Books-A-Million, Inc. v. S.C. Dep't of Revenue, 28110

CourtUnited States State Supreme Court of South Carolina
Writing for the CourtHEARN JUSTICE:
PartiesBooks-A-Million, Inc., Petitioner, v. South Carolina Department of Revenue, Respondent. Appellate Case No. 2020-001102
Docket Number28110
Decision Date14 September 2022

Books-A-Million, Inc., Petitioner,

South Carolina Department of Revenue, Respondent.

Appellate Case No. 2020-001102

No. 28110

Supreme Court of South Carolina

September 14, 2022

Heard November 8, 2021

Appeal from the Administrative Law Court John D. McLeod, Administrative Law Judge


Burnet Rhett Maybank, III and James Peter Rourke, both of Nexsen Pruet, LLC, of Columbia, for Petitioner.

Sean Gordon Ryan and Adam J. Neil, both of Columbia, for Respondent.

Anthony E. Rebollo, Benjamin Palmer Carlton, Carmen Vaughn Ganjehsani, of Richardson Plowden &Robinson, P.A., of Columbia, for Amici Curiae Warehouse Home Furnishings Distributors, Inc.



For $25 per year, customers of Books-A-Million can become members in the "Millionaire's Club" to receive retail discounts. These memberships became the subject of a tax audit by the South Carolina Department of Revenue ("Department") and, as a result, Books-A-Million ("Taxpayer") was assessed nearly a quarter-of-a-million dollars in back taxes. The Administrative Law Court ("ALC") agreed with the Department's assessment, and the court of appeals affirmed on the grounds that the "proceeding or accruing" language of our sales tax act includes the returns from Millionaire's Club sales. We granted certiorari and affirm.


Books-A-Million is a retail bookstore operating thirteen locations throughout South Carolina. In 2015, the South Carolina Department of Revenue audited three years of Books-A-Million's financial records and discovered that no sales tax was being charged on Millionaire's Club memberships. The Department thereafter issued a Notice of Proposed Assessment for $242,076.97[1] in unpaid sales tax.

Taxpayer was granted a contested hearing before the ALC, which upheld the assessment because, under South Carolina law, the sales of intangible memberships can be taxable if their value originates from the sale of taxable goods. Taxpayer then appealed to the court of appeals which affirmed. See Books-A-Million, Inc. v. S.C. Dep't of Revenue, 430 S.C. 388, 844 S.E.2d 399 (Ct. App. 2020). Both courts held that the pertinent language of "value proceeding or accruing" from the definition of "gross proceeds of sales" was inclusive of Taxpayer's Millionaire's Club membership fees because the language included value related to sales, not merely the value of the sales themselves. See id.; S.C. Code Ann. § 12-36-90 (2014 &Supp. 2021).


Did the court of appeals err in concluding that Books-A-Million's "Millionaire's Club" membership fees were subject to sales tax under South Carolina law?



Taxpayer argues that its sales of Millionaire's Club memberships are not taxable under South Carolina's sales tax because the language of the statute excludes it. The Department contends that our tax code contemplates value not just from sales of tangible goods, but from related costs because of the language "proceeding or accruing" as well as the jurisprudence of this Court. We agree with the Department.

We review questions of statutory interpretation de novo. See Centex Int'l. v. S.C. Dep't of Revenue, 406 S.C. 132, 139, 750 S.E.2d 65, 69 (2013). Tax statutes are to be interpreted like any other statutes. Alltel Commc'ns, Inc. v. S.C. Dep't of Revenue, 399 S.C. 313, 319-20, 731 S.E.2d 869, 872 (2012) (holding, "[t]he usual rules of statutory construction apply to the interpretation of tax statutes"). We note that "the cardinal rule of statutory construction is to ascertain and effectuate the intent of the legislature." Charleston Cnty. Sch. Dist. v. State Budget &Control Bd., 313 S.C. 1, 5, 437 S.E.2d 6, 8 (1993). Because "the best evidence of legislative intent is the text of the statute[,]" we turn our focus to the words used. See Creswick v. Univ. of S.C., 434 S.C. 77, 82, 862 S.E.2d 706, 708 (2021).

In South Carolina, individuals who are engaged in the sale of tangible personal property must pay five percent of the gross proceeds of their sales in taxes. S.C. Code Ann. § 12-36-910(A) (2014). The statute defines tangible personal property as "personal property which may be seen, weighed, measured, felt, touched, or which is in any other manner perceptible to the senses." Id. § 12-36-60 (2014). "Gross proceeds of sales" is defined as "the value proceeding or accruing from the sale, lease, or rental of tangible personal property." Id. § 12-36-90. (emphasis added).

