National Food Corp. v. Aurora County Bd. of Com'rs
| Decision Date | 27 April 1995 |
| Docket Number | Nos. 18800,18815,s. 18800 |
| Citation | 537 N.W.2d 564 |
| Parties | NATIONAL FOOD CORPORATION, Appellee, v. The AURORA COUNTY BOARD OF COMMISSIONERS Acting as the Aurora County Board of Equalization, Appellant. . Considered on Briefs |
| Court | South Dakota Supreme Court |
John F. Cogley of Morgan, Theeler, Cogley & Petersen, Mitchell, for appellee.
Susan Steele, Aurora County State's Attorney, Plankinton, and Thomas H. Harmon of Tieszen Law Office, Pierre, for appellant.
County Board of Equalization assessed real property taxes on equipment of agricultural corporation operating large pullet-raising and egg-laying facilities. Corporation appealed to circuit court, which reversed the Board of Equalization. Aurora County appeals and we reverse.
National Food Corporation (National Food) owns a pullet-raising facility (East Farm) and an egg-laying and feed mill facility (West Farm) in Aurora County, South Dakota. The Director of Equalization assessed the value of the property in 1993 according to his own appraisal and an earlier one by an outside appraisal firm.
The 1993 real property tax assessment for the East Farm included a 30,000 gallon propane tank. The 1993 real property tax assessment for the West Farm included the following:
1. All machinery and equipment in the feed mill including a grain dryer, scalper, two load-out tanks located outside the building itself, a hammer mill, a roller mill, a corn auger, a distributor head and surge hopper and three motors of various sizes located in the head house above the main building. The items taxed at the feed mill also include a motor control center, several electrical panels, a weigh hopper and dump, load cells, a micromix, two two-ton mixers, an air compressor, a dust control system, various motors, a hydraulic system and 20 work tanks in the main building
2. Augers, conveyors and feed-handling equipment
3. An outside scale
4. A 20,000-gallon vertical tank
5. Grain dryer
6. Another scalper for finished feed
7. Three 5,000-bushel capacity hopper bins (wet tanks)
8. Two load-out tanks (overhead hopper bins) located over the scale.
National Food appealed to the circuit court, claiming the items were not taxable as real property and, even if they were taxable, the assessed values should be reduced for economic obsolescence.
The court found the work tanks and distributor head were an integral part of the building which could only be removed through the roof of the building at a cost of approximately $8,000.00. Therefore, the court found the work tanks and distributor head were real property. The court found the three hopper bins, the fat tank, and the two overhead tanks on the West Farm were permanently affixed to the land and taxable as real property. The court found the 30,000 gallon propane tank on the East Farm was affixed to the land and taxable as real property.
The court found the machinery and equipment in the main building of the feed mill and the header house were not constructed as "an integral part of or essential to the support of a building or structure" and concluded the remaining machinery and equipment used in the feed mill were personal property, including the scale, the grain dryer, and the scalper.
The court remanded to the Aurora County Board of Commissioners acting as the Aurora County Board of Equalization with directions to reassess the property. Aurora County appeals and we reverse.
SDCL 10-4-2 provides in part Real property, for the purposes of ad valorem taxation, includes the land itself, ... and improvements to the land, such as ditching, surfacing and leveling, and all rights and privileges thereto belonging[.] Real property also includes all buildings, structures and mobile homes, as defined in subdivision 32-3-1(8) which are permanently affixed by foundation to the land upon which they are located, including systems for the heating, air conditioning, ventilation, sanitation, lighting, and plumbing of such structures, buildings and mobile homes, and all rights and privileges thereto belonging, and trees.
. . . . .
Id. (emphasis added).
"[T]he question of whether a statute imposes a tax under a given factual situation is a question of law[.]" Thermoset Plastics, Inc. v. Dept. of Revenue, 473 N.W.2d 136, 138 (S.D.1991). "[S]tatutes which impose taxes are to be construed liberally in favor of the taxpayer and strictly against the taxing body." Id. (citation omitted). "Statutes exempting property [from] taxation should be strictly construed in favor of the taxing power." Id. at 139 (citation omitted). "The words in such statutes should be given a reasonable, natural, and practical meaning to effectuate the purpose of the exemption." Id. (citation omitted).
If property is a structure, then it is taxable as real property. SDCL 10-4-2. "Structure" is defined as:
Any construction, or any production or piece of work artificially built up or composed of parts joined together in some definite manner. That which is built or constructed; an edifice or building of any kind.
A combination of materials to form a construction for occupancy, use or ornamentation whether installed on, above, or below the surface of a parcel of land.
Black's Law Dictionary, 1424 (6th ed. 1990). The property and equipment in question, including the scale, the grain dryer and the scalper, are "structures" as that term is commonly used.
SDCL 43-1-3(2) defines "real property" as "[t]hat which is affixed to the land." A "thing affixed to the land" is something "permanently resting upon it, as in the case of buildings; or permanently attached to what is thus permanent, as by means of cement, plaster, nails, bolts, or screws." SDCL 43-33-1. In defining a "real property improvement" for purpose of the contractor's excise tax, we stated:
[S]ilos are placed upon farm land to promote the use for which the realty has been put. The construction of these silos onto a concrete slab with anchor bolts is taxable ... as a realty improvement.
