WATERTOWN COOP. ELEVATOR v. Dept. of Rev., No. 21570.

CourtSouth Dakota Supreme Court
Writing for the CourtKONENKAMP, Justice.
Citation2001 SD 56,627 N.W.2d 167
Decision Date02 May 2001
Docket NumberNo. 21570.
PartiesWATERTOWN COOP. ELEVATOR ASSOCIATION, License No. 05-004833-ST, 14-005973-ST, 14-006274-ST, 14-006572-ST, 14-007590-ST, 18-003130-ST, 18-003131-ST, Appellee, v. SOUTH DAKOTA DEPARTMENT OF REVENUE, Appellant. Farmers Union Oil Co. (Wecota/Faulkton/Onaka) License No. 25-001-46-215815E-ST-001, 25-002-46021581E-ST-001, Appellee, v. South Dakota Department of Revenue, Appellant.

627 N.W.2d 167
2001 SD 56

WATERTOWN COOP. ELEVATOR ASSOCIATION, License No. 05-004833-ST, 14-005973-ST, 14-006274-ST, 14-006572-ST, 14-007590-ST, 18-003130-ST, 18-003131-ST, Appellee,
v.
SOUTH DAKOTA DEPARTMENT OF REVENUE, Appellant.
Farmers Union Oil Co. (Wecota/Faulkton/Onaka) License No. 25-001-46-215815E-ST-001, 25-002-46021581E-ST-001, Appellee,
v.
South Dakota Department of Revenue, Appellant

No. 21570.

Supreme Court of South Dakota.

Considered on Briefs January 8, 2001.

Decided May 2, 2001.

Rehearing Denied June 8, 2001.


627 N.W.2d 168
Robert C. Riter, Jr. of Riter, Mayer, Hofer, Wattier & Brown, Pierre, South Dakota, for appellees

Mark Barnett, Attorney General, Pierre, South Dakota, Harvey M. Crow, Jr., Special Assistant Attorney General, Department

627 N.W.2d 169
of Revenue, Rapid City, South Dakota, for appellant

KONENKAMP, Justice.

[¶ 1.] In this administrative proceeding, we (1) review the timeliness of the appeal, (2) decide whether charges for providing production specialists may be taxed as payments for "services" under SDCL 10-46-2.1, and (3) examine a finding by the circuit court classifying as arbitrary the Secretary of Revenue's decision. We conclude that the appeal is timely, and we reverse the circuit court's ruling that the charges were not taxable.

Background

[¶ 2.] Watertown Coop. Elevator Association and Farmers Union Oil Co. (the taxpayers) sell agronomy products to farmers and ranchers. These products include seed, feed, fertilizer, and chemicals. Cenex/Land O'Lakes Agronomy Company and Harvest States Cooperative distribute the products at wholesale to the taxpayers. As part of a separate contract with the taxpayers, these distributors provide production specialists to advise the taxpayers' customers on which products to buy and how best to use them. The contract states that the distributor will "assign a Crop Production Specialist (CPS) to [the taxpayers] to provide services."1 At all times the Crop Production Specialist or Livestock Production Specialist remains an employee of the distributor. The taxpayers reimburse the distributors for all actual expenses of the production specialists, including salary, social security, income tax withholding, workers' compensation, equipment leases, travel, and other incidental expenses.

[¶ 3.] The production specialists spend eighty percent of their time in the field making contact with farmers and ranchers, attempting to sell agronomy products. Orders taken by the specialists are processed through the taxpayers' retail businesses. Specialists advocate the sale of only their particular distributor's products. While in the field, they gather information concerning soil or livestock and make recommendations about particular products. They may also monitor the use of these products, make return visits, and assist a farmer or rancher in developing a management program, including a profit analysis. The taxpayers do not charge their customers a separate fee for these services. Instead, the cost of maintaining the production specialist program is built into the purchase price of their products.

[¶ 4.] The taxpayers benefit by having "professional salespeople highly trained that [can] help them sell their products at the local [level]...." Since the production specialist's job objective is to increase the sale of products, the specialist works to enlarge the taxpayers' customer base and to maintain and service current accounts. The emphasis of this program is to sell a higher volume of product, which, benefits the taxpayers and the distributors.

