BUTLER MACHINERY v. Dept. of Revenue, No. 22202.

CourtSouth Dakota Supreme Court
Writing for the CourtLOVRIEN, Circuit.
Citation2002 SD 134,653 N.W.2d 757
Decision Date06 November 2002
Docket NumberNo. 22202.
PartiesBUTLER MACHINERY COMPANY, Appellant, v. SOUTH DAKOTA DEPARTMENT OF REVENUE, Appellee.

653 N.W.2d 757
2002 SD 134

BUTLER MACHINERY COMPANY, Appellant,
v.
SOUTH DAKOTA DEPARTMENT OF REVENUE, Appellee

No. 22202.

Supreme Court of South Dakota.

Considered on Briefs May 28, 2002.

Decided November 6, 2002.


653 N.W.2d 758
Ronald G. Schmidt of Schmidt, Schroyer & Moreno, Pierre, South Dakota, Attorneys for appellant

Michael T. Kenyon, South Dakota Department of Revenue, Pierre, South Dakota, Attorney for appellee.

653 N.W.2d 759
LOVRIEN, Circuit Judge

[¶ 1.] Butler Machinery (Butler) appeals a Department of Revenue (DOR) ruling that it must pay use tax on the parts that it uses to repair and maintain its rental fleet. We affirm.

FACTS AND PROCEDURAL HISTORY

[¶ 2.] Butler's business is the sale, lease, and repair of heavy construction equipment. Under the lease agreements it has with its customers, Butler must maintain the leased equipment. To make these repairs, Butler purchases repair parts from its suppliers. Butler does not pay sales tax on these parts at the time of purchase. As equipment needs to be repaired, Butler takes these parts out of inventory and uses them to repair the leased equipment. It is this transaction that the DOR claims is subject to the payment of a use tax by Butler.1

[¶ 3.] In computing its rental charges, Butler includes its anticipated repair costs for the equipment. Butler pays sales tax on its rental income. Butler's typical rental agreement requires the lessee to maintain the equipment and provide all maintenance items such as fuel, oil, filters, etc. during the term of the lease. Butler does not pay sales tax on these maintenance items.

[¶ 4.] Pursuant to the terms of its typical rental agreement, Butler must provide the customer with equipment in good operating condition and make all repairs, except those specified. Butler's technicians service the rental equipment before it is delivered to a customer, including filling the compartments with the various fluids (oil, grease, wiper fluid, etc.) as necessary. If a customer returns equipment to Butler needing fluids, the company charges that customer for the fluids, plus sales tax.

[¶ 5.] DOR determined Butler was required to pay a use tax on repair and maintenance parts installed in its rental fleet. Butler filed an administrative appeal and the hearing examiner upheld DOR's determination. The matter was appealed to the circuit court which also affirmed DOR's determination.2 The question on appeal is whether Butler is required to pay use tax on the repair parts and maintenance items installed in its rental fleet? We conclude that it is.

STANDARD OF REVIEW

[¶ 6.] The standard of review in tax matters is well settled in South Dakota:

The question of whether a statute imposes a tax under a given factual situation is a question of law. Statutes which impose taxes are to be construed liberally in favor of the taxpayer and strictly against the taxing body. Statutes exempting property from taxation should be strictly construed in favor of the taxing power. The words in such statutes should be given a reasonable, natural, and practical meaning to effectuate the purpose of the statute. Matter of Sales & Use Tax Refund Request of Media One, Inc., 1997 SD 17, ¶ 9, 559 N.W.2d 875, 877; National Food Corp. v. Aurora County Board of Commissioners, 537 N.W.2d 564, 566 (S.D.1995); Thermoset Plastics, Inc. v. Dept. of Rev., 473 N.W.2d 136, 138-39 (S.D.1991). "Whether a statute imposes a tax under
653 N.W.2d 760
a given factual situation is a question of law and thus no deference is given to any conclusion reached by the Department of Revenue or the circuit court." Dept. of Rev. v. Sanborn Tel. Coop., 455 N.W.2d 223, 225 (S.D.1990) (alterations in original) (quoting Midcontinent Broadcasting Co. v. Dept. of Rev., 424 N.W.2d 153, 154 (S.D.1988)).

Robinson & Muenster Associates, Inc. v. South Dakota Dept. of Rev., 1999 SD 132, ¶ 7, 601 N.W.2d 610, 612.

