Opinion ID: 1264955
Heading Depth: 2
Heading Rank: 1

Heading: Imposition of the sales tax upon dry cleaners

Text: Robinson argues the sales tax violates the equal protection clause because it is not imposed upon all service providers, only dry cleaners. Both parties agree this Court is charged with applying the rational basis test to determine whether the tax offends the equal protection clause. Under the test the Court is tasked with determining: 1) whether the law treats similarly situated entities different; 2) if so, whether the Legislature has a rational basis for the disparate treatment; and 3) whether the disparate treatment bears a rational relationship to a legitimate government purpose. Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 93 S.Ct. 1001, 35 L.Ed.2d 351 (1973); Bibco Corp. v. City of Sumter, 332 S.C. 45, 504 S.E.2d 112 (1998). Robinson bears the burden of proving the tax is unconstitutional and it must overcome this Court's mandate to sustain a legislative enactment if there is any reasonable hypothesis to support it. D.W. Flowe & Sons, Inc. v. Christopher Constr. Co., 326 S.C. 17, 482 S.E.2d 558 (1997). The fundamental disagreement between Robinson and the State focuses on the first prong of the test. Specifically, each side views the composition of those similarly situated differently. Robinson asserts those businesses similarly situated to it are all service-oriented businesses, while the State asserts similarly situated businesses are only dry cleaners. The State, therefore, defines the class in terms of a distinct trade as opposed to Robinson's formulation of a broad economic sector. A class may be constitutionally confined to a particular trade. See Armour Packing Co. v. Lacy, 200 U.S. 226, 26 S.Ct. 232, 50 L.Ed. 451 (1906); State v. Byrnes, 219 S.C. 485, 66 S.E.2d 33 (1951). As Robinson does not claim the State taxes dry cleaners, i.e. those similarly situated, differently it fails to prove a violation of the equal protection clause. See TNS Mills, Inc. v. South Carolina Dep't of Revenue, 331 S.C. 611, 503 S.E.2d 471 (1998). Assuming, arguendo, Robinson's definition of similarly situated is correct, the argument fails because the State has a rational basis for treating dry cleaners differently. The State's rational basis for treating dry cleaners differently from other service providers serves a legitimate government interest. To find both the legitimate government interest and the rational basis for treating dry cleaners differently, we view the Act in its entirety. See South Carolina Coastal Council v. South Carolina State Ethics Com'n, 306 S.C. 41, 410 S.E.2d 245 (1991) (in interpreting a law a court must look to its language and its meaning in conjunction with the purpose of the whole statute and the policy of the law). In reviewing the entire Act we note the code provides dry cleaners with a tax exemption for supplies and machinery used to perform their services. See S.C.Code Ann. § 12-36-2120(24). As noted by the circuit court, [u]nlike most service industries, dry cleaners have high startup costs as a result of expensive machinery and equipment ... [b]y exempting machinery purchased by dry cleaners and, in turn, taxing their sales, the Legislature makes it less expensive for individuals to start this type of business. The State's rational basis for treating dry cleaners differently from other trades in the service industry is to promote the legitimate governmental interests of fostering economic development in a particular segment of the economy. The Legislature achieves this goal by exempting dry cleaners from paying sales taxes on expensive machinery necessary to start the business in exchange for allowing the payment of sales taxes based on later-earned receipts. Significantly, the State argued below the dry cleaning process involves the use of chemicals and other products posing a threat of environmental harm. The tax may be a method to defray the cost of such harm.