Articles Posted in Tax Law

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The Supreme Court affirmed the judgment of the circuit court granting summary judgment for certain Internet sellers (Sellers) and enjoining the State from enforcing 2016 legislation extending the obligation to collect and remit sales tax to sellers with no physical presence in the state. Pursuant to the legislation, the State brought this declaratory judgment action seeking a declaration that Sellers, who had no physical presence in the state, must comply with the requirements of the 2016 legislation. The circuit court enjoined the State from enforcing the obligation to collect and remit sales tax against Sellers, observing its obligation to adhere to Supreme Court precedent prohibiting the imposition of an obligation to collect and remit sales tax on sellers with no physical presence in the State. The Supreme Court affirmed, holding that the circuit court correctly applied the law when it granted Sellers’ motion for summary judgment. View "State v. Wayfair Inc." on Justia Law

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The Department of Revenue subjected several corporations owned by North American Truck & Trailer, Inc. (collectively, Taxpayers) to a sales-and-use-tax audit, which uncovered errors regarding Taxpayers’ reporting of use tax. Thereafter, the Department assessed Taxpayers for unpaid use taxes. Taxpayers paid the assessment under protest and requested an administrative hearing. At the hearing, Taxpayers argued that the shop supplies assessed were exempt from use tax and offered exhibits in support of their position. The hearing examiner declined to consider a sales invoice offered by Taxpayers demonstrating a typical transaction that involved the cost of supplies because Taxpayers submitted it more than sixty days after the audit began, in violation of S.D. Codified Laws 10-59-7. The Supreme Court affirmed, holding that the hearing examiner did not err when it (1) affirmed the Department’s refusal to consider the sales invoice; and (2) affirmed the Department’s certificate of assessment of use tax due and owing on transactions where shop supplies, purchased without payment of sales tax, were used and consumed. View "Black Hills Truck & Trailer, Inc." on Justia Law

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USA Tire Management Systems Inc. entered into a contract with Great Western Bank to “take title to, remove, and transport” tires and casings from a foreclosed property that a bank was attempting to sell. After an audit, the South Dakota Department of Revenue issued an assessment on the gross receipts USA Tire received from Great Western under their contract. USA Tire contested the assessment. The circuit court affirmed the assessment. USA Tire appealed, arguing that it was entitled to a trucking services tax exemption. The Supreme Court affirmed, holding that USA Tire did not meet its burden of proving that its services were exempt trucking services under S.D. Codified Laws 10-45-12.1. View "In re Sales Tax Liability of USA Tire Mgmt. Sys., Inc." on Justia Law

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In 2012, the South Dakota Department of Revenue (Department) commenced an audit of Taxpayer’s excise tax and sales tax licenses for tax period 2009 through 2012. At issue in this case was whether Taxpayer’s construction management at-risk services provided to public and non-profit entities were subject to a contractor’s excise tax under S.D. Codified Laws 10-46A-1. Taxpayer did not remit excise tax on the gross receipts it received from its construction management at-risk services provided to public and non-profit entities. As a result of the audit, the Department issued Taxpayer a certificate of assessment for $43,020, which included excise tax and interest. The circuit court reversed the Department’s certificate of assessment, ruling that Taxpayer’s services were not subject to a contractor’s excise tax under section 10-46A-1. The Supreme Court reversed, holding that Taxpayer’s act of entering into a contract with a public entity to guarantee a satisfactorily completed public improvement project by a specific date for a specific cost was subject to excise tax under section 10-46A-1. View "Puetz Corp. v. S.D. Dep’t of Revenue" on Justia Law

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At issue in this case was the homestead exemption’s prohibition on the collection of real property taxes under S.D. Codified Laws 43-31. In January 2014, prior to turning seventy years old, John Reints filed an application for a prohibition on the collection of real property taxes assessed on his home in 2013. Pennington County denied Reints’s request because he had not turned seventy prior to January 1, 2014. The Department upheld the determination, determining that the prohibition does not apply to taxes assessed prior to the year in which the applicant reaches seventy years of age. The circuit court affirmed. The Supreme Court affirmed, albeit on different grounds, holding (1) once a prohibition is granted under chapter 43-31 a county is restrained from collecting any real property taxes on the applicant’s single-family dwelling, regardless of when those taxes were assessed; (2) nevertheless, an applicant cannot establish a base year under the exemption until he actually reaches the age of seventy; (3) because Reints was only sixty-nine years old when he submitted his application, he had not established a base year as required by section 43-31-32; and (4) therefore, Reints’s application was properly denied. View "Reints v. Pennington County" on Justia Law

