October 6, 1980

Mr. Clyde Saukerson 
Deputy State's Attorney 
Davison County Courthouse 
Mitchell, South Dakota 57301

Official Opinion No. 80-62

County Liability for Contractors' Excise Tax Under SDCL 10-46a

Dear Mr. Saukerson:

You have requested an official opinion from this office in regard to the following questions:

QUESTIONS: 

1.  Under what circumstances would the county be subject to the contractor's excise tax contained in 10-46A based on the exceptions delineated in SDCL 10-46A-5? 

2.  What is the county liability for excise tax based on maintenance agreements the county may have with various townships? 

3.  If the county is in fact liable for payment of this excise tax based on work done for the townships to what date would such taxes be retroactively due?

IN RE QUESTION NO. 1:

The Contractor's Excise Tax is a tax imposed upon the gross receipts of all prime contractors and subcontractors engaged in realty improvement contracts. Definitions prescribed in the Standard Industrial Classification Manual of 1972 as prepared by the Statistical Policy Division of the Office of Management and Budget, Office of the President, includes, among others, what is known as Major Group 16, which encompasses highway and street construction. It is applicable, however, only to such street and highway construction which results in the payment of gross receipts to the contractor.  Therefore the county engaging in  its own highway construction would not be liable for the excise tax under that chapter.

IN RE QUESTION NO. 2:

In response to your second question, having to do with work done by the county for various townships, I call your attention to Official Opinion 80-41, a copy of which is attached, which answers this question with the conclusion that highway and street construction performed by a county for a township is subject to the state contractor's excise tax.

IN RE QUESTION NO. 3:

With respect to Question 3, as to the date of tax liability, SDCL 10-46A-2, Sections 12(b) and 12(d), Chapter 84, Laws of 1979, provided that the tax should apply to all realty improvement contracts bid after June 1, 1979.  It is therefore only the gross receipts from those contracts entered into with the township after June 1, 1979 for which the county would be liable for tax.  This section, however, would mean that while it would not apply to specific contracts for construction or maintenance work bid before June 1, 1979, if the county had an open end contract with the townships which did not specify a  particular project but merely committed the county to doing periodic maintenance work for the township the tax would be applicable to the actual work performed after June 1, 1979.  The old excise tax rate was 4 percent, the new excise tax rate after April 1, 1980, is 1 1/2 percent.

Respectfully submitted,

Mark V. Meierhenry
Attorney General