City of Lennox v. Wendell, 12311

Decision Date03 May 1979
Docket NumberNo. 12311,12311
Citation278 N.W.2d 635
PartiesCITY OF LENNOX, d/b/a Idle Hour Bar, Respondent, v. Lyle WENDELL, as Secretary of the Department of Revenue of the State of South Dakota, Appellant.
CourtSouth Dakota Supreme Court

Vance Goldammer, Sioux Falls, for respondent, Gary J. Pashby, Sioux Falls, on the brief.

Gene R. Woodle, Asst. Atty. Gen., Pierre, for appellant, William J. Janklow, Atty. Gen., Pierre, on the brief.

FOSHEIM, Justice (on reassignment).

This case involves the determination of sales tax due the state from the Idle Hour Bar (Bar), which is owned by the City of Lennox (City). The Department of Revenue (Department) audited the Bar for the three fiscal years from July, 1970 to June 1973, and the Secretary of Revenue (Secretary) ruled that $1,976.59 was due for the period between July, 1971 and June, 1973. The City appealed and the circuit court reversed. The Department claims: (1) That the appeal to the circuit court was not timely; and (2) that there was substantial evidence to support the Secretary's determination. We conclude that there is substantial evidence to support the Secretary's determination and therefore reverse and remand.

The City owns the Bar and employs a manager. In the summer of 1973, the Department audited the Bar's books for the preceding three fiscal years. The auditors accepted the Bar's sales tax return for July, 1970 to June, 1971, as correct, although the audit showed that the City might actually have paid more tax than was due. For the period between July, 1971 and June, 1973, the auditors and the Secretary determined that the City owed $1,976.59 in additional tax and penalty. The Department deducted this amount from funds due to the City.

The auditors arrived at this figure by estimating the return that should have been realized on items sold by the Bar. The auditors then multiplied this rate of return by the amount of inventory that the Bar had purchased during the applicable periods. The reason given for this audit method was that the Bar's records were too incomplete to serve as the basis for an audit. The Lennox City Auditor agreed on an average return realized per case of liquor, but there was apparently no allowance made for spillage, bartender error, breakage, spoiled beer or liquor, liquor given away, or other possible non-sales dispositions of inventory.

The Secretary's undated order was executed on or about July 26, 1976. The record does not indicate when, if ever, the order was served upon the City. The City filed its notice of appeal and served it upon the Secretary on August 20, 1976.

The Secretary's counsel stipulated in circuit court that the City's sales tax returns were prepared from certain of the Bar's records, and that the returns contained all receipts of which City financial officers had knowledge. The Secretary thus claims that certain receipts were never reported to the City's financial officers.

We first consider the issue of whether the appeal was timely. The Department contends that SDCL 10-45-32 requires the City to appeal within ten days of the Secretary's decision. That statute provides, however, for notification "by ordinary mail" in the same sentence. There is nothing on the record that would indicate when the Secretary notified the City of his decision. We believe that the ten-day period, if it is applicable, cannot begin to run until the day of notification. Because of this disposition, we do not reach the question of which statute governs this appeal.

We next consider the issue of whether the Secretary's determination is supported by substantial evidence. The nature of evidence necessary to meet this test has been well delineated in prior cases. See Dail v. S.D. Real Estate Comm'n, S.D., 257 N.W.2d 709 (1977); McKinnon v. State Banking Comm'n, 78 S.D. 407, 103 N.W.2d 179 (1960). This test requires us to consider all the evidence on the record in the light most favorable to the Secretary's determination. We may not substitute our judgment for that of the Secretary as to weight of evidence on questions of fact. SDCL 1-26-36. In addition, the Secretary's correction of an incorrect return is prima facie correct. SDCL 10-45-32. We may, however, reverse administrative determinations that are unsupported by all the evidence in the record. City of Brookings v. Dept. of Environmental Protection, S.D., 274 N.W.2d 887 (1979). The scope of review of the Secretary's decision on appeal to this court is the same as it was in the trial court. Piper v. Neighborhood Youth Corps., S.D., 241...

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2 cases
  • Karras v. State, Dept. of Revenue, 16394
    • United States
    • South Dakota Supreme Court
    • March 23, 1989
    ...resort to other available information and auditing techniques to determine whether a sales tax deficiency exists. See City of Lennox v. Wendell, 278 N.W.2d 635 (S.D.1979). In City of Lennox, this court was faced with a situation which was similar to that in the present case. There, the Depa......
  • State v. Ruttman, 20508
    • United States
    • South Dakota Supreme Court
    • March 24, 1999 he provided his employees and for waste that he claims was greater than that calculated by the department. In City of Lennox v. Wendell, 278 N.W.2d 635 (S.D.1979) we rejected a similar Although it does not appear that the Secretary gave any allowance for spillage, free drinks or brea......

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