Sioux Falls Shopping News v. Dept. of Rev., No. 24616.

CourtSupreme Court of South Dakota
Writing for the CourtBjorkman
Citation2008 SD 34,749 N.W.2d 522
PartiesSIOUX FALLS SHOPPING NEWS, INC., Appellant v. DEPARTMENT OF REVENUE AND REGULATION, Appellee.
Decision Date23 April 2008
Docket NumberNo. 24616.
749 N.W.2d 522
2008 SD 34
SIOUX FALLS SHOPPING NEWS, INC., Appellant
v.
DEPARTMENT OF REVENUE AND REGULATION, Appellee.
No. 24616.
Supreme Court of South Dakota.
Considered on Briefs February 11, 2008.
Decided April 23, 2008.

[749 N.W.2d 523]

Mark V. Meierhenry and Patrick J. Glover, of Danforth and Meierhenry, LLP, Sioux Falls, SD, for appellant.

Harvey M. Crow, Jr., Department of Revenue and Regulation, Pierre, SD, for appellee.

BJORKMAN, Circuit Judge.


[¶ 1.] Sioux Falls Shopping News, Inc., (Shopping News) appeals from the circuit court's judgment affirming the decision of the South Dakota Department of Revenue and Regulation (Department) that the money Shopping News paid for its delivery and distribution services was subject to the use tax. We affirm.

FACTS

[¶ 2.] Shopping News publishes a weekly advertiser distributed free to the general public in the Sioux Falls area. Shopping News contracts with drivers who take the papers from Shopping News' Sioux Falls headquarters and deliver them to drop-off points within a forty mile radius of Sioux Falls. Local carriers—boys and girls between the ages of nine and twelve—pick up the publication at the drop-off points and deliver it door-to-door to homes in the area.

[¶ 3.] Department conducted an audit of the Shopping News from June 2001 through May 2004. The audit resulted in an assessment of use tax on the fees Shopping News paid the contract drivers and local carriers, in the amount of $18,675.63, with an additional $4,704.25 assessed for interest.

[¶ 4.] Shopping News appealed Department's determination.1 The Administrative Law Judge (ALJ) concluded that Shopping News failed to prove entitlement to a statutory exemption from the tax, and entered a proposed decision, which Department's Secretary adopted as Department's final decision. Shopping News then appealed the ALJ's decision to the circuit court.

[¶ 5.] After the circuit court affirmed the ALJ's decision, Shopping News appealed to this Court. Shopping News raises four issues:

749 N.W.2d 524

Whether the circuit court applied the correct standard of review in affirming Department's decision.

Whether the taxpayer is exempt from the use tax because the publication being delivered is a shoppers' guide.

Whether distribution and delivery services are exempt from the use tax.

Whether local carriers are Shopping News' employees, exempting their services from the use tax.

STANDARD OF REVIEW

[¶ 6.] We examine agency findings in the same manner as the circuit court, to decide whether, in light of all the evidence, the findings are clearly erroneous. TAK Communications v. South Dakota Unemployment Ins. Div., 2007 SD 68, ¶ 8, 736 N.W.2d 840, 842. "`If after careful review of the entire record we are definitely and firmly convinced a mistake has been committed, only then will we reverse.'" Id. (citing Streeter v. Canton School Dist., 2004 SD 30, ¶ 14, 677 N.W.2d 221, 225). Questions of law are fully reviewable. Sopko v. C & R Transfer Co., Inc., 1998 SD 8, ¶ 6, 575 N.W.2d 225, 228.

[¶ 7.] The standard of review regarding imposition of and exemption from tax 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.

Butler Machinery Co. v. South Dakota Dept. of Revenue, 2002 SD 134, ¶ 6, 653 N.W.2d 757, 759 (citations omitted) (quoting Robinson & Muenster Associates, Inc. v. South Dakota Dept. of Rev., 1999 SD 132, ¶ 7, 601 N.W.2d 610, 612).

ANALYSIS AND DECISION
ISSUE ONE

[¶ 8.] Whether the circuit court applied the correct standard of review in affirming Department's decision.

[¶ 9.] Shopping News contends that the circuit court, in affirming Department's decision, applied an incorrect standard of review, asserting that the applicable standard is set out in Matter of Sales and Use Tax Refund Request of Media One, 1997 SD 17, ¶ 9, 559 N.W.2d 875, 877. Under that standard, a reviewing court was required to affirm an agency's findings if there was some "substantial evidence" in the record to support them. Id. This Court no longer employs the substantial evidence test, however. This change, first announced in Sopko, 1998 SD 8, ¶ 7, 575 N.W.2d at 228-29, reflects the legislature's amendment of SDCL 1-26-36, which changed the standard of review for sufficiency of the evidence from "unsupported by substantial evidence on the whole record" to "[c]learly erroneous in light of the entire evidence in the record[.]"2 Therefore, this Court declines to adopt Shopping News' proposed standard of review and holds that the circuit court applied the correct standard.

749 N.W.2d 525
ISSUE TWO

[¶ 10.] Whether the taxpayer is exempt from the use tax because the publication being delivered is a shoppers' guide.

[¶ 11.] Shopping News contends that the fees it paid to contract drivers and local carriers for their distribution and delivery services are exempt from the use tax by virtue of SDCL 10-46-9.1. We disagree.

[¶ 12.] Sales tax is imposed "upon the gross receipts of any person from the engaging or continuing in the practice of any business in which a service is rendered." SDCL 10-45-4. Any "service" as defined by SDCL 10-45-4.1 is taxable, unless the service is specifically exempt from the provisions of SDCL ch. 10-45. SDCL 10-45-4. "Service" means "all activities engaged in for other persons for a fee, retainer, commission, or other monetary charge, which activities involve predominantly the performance of a service as distinguished from selling property." SDCL 10-45-4.1.

[¶ 13.] SDCL 10-46-2.1 imposes a use tax on a person using services, measured by the value of the services at the time they are rendered. This statute imposes a tax upon the use of a service unless it is specifically exempted by SDCL 10-46-17.3. The use tax is intended to complement and supplement the sales tax. Media One, 1997 SD 17, ¶ 20, 559 N.W.2d at 882. Prior to its repeal, SDCL 10-46-57 specifically imposed a use tax on the "privilege of the use of any transportation of tangible personal property" if that transportation began and ended within South Dakota.3 SDCL 10-46-57 (1996 rev.).

[¶ 14.] SDCL 10-45-12.1, incorporated in the use tax law by SDCL 10-46-17.3, exempts specific services from the tax. SDCL 10-45-12.1 identifies "advertising services" as exempt from the sales tax. SDCL 10-46-9.1 defines shoppers' guides as free "advertising publications."4

[¶ 15.] Shopping News contends that, because the legislature defined shoppers' guides as advertising publications in SDCL 10-46-9.1, it intended to exempt not only the income from the sale of advertising, but also the related cost of delivering those services, including the fees Shopping News paid to its contract drivers and delivery carriers.

[¶ 16.] We decline to adopt Shopping News' argument. The language of SDCL 10-46-9.1 specifically exempts from the use tax the costs of "[i]nk and newsprint when used in the production of shoppers' guides[.]" It provides no relief from the tax Shopping News now contests.

ISSUE THREE

[¶...

To continue reading

Request your trial
5 practice notes
  • Halbersma v. Halbersma, No. 25115.
    • United States
    • Supreme Court of South Dakota
    • November 10, 2009
    ...on appeal. Nace v. Nace, 2008 SD 74, ¶ 12, 754 N.W.2d 820 n2, 754 N.W.2d 820, 824 n2; Sioux Falls Shopping News v. Dept. of Rev. and Reg., 2008 SD 34, ¶ 29, 749 N.W.2d 522, 528; State v. Olson-Lame, 2001 SD 51, ¶ 6, 624 N.W.2d 833, 834. A party must show the circuit court was given an oppor......
  • State v. Guerra, No. 24643.
    • United States
    • Supreme Court of South Dakota
    • August 19, 2009
    ...[¶ 32.] "Administrative rules have `the force of law and are presumed valid.'" Sioux Falls Shopping News, Inc. v. Depart. of Rev. and Reg., 2008 SD 34, ¶ 24, 749 N.W.2d 522, 527 (quoting Matter of Sales and Use Tax Refund Request of Media One, 1997 SD 17, ¶ 11, 559 N.W.2d 875, 878) (citatio......
  • Krsnak v. S.D. Dep't of Env't & Natural Resources, No. 26367.
    • United States
    • Supreme Court of South Dakota
    • December 12, 2012
    ...2009 S.D. 74, ¶ 32, 772 N.W.2d 907, 916 (quoting Sioux Falls Shopping News, Inc. v. Dep't of Revenue & Regulation, 2008 S.D. 34, ¶ 24, 749 N.W.2d 522, 527). “[A]n agency is usually given a reasonable range of informed discretion in the interpretation and application of its own rules when th......
  • Magellan Pipeline Co. v. S.D. Dep't of Revenue & Regulation, No. 26553.
    • United States
    • Supreme Court of South Dakota
    • October 22, 2013
    ...Manual in order to determine the proper classification”); Sioux Falls Shopping News v. Dep't of Revenue & Regulation, 2008 S.D. 34, ¶ 20, 749 N.W.2d 522, 526 (stating that “[t]he greater part of [SDCL 10–45–12.1] employs the SIC Manual to define specified exempt services”). [¶ 14.] The Depa......
  • Request a trial to view additional results
5 cases
  • Halbersma v. Halbersma, No. 25115.
    • United States
    • Supreme Court of South Dakota
    • November 10, 2009
    ...on appeal. Nace v. Nace, 2008 SD 74, ¶ 12, 754 N.W.2d 820 n2, 754 N.W.2d 820, 824 n2; Sioux Falls Shopping News v. Dept. of Rev. and Reg., 2008 SD 34, ¶ 29, 749 N.W.2d 522, 528; State v. Olson-Lame, 2001 SD 51, ¶ 6, 624 N.W.2d 833, 834. A party must show the circuit court was given an oppor......
  • State v. Guerra, No. 24643.
    • United States
    • Supreme Court of South Dakota
    • August 19, 2009
    ...[¶ 32.] "Administrative rules have `the force of law and are presumed valid.'" Sioux Falls Shopping News, Inc. v. Depart. of Rev. and Reg., 2008 SD 34, ¶ 24, 749 N.W.2d 522, 527 (quoting Matter of Sales and Use Tax Refund Request of Media One, 1997 SD 17, ¶ 11, 559 N.W.2d 875, 878) (citatio......
  • Krsnak v. S.D. Dep't of Env't & Natural Resources, No. 26367.
    • United States
    • Supreme Court of South Dakota
    • December 12, 2012
    ...2009 S.D. 74, ¶ 32, 772 N.W.2d 907, 916 (quoting Sioux Falls Shopping News, Inc. v. Dep't of Revenue & Regulation, 2008 S.D. 34, ¶ 24, 749 N.W.2d 522, 527). “[A]n agency is usually given a reasonable range of informed discretion in the interpretation and application of its own rules when th......
  • Magellan Pipeline Co. v. S.D. Dep't of Revenue & Regulation, No. 26553.
    • United States
    • Supreme Court of South Dakota
    • October 22, 2013
    ...Manual in order to determine the proper classification”); Sioux Falls Shopping News v. Dep't of Revenue & Regulation, 2008 S.D. 34, ¶ 20, 749 N.W.2d 522, 526 (stating that “[t]he greater part of [SDCL 10–45–12.1] employs the SIC Manual to define specified exempt services”). [¶ 14.] The Depa......
  • 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