K Mart Corp., Inc. v. South Dakota Dept. of Revenue, No. 14283

CourtSupreme Court of South Dakota
Writing for the CourtWOLLMAN
Citation345 N.W.2d 55
PartiesK MART CORPORATION, INCORPORATED, Appellant, v. SOUTH DAKOTA DEPARTMENT OF REVENUE, Appellee.
Docket NumberNo. 14283
Decision Date07 March 1984

Page 55

345 N.W.2d 55
K MART CORPORATION, INCORPORATED, Appellant,
v.
SOUTH DAKOTA DEPARTMENT OF REVENUE, Appellee.
No. 14283.
Supreme Court of South Dakota.
Argued Jan. 17, 1984.
Decided March 7, 1984.

Page 56

John S. Lovald of Duncan, Olinger, Srstka, Lovald & Robbennolt, P.C., Pierre, for appellant.

Gene R. Woodle, Asst. Atty. Gen., Pierre, for appellee; Mark V. Meierhenry, Atty. Gen., Pierre, on brief.

WOLLMAN, Justice.

K Mart appeals from a judgment affirming an order of the South Dakota Department of Revenue (Department) requiring payment of use tax on advertising supplements for the period April 1974, through December 1977. We affirm.

The corporate and general office for K Mart is located at Troy, Michigan. K Mart was audited by an auditor for the Multistate Tax Commission for sales and use tax for the audit period of April 1, 1974, through December 31, 1977. During that time period there were K Mart outlets in Aberdeen, Rapid City, and Sioux Falls, South Dakota.

K Mart is involved in two different types of advertising programs that relate to newspaper supplements. One program, the national roto program, is participated in by all the K Mart outlets. Mat printouts are produced in Troy, Michigan, 1 and sent to a publisher with whom K Mart contracts for twenty-six or twenty-seven weeks out of the year to produce the four-color supplement used in the national roto program. The publisher, which is located in a state other than Michigan or South Dakota, receives a distribution list from K Mart which sets forth newspapers to which the publisher is to send particular national rotos.

The other program, the regional roto program, involves a two-color supplement that is printed locally. These rotos are distributed a maximum of between twenty-six or twenty-seven times a year and are intended to take up the slack when the national roto is not printed. The contract to print these regional rotos is between K Mart and the printer. The K Mart stores are free to elect not to use the regional rotos.

During the period of the audit, K Mart had advertising contracts with the Sioux Falls Argus Leader, the Rapid City Journal, and the Aberdeen American News for the delivery of the national and regional rotos as a part of their newspapers on an agreed day of each week. The Argus Leader discounted costs incurred by K Mart for printing and shipping the advertising supplements from the rate it charged for advertisements appearing within the sections printed by the newspaper. The newspapers had editing rights over the advertising.

The advertising and market director for the Sioux Falls Argus Leader testified that after the supplements are shipped by the printer to his newspaper's docks, the mail room personnel incorporate the supplements within the newspaper. He also testified that "by and large" the K Mart advertising supplements are distributed with the Argus Leader on Wednesdays and Sundays. The Argus Leader distributes advertising supplements for other firms on these days, and the single copy sales are substantially greater on these days as compared to other days of the week. Exhibits of representative national and regional rotos bear a newspaper logo preceded by the words "supplement to."

In addition to the rotos shipped to be inserted into newspapers, 500 rotos are shipped by the printer directly to each full-size K Mart store and 250 rotos are shipped to each smaller K Mart store. K Mart does not contend that these advertisements should not have been taxed.

Following a hearing, Department found a deficiency of $12,774, which was assessed against K Mart as a use tax pursuant to SDCL 10-46-2 which provides:

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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 Secs. 10-45-2 and 10-45-3 or amendment...

