STATE OF SOUTH DAKOTA
OFFICE OF
THE ATTORNEY GENERAL

July 8, 1969

John C. Penne
Auditor General
Pierre, South Dakota 57501

OFFICIAL OPINION NO. 69-64

Collections by and compensation of private tax collection agencies SDCL 1967 10-22-17 through 10-22-52

Dear Mr. Penne:

You have requested my opinion in answer to two questions you have relative to the employment of private collection agencies to collect delinquent personal property taxes due from persons who have moved from the State of South Dakota, as provided by SDCL 1967, 10-22-47 through 10-22-52. Your questions are:

"1. What county funds may be used to pay the compensation for such delinquent personal property tax collectors?

"2. In such collection of delinquent taxes from persons, how, without South Dakota, must such collection agency collect the fifteen percent (15%) additional penalty which is authorized to be collected by the sheriff in collecting delinquent personal property taxes?"

An understanding of the purpose of the statute in question is necessary in order to answer the same. Reference to the statute, as adopted, SDC 57.1030, as added to the 1939 Code by Chapter 285 of the Session Laws of 1965, rather than as fragmented in the 1967 compilation makes the provisions and purposes of such statute clearer to understand.

A reading of the statute as enacted makes it patent that the employment of such South Dakota collection agency, or a member of the South Dakota State Bar is the last resort in collecting personal property taxes of persons who have lived within the state, but have departed the state as personal property tax debtors.

The only accounts that may be given such tax collection agency are those which the County Commissioners have declared to be "uncollectable." No personal property taxes can ever be declared "uncollectable" until a distress warrant for their collection is issued to the sheriff and he returns such distress warrant as unsatisfied. Then, the County Commissioners may declare such taxes un collectable if such board, in its discretion, and after being informed as to the true facts by the sheriff or county treasurer, finds that the ordinary procedures for collecting delinquent personal property taxes will be useless. Once any delinquent taxes are declared "uncollectable," and entered upon the proper records as such, an additional distress warrant may not be issued except upon order of the County Commissioners or the written demand of the sheriff.

When taxes are thus declared to be uncollectable, and in point of fact, are uncollectable by the ordinary processes of tax collection, the 1965 amendment authorized the County Commissioners to employ either a South Dakota collection agency, or a member of the South Dakota State Bar to attempt to collect the delinquent personal property taxes of those tax debtors who have left the state. The Legislature also recognized the right of such tax collectors to receive compensation for their accomplished collection of taxes. The statute itself providing that the compensation to be paid is to be measured by money actually collected, but in no event in an amount exceeding fifty percent (50%) of the delinquent taxes collected from nonresidents of the state. The amount of such compensation must be specified in the resolution appointing such tax collector.

After appointment, the county furnishes such tax collector with the name and last known address outside of South Dakota of such delinquent taxpayers. In the event of collection, the tax collector issues his "delinquent tax collector receipt" in triplicate (the original being delivered to such tax debtor, a copy being furnished the county treasurer and the third kept by such collector for his records.) Upon receipt of such payment the collector must deposit such in trust for the county in a bank. Monthly remittances from such trust account must be made to the county treasurer, who upon receipt of such money issues a regular tax receipt to the tax debtor. The tax collector, in collecting his compensation, is not authorized to make deductions from such trust account, but rather he is required to file a verified claim against the county in a manner as required of any creditor of a county.

While the statute does not expressly so provide, it is apparent that in order for the tax collector to intelligently collect such delinquent taxes, he must be advised as to the amount of delinquent taxes due, together with interest and penalties accruing on the same. The statute, it should also be mentioned, does not require the collector to collect such taxes, interest and penalty in full, but rather authorizes any collection of such delinquent taxes. This is inferred from the fact that after the collection of payments upon such delinquent taxes, and the issuance of the collector's receipt, the deposit of such funds in a trust account, and its remittance to the county treasurer, the county treasurer:

"shall issue a regular tax receipt FOR THE AMOUNT PAID and cause the same to be promptly delivered to the tax debtor." (Emphasis added.)

There can be no question that such statute is an attempt to authorize other methods than the traditional methods in collecting delinquent personal property taxes. The sheriff, in using a distress warrant, can levy and seize property of the tax debtor in the county. The tax collector may use other methods to collect such taxes.

With a knowledge of the purposes and mechanics provided by the 1965 statute, the questions submitted may be intelligently answered.

QUESTION 1: The tax collector must remit all moneys he collects from tax debtors. He cannot deduct his compensation therefrom. He must file a claim against the county as any ordinary creditor of a county is required to do. There seems little question that his compensation, after the filing of such verified claim, is payable from the general funds of the county.

The County Budget Law provides that no money may lawfully be taken from the county treasury unless it is in payment of an item provided in either the regular or supplemental county budget. I agree with your conclusion that the county must include payments for such tax collectors in its budgets before such delinquent tax collector may receive compensation for the services he has rendered.

QUESTION 2: As I have pointed out, the statute does not require collection of delinquent taxes, together with interest and penalty before such tax collector may receive payments on such delinquent taxes by an out-of-state tax debtor. Such a requirement, in my mind, would tend to destroy the purposes of the statute-to get tax payments in those instances when traditional tax collection methods either fail or are inappropriate. See: 1953-1954 AGR 234.

In those instances (which in my opinion would be less frequent than collection of a part of such delinquent taxes) where the full amount of taxes, penalties and interest is effected by the tax collector, he shall not add the 15% additional penalty which is authorized to be collected by the sheriff in executing a distress warrant. See: 1947-48 AGR 276; and 1959-60 AGR 89.

Respectfully submitted,

Gordon Mydland
Attorney General