While the membership in question is itself intangible, Taxpayer is liable for sales tax generally because it is engaged in the sale of tangible personal property through the sales of books and other merchandise. The question then is whether the language "value proceeding or accruing from" subjects the bookstore to sales tax on Millionaire's Club memberships. This turns on the relationship between the membership and the sale in question.

Within the relevant statutory language, the term "proceeding" is critical. When used as an intransitive verb as it is in the statute, Merriam-Webster defines "proceed" to mean "to come forth from a source." See Proceed, Merriam-Webster Online, (last visited November 21, 2021) (listing synonyms of proceed as, "spring, arise, rise, originate, derive, flow,


emanate, proceed, stem [which all] mean to come up or out of something into existence." Further delineating the term by saying "proceed stresses place of origin, derivation, parentage, or logical cause"). For a monetary value to proceed from something, the value must come from it. Here, the value of the club memberships originates from the sale of taxable goods because the only benefit to buying the Millionaire's Club membership is discounts on taxable transactions. [2] Books-A-Million does not require membership for entry into its stores, nor does the membership give any proprietary rights such as advanced purchasing. The only difference between a Millionaire's Club membership holder and the general public is that members pay less per purchase of books and merchandise because they have opted to pay $25 per year to Taxpayer. Allowing Books-A-Million to avoid sales tax on the discounted amount because it has received payment from its customers on a yearly instead of a per-purchase basis would be contrary to the South Carolina tax code. This Court has interpreted our tax code to have broad language which inextricably links value to sales. See Travelscape, LLC v. S.C. Dep't of Revenue, 391 S.C. 89, 97, 705 S.E.2d 28, 32 (2011) (finding hotel fees, charged by the taxpayer exclusively for services, were subject to sales tax under the plain language of section 12-36-920(A) as gross proceeds because the service was incidental to the purchase of accommodations). Here, the ALC recognized this broad interpretation in holding:

South Carolina courts have analyzed the definition of gross proceeds of sales several times and have concluded that gross proceeds of sales includes all value that comes from or is [the] direct result of the sale, lease, or rental of tangible personal property

Other states have unique statutory language that yields different results. In Barnes &Noble v. Huddleston, the Tennessee court of appeals, in an unpublished decision, concluded a bookstore's discount membership was nontaxable. See 1996 WL 596955 (Tenn. Ct. App. 1996). While the facts are similar, the statute involved is not. The Tennessee provision applied a six-percent sales tax to the total "sales price." See Tenn. Code Ann. § 67-6-202(a). The statute defines "sales price" as "the total amount for which a taxable service or tangible personal property is sold... provided, that cash discounts allowed and taken on sales shall not be included.."


Tenn. Code Ann. § 67-6-102(25) (1994). This significant difference from our state's "proceeding or accruing language" language led to a different result. In Tennessee, the legislature specifically sought to calculate the tax base as a number exclusive of discounts. In South Carolina, the legislature tied together taxable tangible goods with related intangible assets. Therefore, South Carolina's legislative intent is distinguishable from Tennessee's.

In its brief and in oral argument, counsel for Books-A-Million attempted to bolster its case by arguing that certain "big box" stores are not being taxed on their memberships. While these "conditional retail" and/or "members-only warehouses" are likely not being taxed on their membership sales, the Department declined to confirm or deny this-ostensibly due to taxpayer confidentiality-but proceeded to accept this proposition arguendo. Justice Kittredge's dissent[3] would have us treat this hypothetical admission as the dispositive fact in the case. Whether these stores are actually suffering this alleged disparate treatment is not at issue for the Court to decide today. Rather, we are asked to determine whether our sales tax statute permits the Department to tax Books-A-Million on their Millionaire's Club memberships. To be clear, in reaching our conclusion that these memberships are subject to sales tax, we do so based on our view of statutory interpretation, not based on any deference to the Department. We leave the taxability of these other entities for another day.[4]


Books-A-Million also invites us to compare significantly different businesses such as golf courses, zoos, museums, and grocery stores, painting a bleak picture of the havoc[5] which would ensue if the Department's position were affirmed. We disagree because with Millionaire's Club memberships the only thing that members receive is a discount on taxable retail sales.

The generic private golf club charges a membership fee as a requirement to play on its course or buy items in its pro shop. This is a conditional retail agreement whereby the membership provides...

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