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20 practice notes
  • Maryland Pennysaver Group, Inc. v. Comptroller of Treasury, No. 120
    • United States
    • Court of Appeals of Maryland
    • September 1, 1990
    ...297, 624 S.W.2d 430 (1981); Caldor, Inc. v. Heffernan, 183 Conn. 566, 440 A.2d 767 (1981); K Mart Corp. v. South Dakota Dep't of Revenue, 345 N.W.2d 55 (S.D.1984); Wisconsin Dep't of Revenue v. J.C. Penney Co., 108 Wis.2d 662, 323 N.W.2d 168 Contra see Hadwen, Inc. v. Department of Taxes, 1......
  • Townley, Matter of, No. 15547
    • United States
    • Supreme Court of South Dakota
    • April 22, 1987
    ...Co. v. Aberdeen Housing and Redevelopment Comm'n, 320 N.W.2d 515 (S.D.1982), and K Mart Corp., Inc. v. South Dakota Dept. of Revenue, 345 N.W.2d 55 (S.D.1984), tax exemption statutes are construed strictly against the person claiming exemption. Exemptions are a matter of legislative grace a......
  • Appeal of K-Mart Corp., K-MART
    • United States
    • United States State Supreme Court of Kansas
    • December 6, 1985
    ...relies on a number of cases which have upheld the assessment of use tax on supplements. In K-Mart Corp. v. S.D. Dept. of Revenue, 345 N.W.2d 55 (S.D.1984), the court refused to recognize that advertising supplements are component parts of newspapers for tax exemption purposes. Cf. Caldor, I......
  • Dell Catalog Sales v. Taxation & Rev. Dept., No. 26,843.
    • United States
    • New Mexico Court of Appeals of New Mexico
    • June 3, 2008
    ...same circumstances have created several tests for determining "use." For example, in K Mart Corp. v. South Dakota Department of Revenue, 345 N.W.2d 55 (S.D.1984), the South Dakota Supreme Court held that the taxpayer used advertising materials "by virtue of its ownership of the supplements ......
  • Request a trial to view additional results
20 cases
  • Maryland Pennysaver Group, Inc. v. Comptroller of Treasury, No. 120
    • United States
    • Court of Appeals of Maryland
    • September 1, 1990
    ...297, 624 S.W.2d 430 (1981); Caldor, Inc. v. Heffernan, 183 Conn. 566, 440 A.2d 767 (1981); K Mart Corp. v. South Dakota Dep't of Revenue, 345 N.W.2d 55 (S.D.1984); Wisconsin Dep't of Revenue v. J.C. Penney Co., 108 Wis.2d 662, 323 N.W.2d 168 Contra see Hadwen, Inc. v. Department of Taxes, 1......
  • Townley, Matter of, No. 15547
    • United States
    • Supreme Court of South Dakota
    • April 22, 1987
    ...Co. v. Aberdeen Housing and Redevelopment Comm'n, 320 N.W.2d 515 (S.D.1982), and K Mart Corp., Inc. v. South Dakota Dept. of Revenue, 345 N.W.2d 55 (S.D.1984), tax exemption statutes are construed strictly against the person claiming exemption. Exemptions are a matter of legislative grace a......
  • Appeal of K-Mart Corp., K-MART
    • United States
    • United States State Supreme Court of Kansas
    • December 6, 1985
    ...relies on a number of cases which have upheld the assessment of use tax on supplements. In K-Mart Corp. v. S.D. Dept. of Revenue, 345 N.W.2d 55 (S.D.1984), the court refused to recognize that advertising supplements are component parts of newspapers for tax exemption purposes. Cf. Caldor, I......
  • Dell Catalog Sales v. Taxation & Rev. Dept., No. 26,843.
    • United States
    • New Mexico Court of Appeals of New Mexico
    • June 3, 2008
    ...same circumstances have created several tests for determining "use." For example, in K Mart Corp. v. South Dakota Department of Revenue, 345 N.W.2d 55 (S.D.1984), the South Dakota Supreme Court held that the taxpayer used advertising materials "by virtue of its ownership of the supplements ......
  • Request a trial to view additional results

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