ANALYSIS AND DECISION

[¶ 7.] South Dakota imposes a tax on tangible personal property purchased for use in this state. SDCL 10-46-2 provides:

An excise tax is hereby imposed on the privilege of the use, storage, and consumption in this state of tangible personal property purchased on or after July 1, 1939, for use in this state at the same rate of percent of the purchase price of said property as is imposed by §§ 10-45-2 and 10-45-3 [retail sales and service tax] or amendment which may hereafter be made thereto.

The use referred to in SDCL 10-46-2 is defined as "the exercise of right or power over tangible personal property incidental to the ownership of that property, except that it does not include the sale of that property in the regular course of business." SDCL 10-46-1(12). It is the...

To continue reading

Request your trial
14 practice notes
  • State v. DeLaRosa, No. 22231
    • United States
    • Supreme Court of South Dakota
    • February 12, 2003
    ...drug sniff. As in Ballard, the Court should be sensitive to the "dubious message we send to law enforcement officers and the public," 2002 SD 134 ¶ 18, 617 N.W.2d at 842, by saying that an officer need only withhold the fact that the citizen is free to end the encounter in order to justify ......
  • Citibank, N.A. v. S.D. Dep't of Revenue, #26933
    • United States
    • Supreme Court of South Dakota
    • July 29, 2015
    ...favor of the taxpayer and strictly against the taxing body.'" Id. (quoting Butler Mach. Co. v. S.D. Dep't of Revenue, 2002 S.D. 134, ¶ 6, 653 N.W.2d 757, 759).[¶8.] But we have consistently required strict compliance with statutes of limitation. Jorgensen Farms, Inc. v. Country Pride Corp.,......
  • Citibank, N.A. v. S.D. Dep't of Revenue, No. 26933.
    • United States
    • Supreme Court of South Dakota
    • July 29, 2015
    ...of the taxpayer and strictly against the taxing body.’ ” Id. (quoting Butler Mach. Co. v. S.D. Dep't of Revenue, 2002 S.D. 134, ¶ 6, 653 N.W.2d 757, 759 ). [¶ 8.] But we have consistently required strict compliance with statutes of limitation. Jorgensen Farms, Inc. v. Country Pride Corp., 2......
  • PRAIRIE HILLS WATER v. Gross, No. 22135.
    • United States
    • South Dakota Supreme Court
    • November 6, 2002
    ...Because Covenant # 11 runs with the land, its attorney fee provision is enforceable against subsequent grantees like Jim Gross and Linda 653 N.W.2d 757 Paulson, even though they are not in privity with the original [¶ 48.] We do, however, agree with Grosses' final contention that even if Co......
  • Request a trial to view additional results
14 cases
  • State v. DeLaRosa, No. 22231
    • United States
    • Supreme Court of South Dakota
    • February 12, 2003
    ...drug sniff. As in Ballard, the Court should be sensitive to the "dubious message we send to law enforcement officers and the public," 2002 SD 134 ¶ 18, 617 N.W.2d at 842, by saying that an officer need only withhold the fact that the citizen is free to end the encounter in order to justify ......
  • Citibank, N.A. v. S.D. Dep't of Revenue, #26933
    • United States
    • Supreme Court of South Dakota
    • July 29, 2015
    ...favor of the taxpayer and strictly against the taxing body.'" Id. (quoting Butler Mach. Co. v. S.D. Dep't of Revenue, 2002 S.D. 134, ¶ 6, 653 N.W.2d 757, 759).[¶8.] But we have consistently required strict compliance with statutes of limitation. Jorgensen Farms, Inc. v. Country Pride Corp.,......
  • Citibank, N.A. v. S.D. Dep't of Revenue, No. 26933.
    • United States
    • Supreme Court of South Dakota
    • July 29, 2015
    ...of the taxpayer and strictly against the taxing body.’ ” Id. (quoting Butler Mach. Co. v. S.D. Dep't of Revenue, 2002 S.D. 134, ¶ 6, 653 N.W.2d 757, 759 ). [¶ 8.] But we have consistently required strict compliance with statutes of limitation. Jorgensen Farms, Inc. v. Country Pride Corp., 2......
  • PRAIRIE HILLS WATER v. Gross, No. 22135.
    • United States
    • South Dakota Supreme Court
    • November 6, 2002
    ...Because Covenant # 11 runs with the land, its attorney fee provision is enforceable against subsequent grantees like Jim Gross and Linda 653 N.W.2d 757 Paulson, even though they are not in privity with the original [¶ 48.] We do, however, agree with Grosses' final contention that even if Co......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT