Southeastern Kusan, Inc. v. South Carolina Tax Com'n, SOUTHEASTERN-KUSA
| Decision Date | 23 June 1981 |
| Docket Number | SOUTHEASTERN-KUSA,No. 21501,INC,21501 |
| Citation | 280 S.E.2d 57,276 S.C. 487 |
| Court | South Carolina Supreme Court |
| Parties | , Appellants, v. SOUTH CAROLINA TAX COMMISSION and Robert Wasson, Chairman, John H. LaFitte,Jr., Commissioner, and Charles N. Plowden, Commissioner, Constituting theMembers of the South Carolina Tax Commission, Respondents. |
Dobson & Dobson, and B. Joel Stoudenmire, Greenville, for appellants.
Atty. Gen. Daniel R. McLeod, Deputy Atty. Gen. Joe L. Allen, Jr., and Senior Asst. Atty. Gen. G. Lewis Argoe, Jr., and Asst. Atty. Gen. Jackson E. Fields, Jr., Columbia, for respondents.
Charles W. Knowlton, of Boyd, Knowlton, Tate & Finlay, Columbia, for amicus curiae.
Plaintiff Southeastern-Kusan, Inc. (Southeastern), pursuant to § 12-35-1440, Code of Laws of South Carolina (1976), seeks a refund of $67,769.11 sales tax and interest it paid under protest to defendant South Carolina Tax Commission (Tax Commission). The outcome revolves around our interpretation and application of the sales tax exemption in § 12-35-550(17).
The facts are not disputed. Southeastern manufactures plastic parts and sells them predominantly to other manufacturers where the parts become integrated into a final product, e. g., plastic components in furniture, in textile machinery, and in stereo equipment. Because these parts are generally custom ordered, a special mold must first be designed for each customer. The mold is inserted into and becomes a necessary part of Southeastern's machinery during production of the plastic parts and is then stored by the customer at Southeastern's plant for future orders. Southeastern bills the customer for the molds separately from its bills for plastic parts. No sales tax is added to the billings for the molds. The contest arises because the Tax Commission submits that sales tax should have been added and collected.
Under § 12-35-510, a 4% tax on the gross proceeds of sales is imposed generally upon every person within South Carolina in the business of selling at retail any tangible personal property. In § 12-35-550, however, the legislature has exempted from this 4% sales tax the proceeds derived from certain enumerated sales. Section 12-35-550(17) provides the following exemption:
"There are exempted from the provisions of this article (Retail License, Sales & Use Taxes)
....
(17) The gross proceeds of the sale of ... machinery used in ... processing and manufacturing of tangible personal property; provided that the term 'machines,' as used in this article, shall include the parts of such machines (and) attachments ... which are used ... on or in the operation of such machines and which are necessary to the operation of such machines ...."
There is no disagreement between the parties that the term "machines," as used in this exemption, covers the molds. The issue is whether the exemption was intended to apply only to those who both own the machinery (e. g., mold) and use it in their own manufacturing plant. In such case, Southeastern could not claim the exemption since it did not own the molds.
As a general rule, tax exemption statutes are strictly construed against the taxpayer. Owen Industrial Products, Inc. v....
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...application of a statute produces an absurd result will the court consider a different meaning. Southeastern-Kusan, Inc. v. South Carolina Tax Comm., 276 S.C. 487, 280 S.E.2d 57 (1981). The court will reject an interpretation of a statute which leads to absurd result that could not have bee......
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