January 30, 1975
Colonel Dennis Eisnach
Superintendent
South Dakota Highway Patrol
118 West Capitol
Pierre, South Dakota 57501
OFFICIAL OPINION 75-14
Request for memorandum opinion on compensation question
Dear Col. Eisnach:
You have asked for my opinion based on the following fact situation:
An elevator operator has an elevator in city A in the state of South Dakota. He is licensed under chapter 10-45 (Sales Tax License) of the SDCL. Customers order a mixed livestock feed from this elevator operator, a product that he does not keep on hand at his elevator and apparently is not in a position to mix or prepare on his premises. It is quite likely that he also solicits their requests for this product either by word of mouth or in the normal advertisement channels. In order to provide his customers with this product which he does not carry, he utilizes a truck owned by him of a gross of less than 26,000 pounds to go to Elevator B in a neighboring state to pick up the produce. The load is then hauled directly from Elevator B to the customers and at no time is it hauled back to Elevator A.
SDCL 32-9-3 (6) contains the following exemption from the definition of motor carriers required to purchase compensation certificates:
When operating a motor vehicle of less than twenty-six thousand pounds gross weight owned by a merchant licensed under chapter 10-45 or his commissioned paid employee and used in transporting his employer's previously sold merchandise to a purchaser outside the limits of a municipality and in returning exchanged property;
Exemptions from a taxing statute must be strictly construed and any doubts resolved against exemption. 1953-54 AGR 252.
Since you concede that the motor vehicle in question is less than 26,000 pounds gross weight, that the elevator operator is licensed under SDCL 10-45, and that the merchandise is previously sold merchandise, the only questions are whether it is this elevator A's previously sold merchandise or someone else's previously sold merchandise, and whether elevator A can haul directly from elevator B to the customers.
If the merchant in question is simply taking orders for, and delivering someone else's previously sold merchandise, he is merely an agent for that other merchant and the exemption does not apply. If, on the other hand, the merchant in question purchases the goods from elevator B, collects the money himself (including sales tax on the sale where applicable) and then delivers the goods from his business location, he is entitled to the exemption. See 1953-54 AGR 252; 1951-52 AGR 240; 1949-50 AGR 268; 1947 AGR 367.
While it is permissible for elevator A to deliver goods from a remote location, such as a warehouse, the warehouse or remote location must belong to elevator A. 1965-66 AGR 104, 105, 106. Therefore, under your hypothesis elevator A would be required to haul the goods from elevator B to one of elevator A's places of business. 1965-66 AGR 104. Of course, this haul would be subject to payment of compensation, 1953-54 AGR 252, 253; 1953-54 AGR 136, 139; 1951-52 AGR 1; 1947-48 AGR 367. Once the goods have been received at one of the elevator A's locations, their delivery to customers would be exempt from compensation (assuming, of course, that they were previously sold to a purchaser outside the city limits). 1965-66 AGR 104; 1953-54 AGR 252; 1953-54 AGR 136; 1951-52 AGR 1; 1947-48 AGR 367.
Therefore, it is my opinion that in order to be exempt from payment of compensation elevator A must (1) own the merchandise before it is sold and delivered, (2) collect sales tax on the merchandise (where applicable), and (3) deliver the merchandise from one of elevator A's locations, not directly from elevator B.
Respectfully submitted,
WILLIAM J. JANKLOW
ATTORNEY GENERAL
WJJ:MAG:rw
