APPEAL FROM THE CIRCUIT COURT OF THE SIXTH JUDICIAL CIRCUIT HUGHES COUNTY, SOUTH DAKOTA
The opinion of the court was delivered by: Honorable Mark Barnett Judge
[¶1.] TRM ATM Corporation (TRM) appeals a sales tax assessment on services it rendered to intermediaries involved in providing automatic teller machine (ATM) banking. The case requires us to consider whether concededly taxable services are subject to sales tax that must be paid by TRM, the provider of the services; or, whether the services are subject to use tax that must be paid by the intermediaries that use TRM's services. If the services are subject to sales tax, we must also determine whether TRM is obligated to pay the tax on receipts that it claims were received only "temporarily" until they were "passed-through" to third parties. We conclude that the services are subject to sales tax. We also conclude that TRM must pay the tax on all of its gross receipts.
Facts and Procedural History
[¶2.] This case was submitted on stipulated facts. TRM is an Oregon corporation that owns, operates, sells, leases, and services ATMs in South Dakota. The South Dakota Department of Revenue and Regulation assessed sales tax on transaction processing and surcharge fees that TRM received from sponsor banks and core-data companies.*fn1 Sponsor banks and core-data companies are intermediaries in an ATM transaction. They contract with an ATM cardholder's depository bank to make remote ATM services available for the cardholder. In order to provide the ATMs at remote locations, the sponsor banks and core-data companies contract with TRM to provide and service the ATMs. The sponsor banks then pay TRM for its services.*fn2 The parties stipulated that:
* Pueblo Bank and Trust and First Financial Bank ("sponsor banks"), and core-data companies Star Processing, Inc., . . . and Money Access Service . . . ("core-data companies"), contract with TRM to provide and service ATMs.
* The transactions from which TRM is paid its fees are between TRM, the sponsor bank, and the core-data companies.
* TRM receives its contractual share of the surcharge and transactional fees through either Pueblo Bank and Trust or First Financial Bank for every transaction. The transaction processing fees and surcharge fees paid here are taxable services to someone; they are not exempt services.
[¶3.] The Department adopted a hearing examiner's decision concluding that the sales tax assessment was correct because: "TRM clearly provides a service and it does so for the transaction fees and surcharge fees. TRM provides its services to the sponsor banks [and the] core data companies." The circuit court affirmed. "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." S.D. Dep't. of Revenue v. Sanborn Tel. Coop., 455 N.W.2d 223, 225 (S.D. 1990).
[¶4.] A sales tax is imposed on the gross receipts of businesses engaged ...