Opinion ID: 901516
Heading Depth: 1
Heading Rank: 5

Heading: Choice Privileges Program

Text: [¶ 16.] According to Choice, all monies collected through the Choice Privileges Program are awarded out of the program. As a result, Choice maintains that there is no taxable service because it does not retain a fee for this transaction. As required by this statute, we use the predominant activity test in deciding if the services were subject to sales tax. Watertown Coop. Elev. Ass'n, 2001 SD 56, ¶ 12, 627 N.W.2d at 172. From examining the transaction, it is evident that Choice offers the Choice Privileges Program to the franchisees in return for a fee. As we said in Watertown Coop, we focus on the transaction. See id. [¶ 17.] This program was created to entice guests to stay at franchisee hotels. One guest benefit is that after staying ten nights, the eleventh night is free. When a guest receives a free night's stay, the franchisee suffers a loss. In return for the franchisee's participation in the program, Choice promises to reimburse the franchisee for the cost of the guest's room. All that is required is payment of $2.50 each time a Choice Privileges member stays at that franchisee's hotel. This constitutes an activity engaged in for other persons for a fee. . . . See SDCL 10-45-4.1. Thus it is a taxable service under SDCL 10-45-4. [¶ 18.] Affirmed in part and reversed in part. [¶ 19.] GILBERTSON, Chief Justice, and SABERS, ZINTER, and MEIERHENRY, Justices, concur.