Brink Elec. Const. Co. v. State, Dept. of Revenue, 17026

CourtSupreme Court of South Dakota
Citation472 N.W.2d 493
Docket NumberNo. 17026,17026
Decision Date26 June 1991

Robert A. Warder, Hill City, for appellant.

John Dewell, Asst. Atty. Gen., Pierre, for appellee; Roger A. Tellinghuisen, Atty. Gen., on brief.

KONENKAMP, Circuit Judge.

Brink Electric Construction Company (Brink) appeals from a judgment dismissing its complaint seeking declaratory relief from contractors' excise tax and use tax imposed in connection with three fixed price construction contracts it performed for the United States. We affirm.

Brink entered into two contracts with the Western Area Power Administration (WAPA), an agency of the United States Department of Energy, and one with the Department of Defense. We describe these contracts in detail below, because the nature of the work performed bears directly on the questions presented here.

Maurine Substation: A contract for replacing equipment and constructing an addition to an electrical substation near Maurine, South Dakota, dated January 9, 1987. The forward to the specifications provided:

The work includes regrading and extending the existing yard and providing electrical equipment for the 230-kV/115-kV interconnection with associated concrete foundations and cable trench; steel structures; metering, relaying, and control equipment; bus systems; and grounding, conduit and insulated cable. The work also includes reroofing and painting the service building.

Ellsworth Air Force Base: A contract awarded August 10, 1987, for repair and replacement of primary electric cable at Ellsworth Air Force Base. The contract provided:

The work consists of trenching, pushing under roadways, installing manholes and duct lines, setting pad mounted transformers, pulling in primary and secondary cable, and making high voltage connections. The contractor must set poles, change out overhead transformers, run overhead primary, convert service entrances, and install pole top switches and metering assemblies.

Flandreau Substation: A contract for building an electrical substation near Flandreau, South Dakota, awarded May 19, 1988. The last bid solicitation was March 3, 1988, with a bid opening on March 22, 1988. The specifications summarized the work as follows:

The work includes removing concrete foundations, steel structures, existing service building, chain link and barbed wire fencing. Clearing, stripping, and excavation for substation site and access road; corrugated metal and corrugated polyethylene pipe; foundations for steel structures, electrical equipment, and service building; cable trenches; galvanized welded steel structures and modifying existing steel structures; Western-furnished power circuit breakers, duplex switchboard sections, and station battery system; furnishing and installing disconnecting switches, fuse-disconnecting switches; voltage transformers, outdoor slip-over bushing-type current transformers, coupling capacitor voltage transformers, and surge arresters; station service distribution transformer, outdoor AC distribution panelboards, and manual transfer switch; grounding system, conduit, insulated conductors and cables, bus system, substation lighting and substation signs, and indoor dc and ac distribution panelboards. 28 ft. X 50 ft. service building.

Brink did not include contractors' excise tax in its bids, because it believed the tax was inapplicable to contracts with the Federal Government. Brink contends that contractors' excise tax may have been applicable to such contracts between 1979 and 1984, but the South Dakota Legislature excluded contracts with the United States in 1984, and then in 1988 re-established the tax on such contracts making it retroactive to 1984.


In 1979 the South Dakota Legislature created a contractors' excise tax on the gross receipts of "Prime contractors and subcontractors engaged in realty improvements contracts...." SDCL 10-46A-2. Since then the Department of Revenue (Department) regularly sent licensees and applicants for licenses bulletins and newsletters, outlining their obligations under this law. Brink obtained its tax license from the Department in 1979.

In 1984 the legislature amended these tax laws in an enactment entitled "An Act to exempt subcontractors from the contractors' excise tax, to increase the tax rate, to exempt certain utility construction contracts and to declare an emergency." 1984 S.D. Session Laws Ch. 92, § 7. Among other things, prime contractors were redefined: "For the purpose of this chapter, a prime contractor is a person entering into a realty improvement contract with another person as defined in § 2-14-2.... (emphasis added). SDCL 10-46A-2.2. SDCL 2-14-2(16) defines person as follows: " 'Person' includes natural persons, partnerships, associations, and corporations...."

