenia Boggero, d/b/a Boggero's Portable Toilets, appeals the Administrative Law Court's order, finding the gross proceeds from her portable toilet business were subject to the South Carolina sales and use tax. Boggero argues the ALC erred in applying the tax because the “true object” of her business is a service. We affirm.

FACTS

Boggero owns and operates Boggero's Portable Toilets in Greenwood as a sole proprietor. It is a family business, started by her father, which Boggero acquired in 2005. Boggero has never applied for a retail sales tax license, collected sales or use tax from customers, or paid sales or use tax to Respondent South Carolina Department of Revenue (the Department).

The Department audited Boggero for sales and use tax for the tax period January 1, 2009, through December 31, 2011 (the audit period). As a result of this audit, the Department imposed sales taxes on the “gross proceeds” from Boggero's portable toilet business in the amount of $8,891.96, plus interest of $602.27, and penalties of $3,191.36. In response to Boggero's protest of the notice, the Department issued a determination, affirming the imposition of the tax. Boggero then requested a contested case hearing before the ALC.

At the hearing, Boggero argued the “true object” of her business was a service—the removal and disposal of human waste—and, therefore, it was not subject to the state sales and use tax.¹ The ALC affirmed the Department's decision, finding the true object sought by the customer was the use of the portable toilets and other tangible personal property. This appeal followed.

LAW/ANALYSIS

Boggero argues the ALC erred in finding the gross proceeds of her business were subject to sales and use tax because the true object of her business is a service—the removal and disposal of human waste. We disagree.

“Tax appeals to the ALC are subject to the Administrative Procedures Act (APA).” Centex Int'l, Inc. v. S.C. Dep't of Revenue, 406 S.C. 132, 139, 750 S.E.2d 65, 68 (2013) (internal quotation marks omitted). “The decision of the [ALC] should not be overturned unless it is unsupported by substantial evidence or controlled by some error of law.” Id. (internal quotation marks omitted).

“Certain situations involve a mixed question of law and fact.” Hopper v. Terry Hunt Constr., 373 S.C. 475, 479, 646 S.E.2d 162, 165 (Ct.App.2007), aff'd by 383 S.C. 310, 680 S.E.2d 1 (2009). For example, “[s]tatutory interpretation is a question of law.” Id. “But whether the facts of a case were correctly applied to a statute is a question of fact, subject to the substantial evidence standard.” Id. Likewise, “whether an agency correctly applied the facts of a case to a statute is a question of fact.” Id. at 483, 646 S.E.2d at 167 ; see also Bursey v. S.C. Dep't of Health & Envtl. Control, 369 S.C. 176, 184–85, 631 S.E.2d 899, 904 (2006), overruled on other grounds by Allison v. W.L. Gore & Assocs., 394 S.C. 185, 188, 714 S.E.2d 547, 549 (2011) (recognizing the meaning of a statutory term is a question of law, but whether a gas and electric company's activities met this definition is a question of fact); Dreher v. S.C. Dep't of Health & Envtl. Control, 412 S.C. 244, 251, 772 S.E.2d 505, 509 (2015) (stating whether a tract of land was “on and within” Folly Island, as defined under a regulation, was a question of fact).

In Bursey, the South Carolina Electric and Gas Company (SCE & G) planned to build a back-up dam on Lake Murray and contacted the Department of Health and Environmental Control (DHEC) to determine whether it was required to obtain a mine operating permit. 369 S.C. at 179, 631 S.E.2d at 901.

DHEC informed SCE & G no permit was necessary because the planned excavation did not fall within the definition of “mining” under the South Carolina Mining Act.² Id. In response to DHEC's determination, a resident filed an appeal with the Mining Council. Id. The Mining Council found SCE & G was required to obtain a mine operating permit because its planned activities constituted “mining” and did not fall within a statutory exception for “on-site” excavation.³ Id. Both the circuit court and this court affirmed, finding substantial evidence supported the Mining Council's decision that SCE & G's project required a permit. Id. at 184, 631 S.E.2d at 904.

