Opinion ID: 2396681
Heading Depth: 3
Heading Rank: 2

Heading: Application to Travelscape

Text: Section 12-36-920(E) imposes the Accommodations Tax on every person engaged or continuing within this State in the business of furnishing accommodations to transients for consideration. Travelscape argues it is not subject to the Accommodations Tax because it: (A) is not engaged in the business of furnishing accommodations, and (B) does not conduct business within the State.
Travelscape first asserts it is not engaged in the business of furnishing accommodations because it neither owns nor operates hotels. According to Travelscape, the ordinary and commonplace understanding of the term furnish, as well as the manner that the term is used throughout section 12-36-920, demonstrates that the term carries with it the connotation of physically providing sleeping accommodations to customers. Because Travelscape is only an intermediary providing hotel reservations to transients and does not physically provide sleeping accommodations, Travelscape contends it is not subject to the Accommodations Tax. We disagree. A statute as a whole must receive practical, reasonable, and fair interpretation consonant with the purpose, design, and policy of lawmakers. Sloan v. S.C. Bd. of Physical Therapy Examiners, 370 S.C. 452, 468, 636 S.E.2d 598, 606 (2006). When faced with an undefined statutory term, the Court must interpret the term in accordance with its usual and customary meaning. Branch v. City of Myrtle Beach, 340 S.C. 405, 409-10, 532 S.E.2d 289, 292 (2000). Courts should consider not merely the language of the particular clause being construed, but the undefined word and its meaning in conjunction with the whole purpose of the statute and the policy of the law. Whitner v. State, 328 S.C. 1, 6, 492 S.E.2d 777, 779 (1997). The United States District Court for the District of South Carolina considered a similar argument in City of Charleston, S.C. v. Hotels.com, 520 F.Supp.2d 757 (D.S.C.2007). In that case, the city of Charleston and town of Mount Pleasant passed nearly identical local accommodations tax ordinances imposing a sales tax on the gross proceeds derived from the rental of any accommodations within municipal boundaries. Id. at 762. Charleston and Mount Pleasant alleged several internet travel companies violated the ordinances by only remitting taxes based on the net rate negotiated with hotels, instead of the marked-up price actually charged to customers on their websites. Id. at 762-63. The legislature enabled municipalities to pass a local accommodations tax by enacting section 6-1-520(A) of the South Carolina Code (2004). In section 6-1-510(1), the legislature defined local accommodations tax as a tax on the gross proceeds derived from the rental or charges for accommodations furnished to transients as provided in Section 12-36-920(A) and which is imposed on every person engaged ... in the business of furnishing accommodations to transients for consideration. (emphasis added). Like Travelscape in this case, the internet travel companies argued Charleston and Mount Pleasant lacked the power to impose the tax on them because they were not engaged in the business of furnishing accommodations. Hotels.com, 520 F.Supp.2d at 767. The district court rejected this argument. In doing so, the district court found the ordinary meaning of the term furnish was to supply what is needed for an activity or purpose. Id. at 768 (citing Webster's II New College Dictionary 454 (2d ed.1999)). The district court further noted [t]he core purpose of the Ordinances is to levy a tax on the amount of money visitors to the municipality spend on their hotel rooms or other accommodations. Id. at 768. With this purpose in mind and with reference to the common understanding of the term furnish, the district court noted its inquiry was directed not at determining who was physically providing sleeping accommodations, but rather on who was accepting money in exchange for supplying the room. Id. Accordingly, the district court denied the travel companies' motion to dismiss. Id. As a general rule, identical words and phrases within the same statute should normally be given the same meaning. Powerex Corp. v. Reliant Energy Serv., Inc., 551 U.S. 224, 232, 127 S.Ct. 2411, 2417, 168 L.Ed.2d 112 (2007). The South Carolina Court of Appeals has long recognized a similar rule. See e.g. Busby v. State Farm Mut. Auto. Ins. Co., 280 S.C. 330, 333, 312 S.E.2d 716, 718 (Ct.App.1984) (citing Pampanga Sugar Mills v. Trinidad, 279 U.S. 211, 218, 49 S.Ct. 308, 310, 73 L.Ed. 665 (1929)) (Where the same word is used more than once in a statute it is presumed to have the same meaning throughout unless a different meaning is necessary to avoid an absurd result.). This Court has held that words in a statute must be construed in context, and their meaning may be ascertained by reference to words associated with them in the statute. Eagle Container Co., LLC v. Cty. of Newberry, 379 S.C. 564, 571, 666 S.E.2d 892, 895 (2008). Travelscape is correct in pointing out that furnish as used in subsection (A) invokes the connotation of physically providing sleeping accommodations to customers. Indeed, the American Heritage Dictionary defines furnish as [t]o equip with what is needed and to supply or give. Am. Heritage Dictionary 540 (2d College Ed.1982). Relying on Powerex, Travelscape argues the term furnish as used in subsection (E) should be read consonant with its use in subsection (A). We agree. As used in subsection (E), furnish does mean to physically provide sleeping accommodations. However, Travelscape's argument ignores the antecedent language in (E) that it applies to all persons engaged ... in the business of furnishing accommodations. Business includes all activities, with the object of gain, profit, benefit, or advantage, either direct or indirect. S.C.Code Ann. § 12-36-20 (2000). Accordingly, we find the context of furnish as it appears in subsection (E) demonstrates that it encompasses the activities of entities such as Travelscape who, whether directly or indirectly, provide hotel reservations to transients for consideration. Contrary to the dissent's view, we do not read the term furnish differently in subsection (E) than we do in (A). Instead, we interpret subsection (E) in such a manner as to give effect to all the language contained thereinparticularly that the entity be engaged ... in the business of furnishing accommodationsrather than focusing on the term furnish in isolation. While Travelscape does not physically provide accommodations, it is in the business of doing so. The legislative purpose of section 12-36-920 supports such a finding. Whitner, 328 S.C. at 6, 492 S.E.2d at 779. In Hotels.com, the district court found the purpose of the ordinances, which were based on section 12-36-920, was to levy a tax on the amount of money visitors to the municipality spend on their hotel rooms or other accommodations. 520 F.Supp.2d at 768. In our view, the legislative purpose of section 12-36-920 is identical. The application of the tax to every person engaged ... in the business of furnishing accommodations also reveals that the legislature intended to levy the tax not merely on those physically providing sleeping accommodations, but on those entities who were accepting money in exchange for supplying hotel rooms. Additionally, section 12-36-920(C) specifically dispels the notion that the tax is imposed only on those entities physically providing the sleeping accommodations. Subsection (C) establishes that the tax is also assessed against real estate agents, brokers, corporations, and listing services. Therefore, we find the legislative purpose of subsection (E) and the context of the term furnish in that subsection demonstrates that Travelscape is subject to the Accommodations Tax because it is engaged ... in the business of furnishing accommodations to transients for consideration. S.C.Code Ann. § 12-36-920(E).
Next, Travelscape argues it is not subject to the Accommodations Tax because it is not engaged in business in South Carolina. Travelscape contends the phrase within the State modifies every person in subsection (E) and thus imposes the tax only on entities having a physical presence in the State. Because it does not have a physical presence in South Carolina, Travelscape asserts it is not required to remit the tax. Travelscape also contends the absence of a use tax in South Carolina and the lack of a provision dealing with out-of-state business transactions in section 12-36-920 demonstrates that the legislature did not intend to impose the Accommodations Tax on Travelscape. We disagree. The taxes imposed by this section are imposed on every person engaged or continuing within this State in the business of furnishing accommodations to transients for consideration. S.C.Code Ann. § 12-36-920(E) (emphasis added). We find the language and sentence structure of subsection (E) reveals that within this State modifies the preceding terms engaged or continuing. As such, the phrase within this State imposes the sales tax on those entities engaged or continuing in the business of furnishing accommodations in South Carolina, without regard to whether the entities maintain offices or otherwise reside in this State. In International Harvester Co. v. Wasson, this Court interpreted identical statutory language in the same manner. 281 S.C. 458, 316 S.E.2d 378 (1984). The statute in Wasson imposed a sales tax upon every person engaged or continuing within this State in the business of selling at retail any tangible personal property. Id. at 460, 316 S.E.2d at 379 (citing S.C.Code Ann. § 12-35-510 (1976)) (emphasis added). We determined the phrase within this State as found in section 12-35-510 required the plaintiff [to be] in [the] business of making retail sales in South Carolina. Wasson, 281 S.C. at 460, 316 S.E.2d at 379. We find within this State as used in section 12-36-920(E) has the same meaning. In accordance with this understanding of within the State, Travelscape will be responsible for remitting the sales tax in question if it was engaged in the business of furnishing accommodations in South Carolina. Clearly, Travelscape was engaged in the business of furnishing accommodations in South Carolina during the audit period, seeing as it: (1) entered into contracts with hundreds of hotels in South Carolina in which the hotels agreed to accept a discounted price, or net rate, for reservations made on Expedia; (2) sent employees to South Carolina for the purpose of negotiating such agreements; and (3) booked reservations in exchange for consideration at hotels located in this State. Accordingly, we find the plain language of section 12-36-920(E) imposes the sales tax on Travelscape because it was engaged in the business of furnishing accommodations in South Carolina.