In 1988 the legislature in an amendment entitled in part "an act to revise the definition of person" changed SDCL 10-46A-2.2 to delete the phrase "another person as defined in § 2-14-2" and replaced it with the following:

For the purpose of this chapter, a prime contractor is a person entering into a realty improvement contract with the United States and its instrumentalities, the state of South Dakota and its subdivisions, or any other state or public corporation, or person as defined in Section 10-45-1. (emphasis added).

1988 S.D. Session Laws Ch. 120, § 3. The 1988 amendment contained an emergency clause making it effective on February 29, 1988 and, in addition, made it applicable to all realty improvement contracts bid or entered into after April 30, 1984, which was the applicable date for the 1984 enactment. 1988 S.D. Session Laws Ch. 120, §§ 4, 5.

The original 1979 enactment made no specific reference to government contracts it simply made no distinction between private or public entities. In 1984, however, the legislature introduced the term "another person" in detailing what types of contracts the tax applied to. Brink argues that the 1984 amendment intended to exempt from excise tax, prime contractors performing work for the United States, because the Federal Government is not a person. To correct this apparent oversight, the legislature in 1988 revised the statute to include specifically contracts with the United States. Brink argues that by making the 1988 amendment applicable to contracts bid or entered into after April 30, 1984, the effect was to impose retroactively a tax where none had existed for four years.

The Department contends that the 1984 amendment never excluded contracts with federal agencies, because the statute defining "person" used the word "including." We have held before that "the term 'including' is not one of all-embracing definition, but connotes simply an illustrative application of the general principle". Argo Oil Corporation v. Lathrop, 76 S.D. 70, 72 N.W.2d 431, 434 (1955), quoting Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95, 96, 62 S.Ct. 1, 4, 86 L.Ed. 65, 70 (1941). "It is hornbook law that the use of the word 'including' indicates that the specified list ... is illustrative, not exclusive." Puerto Rico Maritime Shipping Authority v. I.C.C., 645 F.2d 1102, 1112, n. 26 (D.C.Cir.1981); contra Schauf v. City of New York, 23 Misc.2d 585, 198 N.Y.S.2d 435 (1960).

Can the term "including" expand the definition of person to encompass governments? Corporations, partnerships and associations have traditionally been categorized as persons for legal purposes, but the words "person or corporation" do not ordinarily mean a sovereign government. Southern Union Gas Co. v. New Mexico Pub. Serv. Com'n, 82 N.M. 405, 482 P.2d 913 (1971). Congress has by statute either included or excluded governments in its definition of the word. See, e.g., 15 U.S.C. § 77b(2) ("Person" means a government or political subdivision thereof); 11 U.S.C. § 101(30) ("Person" does not include a governmental unit). Likewise, if South Dakota had wanted to include contracts with government agencies in the excise tax laws, it could have easily done so. The legislature specifically included government entities in other tax laws. See, e.g., SDCL 10-46-1(8) (Use tax: "Person" includes the state and municipal corporations. Repealed in 1987); SDCL 10-45-1(3) (Sales tax: "Person" includes municipal corporations.)

The failure to include the United States and the states in the definition could not have been inadvertent. The United States and the several states of the Union are not persons, and are not commonly thought of as persons, and if it had been intended that "persons" should have such a comprehensive and unusual meaning as to include them, the framers of the definition would have said so.

Davis v. Pringle, 1 F.2d 860, 863 (4th Cir.1924).

Yet no absolute rule of exclusion exists. A different interpretation may, as Justice Frankfurter wrote, be

drawn from the structure of the Act, its legislative history, the practice under it, and the past judicial expressions.... Whether the word "person" or "corporation" includes a State or the United States depends upon its legislative environment. Ohio v. Helvering, 292 U.S. 360, 370, 78 L ed 1307, 1310, 54 S Ct 725 . The Cooper Corp. Case recognized that "there is no hard and fast rule of exclusion. The purpose, the subject matter, the context, the legislative history, and the executive interpretation of the statute are aids to construction which may indicate an intent, by the use of the term, to bring state or nation within the scope of the law." [U.S. v. Cooper Corporation ] 312 U.S. at 604, 605, 85 L ed 1074, 1075, 61 S Ct 742 [743, 744]. (emphasis added).

Georgia v. Evans, 316 U.S. 159, 161, 62 S.Ct. 972, 973, 86 L.Ed. 1346 (1942).

The Department argues that the legislative intent in 1984 was not to...

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