Tracfone Wireless, Inc. v. S.D. Dept. of Rev. & Reg.

• Decision Date: 20 January 2010
• Docket Number: No. 25141.,25141.
• Citation: 778 N.W.2d 130,2010 SD 6
• Parties: TRACFONE WIRELESS, INC., Appellant, v. SOUTH DAKOTA DEPARTMENT OF REVENUE AND REGULATION, Appellee.
• Court: South Dakota Supreme Court

778 N.W.2d 130

2010 SD 6

TRACFONE WIRELESS, INC., Appellant, v. SOUTH DAKOTA DEPARTMENT OF REVENUE AND REGULATION, Appellee.

No. 25141.

Supreme Court of South Dakota.

Considered on Briefs on August 24, 2009.

Decided January 20, 2010.

Charles M. Thompson of May, Adam, Gerdes and Thompson, Pierre, South Dakota and Robert R. Gunning Neil I. Pomerantz of Silverstein & Pomerantz, LLP, Denver, Colorado, for appellant.

Matthew R. Fonder, South Dakota Department of Revenue and Regulations, Pierre, South Dakota, for appellee.

GILBERTSON, Chief Justice.

[¶ 1.] TracFone Wireless, Inc. (TracFone) claims it miscalculated and then overpaid its telecommunications gross receipts tax during the period of April 2004 to March 2007. In April 2007, TracFone sought a refund through the South Dakota Department of Revenue and Regulation (the Department) using a refund claim form and instructions provided by the Department. After TracFone's refund claim was denied by the Department, it sought an administrative appeal hearing. The Department opposed the hearing and argued the payment-under-protest system in SDCL 10-27-2 was the exclusive method of obtaining a tax refund, and that the Department was without jurisdiction to hear TracFone's administrative appeal of the denial of TracFone's refund request filed under SDCL ch. 10-59. The Office of the Hearing Examiner (OHE) ultimately accepted the Department's argument and recommended the Secretary of the Department (Secretary) dismiss the appeal. The Secretary adopted the OHE's proposed decision in full and dismissed TracFone's appeal for lack of subject matter jurisdiction. TracFone appealed to the circuit court. After a hearing, the circuit court determined that the OHE and the Department were without jurisdiction, and affirmed the Secretary's decision to dismiss the appeal for lack of subject matter jurisdiction. TracFone appeals. We reverse and remand.

FACTS

[¶ 2.] TracFone sells prepaid wireless telephone services to retailers and direct consumers throughout the United States. Its sales in South Dakota are subject to the telecommunications gross receipts tax as provided in SDCL ch. 10-33A, which was enacted in 2003. During the period of April 2004 through March 2007, the majority of TracFone's sales in South Dakota were to retailers who in turn sold services to consumers. TracFone calculated its monthly obligation for telecommunications gross receipts tax for the period in question assuming that the four percent tax under SDCL 10-33A-4 applied equally to its direct to consumer sales and its sales to retailers for resale to consumers.¹ TracFone timely submitted to the Department the monthly amounts it calculated were due for the months of April 2004 through March 2007.

[¶ 3.] In April 2007, TracFone determined it had overpaid its telecommunications gross receipts tax for April 2004 through March 2007. It theorized that sales to retailers for resale to consumers did not meet the definition of "at retail" in SDCL 10-33A-3.² TracFone claimed, based on its interpretation of the language in SDCL 10-33A-3, it was only required to pay the telecommunications gross receipts tax on direct sales to consumers.

[¶ 4.] TracFone's outside auditor subsequently contacted the Department to request the proper forms for filing a refund request for overpaid taxes. Using the "Self Audit Worksheets" provided by the Department and following its instructions, TracFone calculated its refund for the months of April 2004 through March 2007. It submitted its refund request on June 15, 2007.

[¶ 5.] In a letter dated July 5, 2007, TracFone's refund request was denied. The Department's denial letter stated that "[i]f you wish to appeal a denial of a request for a refund, you may request a hearing under SDCL 10-59-9 as required by SDCL 10-59-18 and/or SDCL 10-59-26." The letter also noted that the applicable statute of limitations for a refund claim for overpaid taxes was three years per the provisions of SDCL 10-59-19.³

[¶ 6.] On August 3, 2007, TracFone filed an administrative appeal of the Department's denial of its refund claim. The Department filed a motion to dismiss the appeal contending that the provision of SDCL 10-59-9 were inapplicable to a telecommunications gross receipts tax refund request. The Department argued in its motion that the only appeal process available to obtain a refund of telecommunications gross receipts taxes was the payment-under-protest method provided under SDCL 10-27-2.⁴ The Department further argued TracFone was required to pay its tax liability under protest and file suit in circuit court within thirty days of remitting the protested payment. The Department argued that the OHE was, therefore, without jurisdiction to hear the appeal as originally filed by TracFone for TracFone's failure to pay under protest per the provisions of SDCL 10-27-2.

[¶ 7.] On March 26, 2008, after a hearing on the matter, the OHE denied the Department's motion to dismiss. The parties entered a stipulated factual record. They then filed briefs addressing the substantive merits of TracFone's refund claim.

