July 25, 1979

Mr. Louis Graslie, Superintendent 
Belle Fourche Public Schools 
Belle Fourche, South Dakota 57717

Official Opinion No. 79-23

Does the Contractors' Excise Tax apply to contractors making realty improvements for a school district?

Dear Mr. Graslie:

You have requested an official opinion from this office based upon the following factual situation:

FACTS: 

In November of 1978 the voters of our school district approved expenditures of $1,490,000.00 through the sale of bonds and capital outlay certificates. On July 17, 1979, bids for the improvements were opened.  The amount of the lowest bid was in excess of the amount approved by the voters.  The bid exceeded approved funding by approximately the amount of the recently enacted Contractors' Excise Tax.

Based upon the above facts you ask the following question:

QUESTION: 

Are gross receipts from realty improvements made under contract with a school district subject to the Contractors' Excise Tax?

In 1979 the Legislature enacted a tax of 4 percent upon the gross receipts of prime contractors engaged in realty improvement contracts.  The new tax was enacted in House Bill 1039 which has been codified as SDCL 10-46A.

The Contractors' Excise Tax contains neither an exemption for contractors contracting with school districts nor an exemption for school districts themselves.  Therefore, there is no statutory exemption from tax under the facts which you have supplied. Furthermore, I believe that under the holding of the court in Friessen Const. Co. Inc. v. Erickson, 90 S.D. 60, 238 N.W. 2d 1978 (1976) there is no constitutional provision which would prohibit imposition of tax in this situation.

The answer to your question is yes.

Respectfully submitted,

Mark V. Meierhenry
Attorney General

MVM/GRW/np