Opinion ID: 1717328
Heading Depth: 1
Heading Rank: 5

Heading: exemptions from tax liability

Text: National claims that it is exempt from sales tax on fuel cost reimbursement under SDCL 10-45-11 and for PAI under either SDCL 10-45-12.1 or SDCL 10-44-8. Under Northwestern Public Service Co. v. Aberdeen Housing and Redevelopment Comm'n, 320 N.W.2d 515 (S.D.1982), and K Mart Corp., Inc. v. South Dakota Dept. of Revenue, 345 N.W.2d 55 (S.D.1984), tax exemption statutes are construed strictly against the person claiming exemption. Exemptions are a matter of legislative grace and doubts are resolved in favor of taxation. In many of the cases, the taxpayer claims to be in a separate business such as the sale of transportation, PAI, or the sale of gasoline. These taxpayers could legally have engaged in their businesses and avoided tax because those types of businesses were exempt. However, the courts refused to allow these taxpayers to split off small, nontaxable portions of the business. If you are engaged in a taxable business, all of your receipts from that business are subject to tax. See cases cited in footnote. If the courts do not allow taxpayers to split off legitimate, related business activity, surely this taxpayer should not be allowed to split off pieces of business which National is not legally licensed to operate. National may not legally sell fuel or insurance because National is not licensed to do either. It is apparent that the legislature intended to exempt from sales tax only those receipts upon which insurance premium tax is paid. Because tax exemptions are strictly construed against the person claiming exemption, National has the burden of proving that insurance premium tax was paid on amounts received for PAI. There is no such proof in this record. The insurance company received 25% or less of the amount received by National for PAI. National retained 75%. If the insurance company paid any tax on these receipts at all the tax was paid only on the 25% or less that the insurance company received. National cannot claim exemption for sales of gasoline or PAI, because National does not fit within any exemption. National does not sell gas, it rents cars. Because National is not an insurance agent or an insurance company which pays the insurance premium tax, it may not claim that exemption either. One who claims exemption from taxation must show that his exemption is clearly within the letter and spirit of the law. 3A Sutherland, Statutory Construction, § 66.09 (rev. ed. 1986) at 328. National has failed to establish that its claimed exemptions are clearly within the letter and spirit of the law. Id. In conclusion, National is in the car rental business and subject to tax on all receipts from those rentals, regardless of how those receipts are categorized by National in its own business records. In summary, gross includes everything without deduction. Reversed and remanded. WUEST, C.J., and MORGAN and MILLER, JJ., concur. HENDERSON, J., dissents.