[¶ 8.] On July 9, 2008, the OHE's proposed decision was issued. In that decision, the OHE noted it had reconsidered the Department's jurisdictional claim. The OHE concluded that SDCL ch. 10-59 did not apply to the telecommunication gross receipts tax and that the only manner in which to obtain such a refund was under SDCL 10-27-2 by paying under protest and then filing a civil suit against the Department within thirty days. After concluding that the OHE was without jurisdiction to hear TracFone's appeal, it recommended dismissal.

[¶ 9.] The OHE's recommendation was adopted in full by the Secretary. The Secretary's July 15, 2008 final decision also noted TracFone had the right to appeal to circuit court pursuant to SDCL ch. 1-26. TracFone's appeal to circuit court was denied in a one page order that affirmed the Secretary's findings of fact, conclusions of law, and final decision.

[¶ 10.] TracFone appeals raising the following issue:

Whether the OHE and the Secretary had jurisdiction over the administrative appeal of the Department's denial of TracFone's telecommunications gross receipts tax refund claim.

STANDARD OF REVIEW

[¶ 11.] This Court reviews the issue of whether an agency has jurisdiction to hear a matter as a question of law under the de novo standard. O'Toole v. Bd. of Trustees of SD Ret. Sys., 2002 SD 77, ¶ 9, 648 N.W.2d 342, 345. Statutory interpretation is also a question of law. Discover Bank v. Stanley, 2008 SD 111, ¶ 15, 757 N.W.2d 756, 761. As an issue of law, a matter of statutory construction is also reviewed under the de novo standard. Id.

ANALYSIS AND AUTHORITIES

[¶ 12.] TracFone argues that the provisions of SDCL 10-33A-12 expressly permit administrative appeals under SDCL ch. 1-26 of a denial of a refund request for an overpayment of telecommunications gross receipts taxes.⁵ TracFone argues that while SDCL ch. 10-33A is not specifically listed in SDCL 10-59-1 as one of the types of tax matters that may be heard as an administrative appeal by the OHE, the language in SDCL 10-33A-12 expressly authorizes such appeals. The Department argues that TracFone's refund request was limited to the payment-under-protest method contained in SDCL 10-27-2. The Department argues that without reference to SDCL ch. 10-33A in SDCL 10-59-1, an administrative appeal is precluded for any matter under SDCL ch. 10-33A unless the matter meets the definition of a contested case under SDCL 1-26-1(1). We conclude that SDCL 10-33A-12 expressly authorizes administrative appeals⁶ under SDCL ch. 1-26 of a denial of a refund request for overpayment of telecommunications gross receipts taxes.

[¶ 13.] SDCL 10-59-1 authorizes the types of tax matters that may be heard by the OHE as an administrative appeal. It provides:

The provisions of this chapter apply to any taxes or fees or persons subject to taxes or fees imposed by, and to any civil or criminal investigation authorized by, chapters 10-39, 10-39A, 10-39B, 10-43, 10-45, 10-45D, 10-46, 10-46A, 10-46B, 10-46C, 10-46E, 10-47B, 10-52, 10-52A, 32-3, 32-3A, 32-5, 32-5B, 32-6B, 32-9, 32-10, and 34A-13 and §§ 22-25-48, 49-31-51, 50-4-13 to 50-4-17, inclusive, and the provisions of chapter 10-45B.

SDCL 10-59-1. The telecommunication gross receipts tax, SDCL ch. 10-33A, is not listed among those types of taxes that may be heard as an administrative appeal. However, SDCL 10-33A-12 provides: "Any appeal from a decision of the secretary in a contested case shall be taken in accordance with chapter 1-26."

[¶ 14.] Although we must determine the meaning of a statute "from the statute as a whole, as well as enactments relating to the same subject," we also must apply the rule that "a statute relating to a particular subject will prevail over the general terms of another statute." Martinmaas v. Engelmann, 2000 SD 85, ¶ 49, 612 N.W.2d 600, 611. This is in keeping with our general rule of statutory construction that "interpretation is augmented by the precept that `terms of a statute relating to a particular subject will prevail over general terms in another statute.'" Faircloth v. Raven Industries, Inc., 2000 SD 158, ¶ 11, 620 N.W.2d 198, 202 (quoting Meyerink v. NW Pub. Serv. Co., 391 N.W.2d 180, 184 (S.D.1986)). SDCL 10-33A-4 and SDCL 10-33A-12 are part of the same chapter and were enacted as part of the same Legislation. See 2003 Sess. Laws ch 58, §§ 4, 12. SDCL 10-59-1 is neither. See 2006 Sess. Laws ch. 58, § 13. Furthermore,

The general rule that the express mention of one thing in a statute implies the exclusion of another `is merely an auxiliary rule of statutory construction, to be applied with great caution; it is not a rule of substantive law, or a constitutional command. The maxim is not of universal application, or conclusive as to the meaning of a statute; and it does not constitute a formula for construction to be arbitrarily applied.'

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