Dakota Harvestore Systems, Inc. v. South Dakota Dept. of Revenue, 331 N.W.2d 828, 830 (S.D.1983). In discussing whether equipment can be "realty," we stated:
[T]he equipment could be moved, but frequent movement was not contemplated unless replacement was necessary. In this sense, the installations were permanent. The permanence required is not equated with perpetuity. It is sufficient if the item is intended to remain where affixed until worn out, until the purpose to which the realty is devoted is accomplished or until the item is superseded by another item more suitable for the purpose.
Brink Elec. Const. v. Dept. of Revenue, 472 N.W.2d 493, 499-500 (S.D.1991) ().
The grain tanks, water tanks and propane tank are "structures" under SDCL 10-4-2. Also, the water tanks and propane tanks are part of the plumbing and heating systems of the structures even if the tanks themselves were not deemed "structures." SDCL 10-4-2. The tanks are attached to concrete slabs by bolts so they are part of the real property and taxable as such. See SDCL 43-33-1. The wet tanks, fat tank, grain dryer, and both scalpers are bolted to concrete slabs so they are also real property. Id.; Brink, 472 N.W.2d at 500.
Since we conclude that these items are taxable as real property as "structures," it is not necessary to this decision to reach the second part of SDCL 10-4-2. However, we do so for the benefit of the public, the bench and the bar. Initially, we note that for items other than "buildings, structures, and mobile homes," the second part of SDCL 10-4-2 contains a three-part test for exclusion of items from taxation (as real property).
The second part of SDCL 10-4-2 provides in part:
... Real property does not include items which pertain to the use of such structures, buildings and mobile homes, such as tools, implements, machinery or equipment used in the business, production, trade or manufacturing activity conducted thereon which are not constructed as an integral part of and are not essential for the support of such structures, buildings or mobile homes, and which are removable without materially limiting or restricting the use of such structures, buildings or mobile homes, regardless of size, weight or method of attachment.
Id. (emphasis added). The items must pertain to the use of such structures and the parties stipulated to this fact. The conjunctive "and" indicates each part of the test must be satisfied for the exclusion to apply. See Black Hills Novelty Co., Inc. v. South Dakota Commission on Gaming, 520 N.W.2d 70, 74 (S.D.1994).
First, the items must not be constructed as an integral part of such structure. The court found those items not taxable were not an integral part of any taxable structure. However, this finding is somewhat inconsistent with other findings as discussed herein.
Second, the items must not be essential for the support of such structure. The court found the nontaxable items were not essential for the support of any structure. This finding is also somewhat inconsistent with other findings as discussed herein.
Third, the items must be removable without materially limiting or restricting "the use" of such structure. SDCL 10-4-2. "The use" of such structure is the use intended by the owner. Logan, 331 N.W.2d at 282-83. Here, "the use" intended by the owner on the West Farm is an egg-laying and feed mill operation.
Machinery normally is personal property and is not deemed a fixture except where it is installed in such manner that its removal will result in material injury to it or the realty, or where the building in which it is placed was specially designed to house it, or where there is other evidence that its installation was of a permanent nature.
Id. at 283 (citations omitted). The...
To continue reading
Request your trial
-
Sales and Use Tax Refund Request of Media One, Inc., Matter of
...be given a reasonable, natural, and practical meaning to effectuate the purpose of the exemption. National Food Corp. v. Aurora Cty. Bd. of Comm'rs, 537 N.W.2d 564, 566 (S.D.1995) (citing Thermoset Plastics, Inc. v. Department of Revenue, 473 N.W.2d 136, 138-39 (S.D.1991)); see also Estate ......
-
Accounts Management, Inc. v. Litchfield
...In re Tax Refund of Media One, Inc., 1997 SD 17, p 9, 559 N.W.2d 875, 877(construing SDCL 10-4-23); National Food Corp. v. Aurora County Bd. of Comm'rs., 537 N.W.2d 564, 566 (S.D.1995)(citing Thermoset Plastics, Inc. v. Dept. of Revenue, 473 N.W.2d 136, 138-39 (S.D.1991)); Whalen v. Whalen,......
-
Eurofresh, Inc. v. Graham County
...when the subject property enjoyed environmental attributes superior to the comparables. The issue in National Food Corp. v. Aurora County Board of Commissioners, 537 N.W.2d 564 (S.D.1995), was the valuation of heavy farm equipment taxed as real property. As the court held, quoting the tax b......
-
GRACELAND COLLEGE v. Dept. of Revenue
...should be given a reasonable, natural, and practical meaning to effectuate the purpose of the exemption. Nat'l Food Corp. v. Aurora Cty. Bd. of Comm'rs, 537 N.W.2d 564, 566 (S.D.1995) (citing Thermoset Plastics, Inc. v. Dep't of Revenue, 473 N.W.2d 136, 138-39 (S.D. 1991)); see also Estate ......