On appeal to our supreme court, SCE & G argued our court erroneously applied the substantial evidence standard of review to a legal determination—whether SCE & G's project fell within an exception to the permitting requirements—rather than examining this determination for an error of law. Id. at 183, 631 S.E.2d at 903. Our supreme court disagreed, stating:

The question of whether SCE & G's activities on the project meet the exception to the permitting requirements carved out by the statute is a mixed question of fact and law. There is a question of law in determining the meaning of the term excavation in the exception. There is also a question of fact in determining whether SCE & G's activities in association with the project exceed the scope of the definition of excavation in the exception.

369 S.C. at 184–85, 631 S.E.2d at 904 (citations and internal quotation marks omitted). Thus, the supreme court determined “the issue of whether SCE & G's activity is excavation” was subject to the substantial evidence standard of review. Id. at 185, 631 S.E.2d at 904. Because substantial evidence supported the Mining Council's decision that SCE & G's activities “constituted mining and did not fall within the statutory exception [for excavation,]” the supreme court affirmed. Id. at 186, 631 S.E.2d at 905 (citing Dunton v. S.C. Bd. of Exam'rs in Optometry, 291 S.C. 221, 223, 353 S.E.2d 132, 133 (1987) (“The construction of a statute by the agency charged with its administration will be accorded the most respectful consideration and will not be overruled absent compelling reasons.”)).

Here, the Department of Revenue audited Boggero's transactions with her customers for the tax period January 1, 2009, through December 31, 2011, (the audit period) to determine whether the proceeds were “gross proceeds from the rental of portable toilets” and therefore subject to sales tax under subsection 12–36910(A) of the South Carolina Code (2014).⁴ As a result of this audit, the Department imposed sales tax on the “gross proceeds” from Boggero's portable toilet business. In response to Boggero's protest of the notice, the Department issued a determination, affirming the imposition of the tax. Boggero then requested a contested case hearing before the ALC. The question before the ALC was whether Boggero's “gross proceeds from the rental and servicing of portable toilets [were] subject to sales tax.” In answering this question in the affirmative, the ALC applied the “true object” test. The ALC determined “the true object of the transactions at issue is for the rental or lease of ... the portable toilets and other personal property provided.”

Boggero's sole issue on appeal is whether “[the ALC] erred in finding that the true object of [her] business was not a service and that [her] gross proceeds were therefore subject to the state sales and use tax.” In other words, the gross proceeds of her business were not subject to sales tax because the true object of her business is a service—the removal and disposal of human waste. To answer this question, we must first determine the proper standard of review from the ALC's decision.

Initially, we believe the dispute in this appeal is not primarily a question of statutory interpretation. Cf. CFRE, LLC v. Greenville Cnty. Assessor, 395 S.C. 67, 74, 716 S.E.2d 877, 881 (2011) (“Questions of statutory interpretation are questions of law, which we are free to decide without any deference to the court below.”). The parties agree that if the transactions at issue are a rental or lease of “tangible personal property,” the sales tax applies. See § 12–36–910(A) (“A sales tax ... of the gross proceeds of sales, is imposed upon every person ... in the business of selling tangible personal property at retail.”); S.C.Code Ann. § 12–36–90(1)(b)(ii) (2014) (defining “[g]ross proceeds of sales” as “the value proceeding or accruing from the sale, lease, or rental of tangible personal property”); S.C.Code Ann. § 12–36–100 (2014) (defining “[s]ale” as “any transfer ... of tangible personal property for a consideration including ... a rental, lease, or other form of agreement”). On the other hand, the parties agree that if the transactions are a service, the sales tax does not apply. See S.C.Code Ann. Regs. § 117–308 (2012) (“The receipts from services, when the services are the true object of the transaction, are not subject to the sales and use tax unless [inapplicable exceptions apply]”).

There is no dispute between the parties over the meaning of any terms used in the applicable taxing statutes. Cf. Sonoco Products Co. v. S.C. Dep't of Revenue, 378 S.C. 385, 391, 662 S.E.2d 599, 602 (2008) (implicitly applying a de novo standard of review when “[t]he ultimate decision in this case is dependent upon the Court's determination of the term ‘contiguous' within the meaning of [a statute]”). To the extent there is a question of statutory interpretation here, it most resembles the “mixed question of law and fact” present in Bursey. The source of contention in this appeal is whether Boggero's transactions with her customers during...