Northwestern Public Service Co. v. Housing and Redevelopment Com'n of City of Aberdeen, No. 13469

CourtSouth Dakota Supreme Court
Writing for the CourtMORGAN; WOLLMAN; HENDERSON; HENDERSON
Citation320 N.W.2d 515
PartiesNORTHWESTERN PUBLIC SERVICE COMPANY, Plaintiff and Appellee, v. The HOUSING AND REDEVELOPMENT COMMISSION OF the CITY OF ABERDEEN, a. k. a. Aberdeen Housing Authority, Defendant and Appellant, and The Department of Revenue of the State of South Dakota, Defendant and Appellee.
Decision Date09 June 1982
Docket NumberNo. 13469

Page 515

320 N.W.2d 515
NORTHWESTERN PUBLIC SERVICE COMPANY, Plaintiff and
Appellee,
v.
The HOUSING AND REDEVELOPMENT COMMISSION OF the CITY OF
ABERDEEN, a. k. a. Aberdeen Housing Authority,
Defendant and Appellant,
and
The Department of Revenue of the State of South Dakota,
Defendant and Appellee.
No. 13469.
Supreme Court of South Dakota.
Argued Oct. 22, 1981.
Decided June 9, 1982.

Alan D. Dietrich, Huron, for plaintiff and appellee.

Charles B. Kornmann of Richardson, Groseclose, Kornmann, Wyly, Wise & Klinkel, Aberdeen, for defendant and appellant.

Joe Nadenicek, Asst. Atty. Gen., Pierre, for defendant and appellee; Mark V. Meierhenry, Atty. Gen., Pierre, on brief.

MORGAN, Justice.

This appeal arises from a declaratory judgment which required appellant, Housing and Redevelopment Commission of Aberdeen (HRC), to pay a gross receipts tax on its purchase of electricity from Northwestern Public Service (NWPS). HRC appeals, arguing that it is exempt from payment of such a gross receipts tax by SDCL 10-45-10 and 11-7-72. We affirm the trial court's ruling that HRC is not exempt from payment of the tax by these provisions. 1

HRC, which qualifies as a municipal corporation, owns a 75-unit apartment building and several single-family dwellings in Aberdeen. These units are obtained, operated and rented under the provisions of SDCL ch. 11-7 to provide housing to low-income families. Under SDCL 11-7-73, HRC makes payments in lieu of property and sales taxes owed to local governmental units. These payments, however, are not made in lieu of HRC's obligation for the State's gross receipts tax.

NWPS sells electrical energy to HRC. The State informed NWPS that HRC was not exempt from the imposition of a gross receipts tax on this transaction. Although NWPS added the tax to its charges, HRC refused to remit these amounts for the period from July 1979 until the present.

Page 516

NWPS, however, remitted the payments to the State.

Apparently, the amount of electricity used by HRC at the 74-unit apartment building is measured by a single meter. Thus, there is no way to determine how much electricity is used in the common areas as opposed to the individual apartments. Tenants, however, pay charges for the presence of certain electrical appliances in each of its dwellings. Each apartment tenant using a car plug-in is assessed an additional $25.00 per year; if the tenant uses a freezer $2.00 per month is added to the rent, and an air conditioner costs the apartment tenant $25.00 per year. Family dwellings are assessed slightly different rates; car plug-in privileges cost $25.00 per year, freezers $2.00 per month, each refrigerator costs $5.00 per month, and an air conditioner results in an additional assessment of $40.00 per year.

Absent a specific exemption, HRC is liable for the economic incidence of the gross receipts tax on NWPS' sale of electricity to HRC. 2 See South Dakota State Medical Association v. Jones, 82 S.D. 374, 146 N.W.2d 725 (1966). HRC argues that SDCL 10-45-10 grants it tax-exempt status as a municipal corporation. Since the State concedes that HRC is a municipal corporation, our analysis of SDCL 10-45-6 depends on whether "tangible personal property" includes the sale of electricity.

Because SDCL 10-45-10 is a tax exemption, the words "tangible personal property" are strictly and narrowly construed in favor of the taxing power and given a reasonable, natural and practical meaning to effectuate the purpose for which the exemption was granted. Application of Veith, 261 N.W.2d 424 (S.D.1978); C. A. Wagner Const. Co. v. City of Sioux Falls, 71 S.D. 587, 27 N.W.2d 916 (1947); State v. Knudtson, 65 S.D. 547, 276 N.W. 150 (1937). Cf. Nash Finch Co. v. South Dakota Dept. of Rev., 312 N.W.2d 470 (S.D.1981) (tax imposition statutes construed liberally to benefit the taxpayer). For the purposes of the use tax, tangible personal property includes gas and electricity. SDCL 10-46-1(5). Unless the legislature intended a different meaning, we are bound by this definition. SDCL 2-14-4. The plain intent to supply a different meaning is evidenced by the legislature's 1979 amendment to SDCL 10-45-10 and its dichotomous treatment concerning exemption of and liability for different types of business transactions.

