IN THE MATTER OF THE SALES TAX LIABILITY OF USA TIRE MANAGEMENT SYSTEMS, INC. 389 WEST STEAMBOAT DR. DAKOTA DUNES, SD 57049
Considered on Briefs January 11, 2016
APPEAL FROM THE CIRCUIT COURT OF THE FIRST JUDICIAL CIRCUIT UNION COUNTY, SOUTH DAKOTA. THE HONORABLE STEVEN R. JENSEN, Judge.
MICHAEL M. BILLION of Myers & Billion LLP, Sioux Falls, South Dakota, Attorneys for appellant USA Tire Management Systems, Inc.
ROSA YAEGER of South Dakota Department of Revenue, Pierre, South Dakota, Attorneys for appellee South Dakota Department of Revenue.
ZINTER, Justice. GILBERTSON, Chief Justice, and SEVERSON, WILBUR, and KERN, Justices, concur.
[¶1] USA Tire Management Systems Inc. contests a sales tax assessment on gross receipts it received under a contract to " take title to, remove, and transport" tires and casings from a foreclosed property that a bank was trying to sell. The circuit court affirmed the assessment. We affirm.
Facts and Procedural History
[¶2] USA Tire sells used tires. It also re-purposes used tires and casings into water tanks, snowplows, and manure spreaders. Great Western Bank foreclosed on a Sioux Falls business that dealt in tires. USA Tire initially assisted Great Western in inventorying 4,400 of the debtor's large tires (approximately 4,000 tons) and selling some of them on a commission basis. Under that arrangement, USA Tire estimated it would take five to six years to liquidate the tires. This timeframe was unacceptable to Great Western because it wanted to sell the real property and the tires were " a liability." Great Western offered to give the tires to USA Tire if it would remove them from the property. USA Tire declined the offer because the value of the tires was insufficient to cover the expense of transporting them to its South Sioux City, Nebraska plant. USA Tire counteroffered to take the tires if Great Western would pay the transportation costs. Great Western first attempted to locate salvage or sanitary waste service providers to remove the tires for less cost. However, Great Western was unsuccessful, and in October 2010, the bank entered into a contract with USA Tire to remove the tires.
[¶3] Under the contract, Great Western paid USA Tire in excess of $900,000 to " take title to, remove, and transport" the tires and casings from the property. USA Tire was paid based on the tonnage of the tires and casings removed. USA Tire removed the tires and casings between October 2010 and March 2011.
[¶4] In October 2012, after an audit, the South Dakota Department of Revenue issued a jeopardy assessment on the gross receipts USA Tire received from Great Western under their contract. USA Tire contested the assessment. After several administrative and circuit court reviews, the circuit court upheld the portion of the assessment that is being contested in this appeal. The question is whether USA Tire is entitled to a trucking services tax exemption. Entitlement to a tax exemption requires a strict interpretation in favor of the Department. Paul Nelson Farm v. S.D. Dep't of Revenue, 2014 S.D. 31, P 11, 847 N.W.2d 550, 554. We review whether a statute imposes a tax under a
given factual situation de novo. Id. P 7, 847 ...