STATE OF SOUTH DAKOTA
OFFICE OF
THE ATTORNEY GENERAL

THIS OPINION 75-129A IS TO REPLACE ORIGINAL OFFICIAL OPINION 75-129.

December 19, 1975

Secretary Don Dahlin
Department of Public Safety
Transportation Building
Pierre, South Dakota 57501

OFFICIAL OPINION NO. 75-129A

Local rancher's retail sale of his locker plant-processed beef falls under carrier compensation exemption (SDCL 32-9-3)

Dear Secretary Dahlin:

You have requested an official opinion based on the following fact situation:

In order to eliminate the "middle man" concept, Rancher A is hauling his fattened livestock to a locker plant located in a city some distance from his ranch. The locker plant slaughters and processes the beef and packages it for Rancher A. Rancher A picks up the meat and hauls it back to his ranch where he completes the wrapping and packaging of the meat and then offers it for retail sale to customers throughout the State of South Dakota. When orders are received, Rancher A delivers the meat to the customers who are located in rural as well as municipal locations. The meat that Rancher A sells must meet necessary state and federal health standards. He has a sales tax license as per Section 10-45 SDCL. The meat is retail price from $.60 to $3.08 per pound with volume discount on certain quantities.

Specifically, you have asked:

1. Is Rancher A exempt from compensation when he hauls his livestock from his ranch to the locker plant to have the beef processed for retail sale?

2. Is Rancher A exempt from compensation when he returns the meat to his ranch for further wrapping and storage and ultimate sale to customers?

3. Would Rancher A be exempt from compensation on the return trip from the locker plant if he delivered some of the meat that has been previously sold to customers along the way home?

4. Is Rancher A exempt from compensation when he delivers meat to customers within municipalities when the gross weight of the vehicle is 26,000 pounds or less?

5. Would Rancher A's situation change any insofar as delivery to customers are concerned if he sets up a meat processing plant on his ranch and slaughters, processes, and delivers from that location?

Exemptions from compensation must be strictly construed. Mitchell Produce Co. v. Morrison, 63 S.D. 127,257 N.W. 47 (1934). It is nonetheless my opinion that Rancher A may continue his retail meat sales while lawfully retaining his exemption from compensation under the following subsections of SDCL 32-9-3, strictly construed:

(4) When operating motor vehicles within the corporate limits of a municipality and between continguous municipalities or within a distance of three miles thereof;

(6) 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;

(9) When operating a motor vehicle by a farmer of this state in transporting farm property from farm to farm within his vicinity or from local community or market to farm or from farm to a local community or market or in the ordinary exchange of farm work.

(12) When operating a motor vehicle by or for the owner, exclusively used in the transportation of equipment and processed materials to and from a portable flax straw decortications plant, or exclusively used in the transportation of raw materials between storage locations thereof, when such equipment, processed materials, and raw materials are actually owned by the owner of such motor vehicle.

When Rancher A hauls his fattened livestock from his ranch to the locker plant to have the beef processed, he is "transporting farm property from ... farm to a local community," clearly within the SDCL 32-9-3(9) exemption. My answer to your first question is therefore YES.

When Rancher A returns his processed beef to his ranch, he again falls under the subsection nine exemption, "transporting farm property ... from local community ... to farm." Under a statutory exemption for farmers vending "their own products," the North Carolina Supreme Court held that the proviso exempting farmers "included livestock and fresh meats." State v. Spaugh, 129 N.C. 564, 40 S.E. 60 (1901). Even though few farmers in this day and age choose to butcher their own beef, that beef retains its character as a "farmer's own product" while being stored and partially processed for the farmer at the local locker plant. Title does not pass from the farmer to the butcher and back to the farmer, so that the meat loses its "farm product" status along the way. Rather, the farmer is at all times the legal owner of his beef even though he temporarily entrusts the possession of his beef to the locker plant personnel. Thus in this case, unlike the case where the farmer sells his meat to the local locker for them to distribute at will (1955-56 AGR 36), the beef remains a "farm product" whose transfer by the farmer who produced it is exempt under SDCL 32-9-3(9).

Rancher A may also be entitled to exemption under SDCL 32-9-3(12). The meat is a processed material, actually owned by the owner of the motor vehicle and Rancher A is transporting the beef between storage locations. This subsection is arguably subject to varying interpretations. The Honorable Thomas Parker, Judge of the Seventh Judicial Circuit of the State of South Dakota, in State v. Cleveland, January 17, 1969, a case involving the transfer of wood chips from a sawmill to various storage sites, held:

Under subsection 12 ... a motor vehicle operated by or for the owner, which is exclusively used in the transportation of raw materials between storage locations, where the raw materials are actually owned by the owner of the motor vehicle, the vehicle and transportation are exempt from the compensation law requirements.

My answer to your second question is also YES. Rancher A is exempt under SDCL 32-9-3(9) and SDCL 32-9-3(12).

When Rancher A, now acting as a merchant duly licensed under SDCL 10-45, delivers the meat which has been previously sold to customers outside the municipality in a truck with a gross weight of thirteen tons or less, he is exempt from paying compensation under SDCL 32-9-3(6). The answer to question three is therefore YES.

In response to your fourth question, it is my opinion that when Rancher/Merchant A makes in-town deliveries, he is within the 32-9-3(4) exemption.

When Rancher A is transporting his processed meat from his ranch to a municipality, the situation becomes more complex in that the subdivision (4) exemption no longer applies. Subdivision (9) of SDCL 32-9-3, however, provides for an exemption for transportation of farm property from a farm to a local community or market. This exemption might cover Rancher A in his transporting meat from the ranch to a municipality if the municipality involved could be construed to be a local community or a local market.

To attempt to set forth guidelines as to what would constitute such a local community or market constituting an exemption under subdivision (9) cited above, appears to me to be essentially a policy matter for the Legislature, not for this office or for the Department of Public Safety. There is no way under the present language that the Department of Public Safety can be expected to properly administer such a vague and piecemeal piece of legislation or that this office can interpret the law without legislating. The setting of policy here is for the Legislature and it is my considered judgment that the entire area of motor carrier compensation certificates (SDCL 32-9) should be reviewed by the Legislature at the upcoming session with a goal of setting up a fair and workable law that does not require the Department of Public Safety or this office to guess at what the basic policies of the Legislature are.

I quite frankly do not know how I can interpret the provisions of subdivision (9). Attempting to set up a mileage limitation would clearly be legislating and would be very difficult to do since the density of population in the state varies considerably. In trying to apply the law to the situation you present I am confronted with the unusual situation of being unable to answer your question apart from making policy. I hope that the Legislature will take care of the problems you raise through proper legislation; I hereby specifically request that they do so. Until such time as the Legislature acts, it is my opinion on the basis of the facts available to me that the Department of Public Safety should consider the trips of Rancher A to a municipality to deliver his meat products as exempt under the provisions of subdivision (9) cited above.

As to whether Rancher/Merchant A's exempt status would change if he opened his own meat processing plant on his ranch, it is my opinion that he would still be exempt under SDCL 32-9-3(6) provided:

1. His truck was under 26,000 gross weight;

2. He renewed his retailer's sales tax license pursuant to SDCL 10-45 requirements; and

3. His retail merchandise had been previously sold before delivery.

It is therefore my opinion that Rancher A's retail sale of his locker plant-processed beef falls under carrier compensation exemptions, SDCL 32-9-3.

Respectfully submitted,

William Janklow
Attorney General

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