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The South Dakota Department of Revenue assessed Northern Border Pipeline Company, the operator of an interstate pipeline that provides transportation services to natural gas owners who desire to ship their gas, for use tax on the value of the shippers’ gas that the shippers allowed Northern Border to burn as fuel in compressors that moved the gas through the pipeline. An administrative law judge affirmed the assessment. The circuit court reversed, holding that Northern Border’s burning of the shippers’ gas was exempt from use tax under a tax exemption. The Supreme Court affirmed, holding that because Northern Border did not own the gas, use tax may not be imposed under this Court’s precedents. View "N. Border Pipeline Co. v. S.D. Dep’t of Revenue" on Justia Law

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In 2012, Citibank, Inc. filed with the South Dakota Department of Revenue a request for a refund of bank franchise taxes paid for the tax years 1999, 2000, 2001, and 2002. The Department denied the tax refund claim, concluding that the refund claim was filed after the three-year statute of limitations had expired pursuant to S.D. Codified Laws 10-59-19. Citibank requested an administrative hearing before the Office of Hearing Examiners (OHE). OHE dismissed the case for lack of jurisdiction, finding that the refund claim was time-barred by the three-year statute of limitations. The Supreme Court affirmed, holding that Citibank’s 2012 request for a refund of bank franchise taxes was time-barred by section 10-59-19 and, furthermore, equitable tolling was not available to Citibank in this case. View "Citibank, N.A. v. S.D. Dep’t of Revenue" on Justia Law

Posted in: Tax Law

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The property at issue in this case was transferred to Deadwood Stage Run, LLC (Developer) in early 2006. On December 18, 2006, the City of Deadwood created Tax Incremental District Number Eight (the District) out of the property. After the City and Developer entered into a contract for private development of the District, Lawrence County sent its 2007 assessment of the property reflecting the most recent assessment of $934,520. The Developer sought a declaratory judgment prospectively establishing the 2006 assessed valuation of the District as the appropriate tax incremental base rather than the 2007 assessed valuation, arguing that the Department of Revenue incorrectly calculated the tax incremental base for the District in the City by using the County’s November 1, 2006 annual assessment rather than the Department’s August 25, 2006 annual Certificate of Assessment, Equalization, and Levy. The circuit court granted summary judgment in favor of the Department. The Supreme Court affirmed, holding that, in calculating the tax incremental base for a tax incremental district, the Department is statutorily required to use the last aggregate assessed valuation certified by the Department prior to the date of creation of the tax incremental district. View "Deadwood Stage Run, LLC v. Dep’t of Revenue" on Justia Law

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This case involved three establishments (collectively, Establishments) that ran promotional programs intended to attract patrons to their casinos. In essence, if the patrons joined an establishment’s club, they received coupons or credits called “free play” that allowed them to play slot machines without using any of their personal money. The Establishments sued the South Dakota Department of Revenue and Regulation requesting a declaration that free play was not part of adjusted gross proceeds and was therefore not subject to gaming tax. The circuit court granted summary judgment for the Department, ruling that free play was not a deductible event in the calculation of adjusted gross revenue. The Supreme Court reversed, holding that the relevant statutes and regulations do not include the value of free play for slot machines in the calculation of an establishment’s adjusted gross revenue, and therefore, the circuit court erred in ruling that the Establishments must remit gaming tax for the value of free play. View "First Gold, Inc. v. Dep’t of Revenue and Regulation" on Justia Law

Posted in: Gaming Law, Tax Law

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Paul Nelson Farm (“Appellee”) operated an all-inclusive hunting lodge in South Dakota. The Department of Revenue and Regulation conducted an audit on Appellee and determined that Appellee owed unpaid use tax on food, beverages, and ammunition. Appellee argued that it was not required to pay use tax on those items because the food, beverages, and ammunition were not purchased for end use by Appellee but were instead purchased for resale to hunting lodge customers in Appellee’s ordinary course of business. The circuit court affirmed in part and reversed in part, concluding that Appellee was not required to remit use tax on the food but was required to remit use tax on the beverages and ammunition. The Supreme Court held that use tax was not properly imposed on any of the goods because the items were purchased for resale to Appellee’s customers in the regular course of business, and therefore, Appellee’s control and possession of the items did not constitute “use” as defined by S.D. Codified Laws 10-46-1(17). View "Paul Nelson Farm v. S.D. Dep’t of Revenue" on Justia Law