State ex rel. Sioux Falls Motor Co. v. Welsh

• Decision Date: 31 December 1936
• Docket Number: 7922.
• Parties: STATE ex rel. SIOUX FALLS MOTOR CO. v. WELSH, State Director of Taxation.
• Court: South Dakota Supreme Court

270 N.W. 852

65 S.D. 68

STATE ex rel. SIOUX FALLS MOTOR CO. v. WELSH, State Director of Taxation.

No. 7922.

Supreme Court of South Dakota

December 31, 1936

Appeal from Circuit Court, Hughes County; John F. Hughes, Judge.

Mandamus proceeding to compel tax refund, by the State, on the relation of the Sioux Falls Motor Company, against W. C Welsh, as State Director of Taxation. From an order overruling a motion to quash an alternative writ, defendant appeals.

Reversed with directions to quash the alternative writ.

Walter Conway, Atty. Gen., and R. F. Drewry, Asst. Atty. Gen., for appellant.

Martens & Goldsmith, of Pierre, for respondent.

RUDOLPH Judge.

This is an appeal from an order overruling a motion to quash an alternative writ of mandamus. The action involves a construction of certain parts of division 3 of chapter 205 Laws of 1935 (section 33 et seq.), known as the Retail Occupational Sales Tax. The complaint upon which the alternative writ is based alleges that the plaintiff, Sioux Falls Motor Company, is a corporation engaged in the "business or occupation of selling new or unused Ford automobiles, automobile accessories, gas, oils and other repairs, at retail, * * * that incidental to the sale at retail of said Ford automobiles, and as a means of realizing, in cash, the selling price of said Ford automobiles, the said relator occasionally accepts, as a part of the purchase price, and subsequently resells to users, consumers, or others, used or second-handed automobiles of Ford or other make or trade name, as well as other tangible personal property; that the said relator is not engaged in the business or occupation of buying or selling at retail, to users or consumers in South Dakota, used or second-handed automobiles or other tangible personal property, except as alleged in this complaint."

The complaint sets forth five separate transactions, in each of which the plaintiff sold a new Ford automobile and, as a part of the purchase price therefor, accepted a secondhanded or used automobile. In disposing of this secondhanded automobile, which was accepted as part of the purchase price for the new car, the plaintiff again received part of the purchase price in cash, and again took in another secondhanded car. This same process was repeated in disposing of the second used car. In other words, the relator conducted three separate sales, in each instance taking in a used car as a part of the purchase price in order to realize the original price of the new car which was sold. In each of the five transactions set forth in the complaint, a similar process was gone through by relator in disposing of the several new cars. The defendant, Director of Taxation of the State of South Dakota, by rule emanating from his office, provided: "Sales of new automobiles are taxable at the full consideration received, including the allowance made upon a trade-in of a second hand automobile. When the car accepted in trade-in is sold, the gross receipts from that sale is likewise taxable."

Complying with this rule of the director of taxation, the relator paid a tax upon each automobile transaction alleged in the complaint. Tax at the rate provided in said chapter 205, Laws 1935, was paid, based upon the sale of the new automobile for the full consideration received including the allowance made for the secondhanded automobile accepted as part payment. When the secondhanded automobile was sold, the tax was paid upon the entire purchase price received for that car including, as a part of the purchase price, the trade-in value of the secondhanded car taken in on that deal. Relator paid the tax on this basis for each sale of a new as well as a secondhanded car. Relator now claims that the order promulgated by the director of taxation is erroneous; that it paid its tax upon an improper basis, and in this action seeks to compel the director to refund that portion of the tax which it now claims was improperly paid. Relator contends that the correct basis for the payment of this tax is the sale price of the new automobile only, and that it should not be compelled to pay a tax measured by the cash received and in addition the value of the secondhanded cars which it accepted and sold as a result of the original sale of the new cars. The trial court sustained relator's contention, and defendant has appealed.

The following provisions of chapter 205, Laws of 1935, are involved. Subdivision (a), section 34, provides: "There is hereby imposed as a tax upon the privilege of engaging in business as a retailer, a tax of two percent (2%) upon the gross receipts from all sales of tangible personal property, consisting of goods, wares, or merchandise, except as otherwise provided in this Division, sold at retail in the State of South Dakota to consumers or users."

By subdivision (c) of section 33 it is provided: "'Retail sale' or 'sale at retail' means the sale of tangible personal property to the consumer or user thereof, or to any person for any purpose other than for resale."

In subdivision (f) of section 33, the term "gross receipts" as used in subdivision (a) of section 34 is defined as follows: "'Gross receipts' means the amount received in money, credits, property or other money's worth in consideration of sales at retail within this State, without any deduction on account of the cost of the property sold, the cost of materials used, the cost of labor or services purchased, amounts paid for interest or discounts, or any other expenses whatsoever, nor shall any deduction be allowed for losses, provided, however, that discounts for any purpose allowed and taken on sales shall not be included, nor shall the sale price of property returned by customers when the full sale price thereof is refunded either in cash or by credit. Provided, further, that on all sales of retailers, valued in money, when such sales are made under conditional sales contract, or under other forms of sale wherein the payment of the principal sum thereunder be extended over a period longer than sixty (60) days from the date of sale thereof that only such portion of the sale amount thereof shall be accounted, for the purpose of imposition of tax imposed by this act, as has actually been received in cash by the retailer during each quarterly period as defined herein."

In subdivision (e) of section 33 it is provided that: "The isolated or occasional sale of tangible personal property at retail by a person who does not hold himself out as engaging in the business of selling such tangible personal property at retail does not constitute engaging in such manner."

Respondent first contends that the sales of the secondhanded automobiles which it...