[¶ 5.] The Department of Revenue conducted a sales and use tax audit of the taxpayers' books and records. The audit of Watertown Coop. Elevator's books covered September 1993 through August 1996. Afterwards, the Department issued a certificate of assessment finding a use tax due on fees Watertown Coop. paid for production specialist services. The audit of Farmers Union Oil Co. covered the same period with the same result. Both companies paid the entire assessment but

627 N.W.2d 170
contested the validity of the use tax.2 As these appeals have similar facts and issues, they were consolidated. Following an administrative hearing, the hearing examiner issued a ruling favorable to the taxpayers.3 The examiner's findings were submitted to the Secretary of Revenue for review. The Secretary rejected the proposed findings as authorized by SDCL 1-26D-6 and substituted his own findings, conclusions, and final decision

[¶ 6.] The taxpayers received notice of entry of the Secretary's decision on July 12, 1999. On August 4, the taxpayers' counsel filed a notice of appeal in the Hughes County Circuit Court and charged the filing fee to the account counsel's firm maintained with the clerk's office. The clerk of courts later billed counsel's firm. The billing was completed beyond the thirty-day deadline allowed for appeals. The Department moved to dismiss, arguing that the appeal was not perfected within thirty days of notice of entry under SDCL 1-26-31. The motion was denied. The court heard the case on its merits and found that the Secretary acted arbitrarily in rejecting the hearing examiner's findings without giving adequate reasons in writing. See SDCL 1-26D-8. In so ruling, the court found that the Secretary "failed to give proper deference to the hearing examiner's decision and ... findings as to the credibility of witnesses and resolution of conflicts in the evidence." The court found that the services rendered by production specialists were "directly related to the sale of the taxpayers' products" and thus are exempt because the sales of agronomy products are exempt. The Department appeals.

1. Timeliness of Appeal

[¶ 7.] The Department moved the circuit court to dismiss the taxpayers' appeal, claiming that it was not perfected within the thirty-day period provided for in SDCL 1-26-31. Specifically, the Department asserted that the practice of charging the filing fee to a law firm's account at the clerks' office does not perfect an appeal unless payment is actually made within the thirty day appeal period. The Department anchors its claim on our holding in Hansen v. South Dakota Board of Pardons and Paroles, 1999 SD 135, 601 N.W.2d 617. We review the grant or denial of a motion to dismiss as a legal question, asking, "is the pleader entitled to judgment as a matter of law?" White Eagle v. City of Fort Pierre, 2000 SD 34, ¶ 4, 606 N.W.2d 926, 928 (citations and internal quotations omitted).

[¶ 8.] In Hansen an inmate mailed his notice of appeal to the Minnehaha County Clerk of Court's Office. The notice did not include the filing fee or an application for waiver of the fee. Hansen, 1999 SD 135, ¶ 2, 601 N.W.2d at 618. The clerk refused to file the appeal and returned the notice to an attorney who was on contract to assist inmates. Id. at ¶ 3. An amended appeal was presented to the clerk along with an application for waiver of the fee; however, it was presented outside the thirty-day appeal deadline. Id. We held that under SDCL 1-26-31 an appeal is "not perfected unless and until the filing fee or appropriate waiver is deposited with the clerk of the circuit court." Id. at ¶ 8.

[¶ 9.] In Hansen, obviously, the inmate did not maintain an account with the clerk of courts. Consequently, he was required to deposit the "filing fee or appropriate

627 N.W.2d 171
waiver" along with his notice of appeal. Hansen, 1999 SD 135, ¶ 8, 601 N.W.2d at 619. This case is distinguishable. It is common practice for law firms to maintain an account with the clerk and charge fees to that account. A charge to a firm's account at the time of filing is equivalent to depositing a fee. We decline to interpret Hansen as requiring attorneys to draw and deposit a check each time an appeal is filed. Thus, the filing of the notice of appeal on August 4, 1999, along with the charge to the account perfected the taxpayers' appeal within the thirty-day deadline.

2. Services Subject to Use Tax

[¶ 10.] Our standard of review in an administrative appeal is governed by SDCL 1-26-36. We give deference to the agency on factual matters, applying the clearly erroneous standard of review. Sopko v. C & R Transfer Co., Inc., 1998 SD 8, ¶ 6, 575 N.W.2d 225, 228 (citations omitted). When factual determinations are made on the basis of documentary evidence, however, we review the matter de novo unhampered by the clearly erroneous rule. Kurtz v. SCI, 1998 SD 37, ¶ 10, 576 N.W.2d 878, 882. But see SDCL 15-6-52(a) (as amended effective July 1, 2000). "Whether a statute imposes a tax under a given factual situation is a question of law and thus no deference is given to any conclusion reached by [the] Department [of Revenue] or the circuit court." Dep't. of Revenue v. Sanborn Tel. Co-op., 455 N.W.2d 223, 225 (S.D.1990) (citing Midcontinent...

