Court Opinion

ID: 9663371
Source: CourtListenerOpinion
Date Created: 2023-08-23 23:36:30.371057+00
Date Added: 2024-06-11T18:14:48.631866
License: Public Domain

WUEST, Chief Justice (on reassignment).
The South Dakota Department of Revenue (Department) appeals from a circuit court decision reversing an order of the South Dakota Secretary of Revenue (Secretary) which directed the Jackpine Gypsies Motorcycle Club, Inc. and the Black Hills Motorcycle Classic, Inc. (Clubs) to pay retail sales tax due on the ticket sales from their annual Black Hills Motorcycle Classic. We reverse.
The Clubs are nonprofit corporations that sponsor the Black Hills Motorcycle Classic and Rally (Classic). The Classic is a week-long series of motorcycle events held in Sturgis and the surrounding Black Hills of South Dakota. The Classic has been an annual event since 1941, and each August there are racing events and other sponsored festivities.
The Department contends that retail sales tax is due on the Club’s ticket sales from the 1984 Classic. The Clubs insist that their receipts are exempt from tax under SDCL 10-45-13(3), which states in pertinent part:
There are specifically exempted from the provisions of this chapter and from computation of the amount of tax imposed by it, the gross receipts from the following: (3) Admissions to community operated celebrations and shows sponsored by a Chamber of Commerce or other similar nonprofit organization if the county, city or town in which the activity takes place officially sponsors the activity and no charge is made to the operators of the celebration or show for the use of county, city or town facilities or services[;]
The Secretary determined that Sturgis was not an official sponsor of the event and ruled that the Clubs were liable for sales tax. The Clubs refused to make their records available to the Department and instead appealed the Secretary’s decision to the circuit court.
The circuit court reversed the Secretary’s decision because the Department’s interpretation of SDCL 10-45-13(3) holding there must be an official resolution to indicate the city’s official sponsorship was too narrow an interpretation. The trial court held under the totality of the circumstances the city’s support for the event constituted official sponsorship. The court found that the statute is ambiguous and fails to give notice to counties, cities or towns that intend to hold similar community operated celebrations, and all ambiguity should be resolved against the taxing authority.
On review, this court is not bound by any presumption that the circuit court decision was correct. We essentially review the agency decision on a fact question as did the circuit court. Raml v. Jenkins Methodist Home, 381 N.W.2d 241, 242 (S.D.1986); State Division of Human Rights v. Miller, 349 N.W.2d 42, 46 n. 2 (S.D.1984). We will uphold the ruling on a question of fact unless, in light of the entire record, the decision is clearly erroneous or we are left with a firm and definite conviction that a mistake has been made. Raml, 381 N.W.2d at 242-243; SDCL 1-26-37; See also, Kienast v. Sioux Valley Co-op, 371 N.W.2d 337, 339 (S.D.1986); Stavig v. South Dakota Highway Patrol, 371 N.W.2d 166, 168 (S.D.1986).
The Secretary of Revenue concluded that “no official sponsorship was ever presented to the city council of Sturgis nor was any action taken by vote of that body to effect an official sponsorship of the 1984 Classic,” and therefore Sturgis was not an official sponsor of the Black Hills Motorcycle Classic. We hold the Secretary was not “clearly erroneous.”
Specific exemptions from a tax will be construed in favor of the taxing power. Application of Veith, 261 N.W.2d 424 (S.D.1978). In order for appellees to be exempt from sales tax on the receipts from admissions to their events, the events must be officially sponsored by the City of Stur-gis. The legislature amended SDCL 10-45-13(3) in 1983 by an Act to clarify certain *595sales tax exemptions and the Act specifically required official sponsorship of the activity by the county, city, or town in which the event takes place. Sponsorship by the local chamber of commerce is no longer sufficient to qualify under this exemption. The change provides that the city must actually be a sponsor, and this implies a formal test of sponsorship.
Governing bodies of municipalities take official action through ordinances or resolutions. 62 C.J.S., Municipal Corporations § 160 (1955); 5 McQuillin, The Law of Municipal Corporations § 15.03 (3d ed. 1986); See also, Baker v. Jackson, 372 N.W.2d 142 (1985); SDCL 19-1-1 (defining and discussing ordinances and resolutions). A decision must be evidenced by a resolution, which in effect encompasses all actions of the municipal body other than ordinances. McQuillin, supra at §§ 15.02, 15.06. Statutes authorize such formal procedures for the purpose of assuring timely notice to the electors of the administrative decisions and determinations of the governing body and provide a full and fair opportunity to refer its decisions to the voters for approval or rejection. Roush v. Town of Esmond, 73 S.D. 406, 43 N.W.2d 547 (1950). The Secretary found that there was no such official action taken by the City.
A community can do many things to help support an annual event that takes place there without necessarily becoming an official sponsor of the event. It may act to insure the public safety or even take steps to insure the overall success of the event.
Sturgis budgeted for extra law enforcement and maintenance of public areas to regulate and insure public safety. It closed Main Street and published city and state regulations for similar reasons. Many of those actions were inherent municipal functions and although city officials cooperated to insure the event was an overall success, none of those actions made the City an official sponsor. Without a clear expression by the people of Sturgis by an initiated vote or a resolution by the city council, we should not hold they are.
In 1982, a resolution was initiated and defeated by the electors of Sturgis. According to the city attorney’s explanation on the ballot:
The initiated resolution would require that the City of Sturgis discontinue leasing space to concessionaires during the period of the motorcycle events, refraining from closing Main Street or in any manner supporting or encouraging the said motorcycle events and that the City of Sturgis would notify Jackpine Gypsies and Black Hills Motorcycle Classic that it is opposed to future motorcycle events being held in the City of Sturgis.
The question was presented in a negative form and merely asked if the residents of Sturgis would have the City cease all support or encouragement for the event and that it oppose the event’s returning to the City. It was a test to determine whether the relationship with the community had been strained by disturbances on city property to the point where the motorcycle rally would no longer be welcome in Sturgis. It made no mention of the city as an official sponsor.
If the city council passed a resolution declaring Sturgis an official sponsor, the measure could be tested by the voters by referendum. Obviously, there are strong feelings as to whether Sturgis should host the event at all, but its residents have settled for an unofficial accommodation. Sturgis has chosen to limit its relationship with the motorcycle rally without jeopardizing it completely.
A city can do much to support an event which draws people and dollars to the area. This involvement can help prevent the celebration from going elsewhere the following year. This event brings in nearly 40,000 people. The evidence does not show an official sponsorship by the City of Sturgis, and the Secretary was not “clearly erroneous” in so holding. We reverse.
FOSHEIM and MORGAN, JJ., concur.
HENDERSON, J., and HERTZ, Circuit Court Judge, Acting as a Supreme Court Justice, dissent.
*596SABERS, J., not having been a member of the court at the time this action was submitted to the court, did not participate.