Exemptions are based on public policy and should be construed to effectuate this policy. East River Legal Services v. State, Etc., 303 N.W.2d 375 (S.D.1981). The applicable public policy is determined by what the legislature said, not what they might have said. National College of Business v. Pennington County, 82 S.D. 391, 146 N.W.2d 731 (1966). In 1979 the legislature enacted an amendment to SDCL 10-45-10 which added the words "tangible personal property." Before 1979, these words of qualification did not appear in the statute. Additionally, the act which amended SDCL 10-45-10 expressly declared that its public purpose was to "broaden the base of the sales tax." S.D.Sess.L. ch. 84 at 106 (1979). To read "tangible personal property" as appellant urges is to narrow the tax base and annul the legislature's express intent.

Moreover, the provisions of SDCL ch. 10-45 demonstrate that the legislature treats the sale of tangible personal property, services and electricity as different taxable transactions. SDCL 10-45-2 applies to the sale of tangible personal property. SDCL 10-45-4 taxes business services. SDCL 10-45-6 places a tax on the sales, furnishing or service of electricity. Although each type of transaction corresponds with specifically worded provisions imposing the gross receipts tax, only the sale of business services and tangible personal property are referred to in the exemption provisions. The legislature has never used the words "sales, furnishing or service of ... electricity" in any provision granting

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an exemption. With regard to the sales of tangible personal property and business services, however, the legislature has enacted correlative exemption provisions. SDCL 10-45-10, -20. Since the legislature has...

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9 practice notes
  • Townley, Matter of, No. 15547
    • United States
    • Supreme Court of South Dakota
    • 22 Abril 1987
    ...for PAI under either SDCL 10-45-12.1 or SDCL 10-44-8. Under Northwestern Public Service 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 strict......
  • Sales Tax Liability of Valley Queen Cheese, Matter of, No. 15148
    • United States
    • Supreme Court of South Dakota
    • 18 Marzo 1986
    ...generally construed in favor of the taxpayer, while tax exemption statutes are construed against the taxpayer. N.W.S.P. v. Housing, Etc., 320 N.W.2d 515 (S.D.1982); Nash Finch Co. v. South Dakota Department of Revenue, 312 N.W.2d 470 We agree with the opinion the circuit court expressed in ......
  • K Mart Corp., Inc. v. South Dakota Dept. of Revenue, No. 14283
    • United States
    • Supreme Court of South Dakota
    • 7 Marzo 1984
    ...natural, and practical meaning to effectuate the purpose of the exemption. Northwestern Pub. Serv. Co. v. Housing and Redev. Comm'n, 320 N.W.2d 515 Although the taxation statutes do not define "newspaper," 2 several definitions can be found in the case law of other jurisdictions. After revi......
  • State and City Sales Tax Liability of Quality Service Railcar Repair Corp., Matter of, No. 16101
    • United States
    • Supreme Court of South Dakota
    • 14 Octubre 1988
    ...exemption was granted. K Mart Corp. v. S.D. Dept. of Revenue, 345 N.W.2d 55 (S.D.1984); Northwestern Public Ser. Co. v. Housing, etc., 320 N.W.2d 515 (S.D.1982). Taxpayers seeking to avoid taxation through a statutory exemption have the burden of proving their entitlement to the exemption. ......
  • Request a trial to view additional results
9 cases
  • Townley, Matter of, No. 15547
    • United States
    • Supreme Court of South Dakota
    • 22 Abril 1987
    ...for PAI under either SDCL 10-45-12.1 or SDCL 10-44-8. Under Northwestern Public Service 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 strict......
  • Sales Tax Liability of Valley Queen Cheese, Matter of, No. 15148
    • United States
    • Supreme Court of South Dakota
    • 18 Marzo 1986
    ...generally construed in favor of the taxpayer, while tax exemption statutes are construed against the taxpayer. N.W.S.P. v. Housing, Etc., 320 N.W.2d 515 (S.D.1982); Nash Finch Co. v. South Dakota Department of Revenue, 312 N.W.2d 470 We agree with the opinion the circuit court expressed in ......
  • K Mart Corp., Inc. v. South Dakota Dept. of Revenue, No. 14283
    • United States
    • Supreme Court of South Dakota
    • 7 Marzo 1984
    ...natural, and practical meaning to effectuate the purpose of the exemption. Northwestern Pub. Serv. Co. v. Housing and Redev. Comm'n, 320 N.W.2d 515 Although the taxation statutes do not define "newspaper," 2 several definitions can be found in the case law of other jurisdictions. ......
  • State and City Sales Tax Liability of Quality Service Railcar Repair Corp., Matter of, No. 16101
    • United States
    • Supreme Court of South Dakota
    • 14 Octubre 1988
    ...exemption was granted. K Mart Corp. v. S.D. Dept. of Revenue, 345 N.W.2d 55 (S.D.1984); Northwestern Public Ser. Co. v. Housing, etc., 320 N.W.2d 515 (S.D.1982). Taxpayers seeking to avoid taxation through a statutory exemption have the burden of proving their entitlement to the exemption. ......
  • Request a trial to view additional results

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