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24 practice notes
  • Brown v. Douglas School Dist., No. 22050.
    • United States
    • Supreme Court of South Dakota
    • July 31, 2002
    ...Dept. of Transp., 1998 SD 130, ¶ 5, 587 N.W.2d 595, 597. We give deference, Watertown Coop. Elevator Assn. v. State Dept. of Revenue, 2001 SD 56, ¶ 10, 627 N.W.2d 167, 171, and great weight to the agency or hearing officer on fact questions. Goebel v. Warner Transp., 2000 SD 79, ¶ 10, 612 N......
  • Abdulrazzak v. S.D. Bd. of Pardons & Paroles, #28685
    • United States
    • Supreme Court of South Dakota
    • March 4, 2020
    ...2013 S.D. 75, ¶ 7 n.2, 838 N.W.2d 843, 847 n.2 ). See also Watertown Co-op Elevator Ass'n v. S.D. Dep't of Revenue, 2001 S.D. 56, ¶ 7, 627 N.W.2d 167, 170 (holding that a decision to dismiss an administrative appeal to circuit court is reviewed de novo). "Further, when statutory interpretat......
  • Kasuske v. Farwell, Ozmun, Kirk & Co., No. 23555.
    • United States
    • Supreme Court of South Dakota
    • February 8, 2006
    ...or inferences. Haynes v. Ford, 2004 SD 99, ¶ 14, 686 N.W.2d 657, 661 (citing Watertown Coop. Elevator Ass'n v. S.D. Dept. of Revenue, 2001 SD 56, ¶ 10, 627 N.W.2d 167, [¶ 10.] Finally, pure questions of law and mixed questions of law and fact are fully reviewable. Enger, 1997 SD 70, ¶ 10, 5......
  • Darling v. West River Masonry, Inc., No. 25275.
    • United States
    • Supreme Court of South Dakota
    • January 6, 2010
    ...Vollmer v. Wal-Mart Store, Inc., 2007 SD 25, ¶ 12, 729 N.W.2d 377, 382 (citing Watertown Coop. Elevator Ass'n v. S.D. Dep't of Rev., 2001 SD 56, ¶ 10, 627 N.W.2d 167, [¶ 11.] In a workers' compensation dispute, a claimant must prove all elements necessary to qualify for compensation by a pr......
  • Request a trial to view additional results
24 cases
  • Brown v. Douglas School Dist., No. 22050.
    • United States
    • Supreme Court of South Dakota
    • July 31, 2002
    ...Dept. of Transp., 1998 SD 130, ¶ 5, 587 N.W.2d 595, 597. We give deference, Watertown Coop. Elevator Assn. v. State Dept. of Revenue, 2001 SD 56, ¶ 10, 627 N.W.2d 167, 171, and great weight to the agency or hearing officer on fact questions. Goebel v. Warner Transp., 2000 SD 79, ¶ 10, 612 N......
  • Abdulrazzak v. S.D. Bd. of Pardons & Paroles, #28685
    • United States
    • Supreme Court of South Dakota
    • March 4, 2020
    ...2013 S.D. 75, ¶ 7 n.2, 838 N.W.2d 843, 847 n.2 ). See also Watertown Co-op Elevator Ass'n v. S.D. Dep't of Revenue, 2001 S.D. 56, ¶ 7, 627 N.W.2d 167, 170 (holding that a decision to dismiss an administrative appeal to circuit court is reviewed de novo). "Further, when statutory interpretat......
  • Kasuske v. Farwell, Ozmun, Kirk & Co., No. 23555.
    • United States
    • Supreme Court of South Dakota
    • February 8, 2006
    ...or inferences. Haynes v. Ford, 2004 SD 99, ¶ 14, 686 N.W.2d 657, 661 (citing Watertown Coop. Elevator Ass'n v. S.D. Dept. of Revenue, 2001 SD 56, ¶ 10, 627 N.W.2d 167, [¶ 10.] Finally, pure questions of law and mixed questions of law and fact are fully reviewable. Enger, 1997 SD 70, ¶ 10, 5......
  • Darling v. West River Masonry, Inc., No. 25275.
    • United States
    • Supreme Court of South Dakota
    • January 6, 2010
    ...Vollmer v. Wal-Mart Store, Inc., 2007 SD 25, ¶ 12, 729 N.W.2d 377, 382 (citing Watertown Coop. Elevator Ass'n v. S.D. Dep't of Rev., 2001 SD 56, ¶ 10, 627 N.W.2d 167, [¶ 11.] In a workers' compensation dispute, a claimant must prove all elements necessary to qualify for compensation by a pr......
  • Request a trial to view additional results

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