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24838 - Fraternal Order of Police, et al. v. South Carolina Department of Revenue

Davis Adv. Sh. No. 31
S.E. 2d

THE STATE OF SOUTH CAROLINA

In The Supreme Court





Fraternal Order of Police, Charleston Lodge #3, Pet

Helpers, Inc., d/b/a Shipwatch Bingo, Am-iy Navy Union

Garrison #2020, Faith Temple Full Gospel Fellowship

Church, A Terre Des Hommes USA, Inc., Cherokee

Suicide Intervention Center, Inc., Army Navy Garrison

#2165, Lexington Voiture 1211 La Societe Des 40 & 8

d/b/a Sunset Bingo, United Veteran Association, Inc.

Roadrunners Softball Association, Inc., United Society

of the Blind of Greenwood, The Good Samaritan

Mission Center d/b/a Beacon Bingo, Fraternal Order of

the Elks (BPOE), Greenville Lodge No. 858, Piedmont

Historical Society d/b/a Great American Bingo, Pilgrim's

Inn, Inc., West Main Community Club, Ms. Wheelchair

South Carolina, Inc., Citizens for Advancement of the

Physically Handicapped, Post 174 American Legion -

Ladies Auxiliary, HF Help Corporation, Army Navy

Garrison #2156, Cherokee Gaffney Sertoma Club 10752,

South Carolina Dairy Goat Association, Grand Strand

Optimist Club d/b/a Galaxy Bingo, Miss Dillon County

Beauty Pageant, Inc., Church in the Lord Jesus Christ

of The Apostolic Faith, Inc. - Chesterfield Church in the

Lord Jesus Christ of the Apostolic Faith, Inc. - Lake

City, Church in the Lord Jesus Christ of the Apostolic

Faith, Inc. - Darlington, Church of the Lord Jesus

Christ of the Apostolic Faith, Inc. - Lynchburg,

Dovesville Rural Fire Department, Union Baptist

Church, VFW #3181,

Appellants,

v.

South Carolina Department of Revenue,

Respondent.



AFFIRMED IN PART; REVERSED IN PART;

AND REMANDED





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FRATERNAL ORDER OF POLICE, et al. v. SC DEPT. OF REVENUE





Appeal From Richland County

Marc H. Westbrook, Judge





Opinion No. 24838

heard February 18, 1998 - Filed September 14, 199E





Joseph Alton Bivens and Gerald M. Finkel, both of

Finkel & Altman, L.L.C., of Columbia; and Mark A.

Mason, of Mason Law Firm, P.A. of Mt. Pleasant, for

appellants.





Ronald W. Urban, Harry T. Cooper, Jr., and Jeffrey

M. Nelson, all of the South Carolina Department of

Revenue, of Columbia, for respondent.





FINNEY, C.J.: This is a tax refund case brought by bingo

operators. The Department denied the refund, and that ruling was

affirmed by the administrative law judge and the circuit court. We affirm

in part and reverse in part.





This appeal requires the Court to construe several statutes

which were repealed effective October 1, 1997. The parties have stipulated,

however, that our decision will govern liability and refunds for the period

July 1, 1992 to September 30, 1997.





The first issue is whether bingo taxes collected pursuant to S.C.

Code Ann. §§ 12-21-3440(B) and 12-21-3441 (Supp. 1997) are included in

gross proceeds so as to be subject to the sales and use tax imposed by S.C.

Code Ann. § 12-21-3610 (Supp. 1997). The Department, the administrative

law judge, and the circuit court judge held the bingo tax was a component

of gross proceeds and thus subject to the sales tax. We disagree, and

reverse.





The Bingo Act's definitional statute defined "gross proceeds" as

"the total amount received from the sale of bingo cards and entrance fees

charged at locations in which the bingo is conducted." S.C. Code Ann. §

12-21-3320(8) (Supp. 1997). Statutory language is to be given its plain and

ordinary meaning. McClain v. South Carolina Dep't of Educ., 323 S.C. 132,

473 S.E.2d 799 (1996). Under the primary bingo tax statute, Class AA and

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FRATERNAL ORDER OF POLICE, et al. v. SC DEPT. OF REVENUE





B license holders collect a "per player" bingo tax while Class D and E

holders remit a bingo tax calculated as a percentage of gross proceeds.

Compare § 12-21-3440(B)(1) and (2) with § 12-21-3440(B)(4) and (5).

Statutes should not be construed so as to lead to an absurd result.

Carolina Power & Light v. Town of Pageland, 321 S.C. 538, 471 S.E.2d 137

(1996). As noted above, for Class D and E holders, bingo tax liability is

based on a percentage of their gross proceeds. To hold then, that the bingo

taxes are a component of gross proceeds demonstrates the reductio ad

absurdum of the Department's position. The bingo tax is not a component

of gross proceeds, and accordingly is not subject to the sales and use tax.1





The next issue is whether gross proceeds includes the monies

bingo operators are statutorily required to pay out as prize money under

§ 12-21-3420(12) (Supp. 1997). The circuit court held these funds are part

of the taxable gross proceeds, and that to adopt the operators' argument

that these funds are excluded would be to rewrite "gross proceeds" as "net

proceeds." We agree. The statute defines gross proceeds as "the total

amount received from the sale of bingo cards and entrance fees. . . .", and

provides no deduction for prize money or any other expense. The statutory

language is clear and unambiguous. McClain v. South Carolina Dep't of

Educ., supra. We affirm the circuit court order including prize money as

gross proceeds subject to the sales and use tax.





The third issue is whether the operators are entitled to a

refund of the sales taxes they paid on their retail purchases of bingo cards,

which they then resold to the players. The circuit court upheld the denial

of this refund request, holding (1) the resale of bingo cards is incidental to

the transaction2 between the operator and the player, which is the wager;


1Even if we were to find some ambiguity on this point, we would be

compelled to find the imposition of the sales tax upon the bingo tax an

improper "tax upon a tax." There is a strong presumption against such

double taxation, and statutes will be construed so as to permit it only

where legislative intent to do so is clear. Wingfield v. South Carolina Tax

Comm'n, 147 S.C. 116, 144 S.E. 846 (1928); Greystone Catering Co. v.

South Carolina Dep't of Rev., 326 S.C. 551, 486 S.E.2d 7 (Ct. App. 1997).

No clear intention sufficient to overcome the strong presumption exists

here.



2 According to the "true object test", sales which are merely

incidental to the transaction and not its true object are not exempt from

the retail sales tax. See Journal of Multistate Taxation, vol. 5, No. 6, pp.

p.20


FRATERNAL ORDER OF POLICE, et al. v. SC DEPT. OF REVENUE





and (2) that the operators lack standing to pursue the refund of a retail

tax they paid. Operators first argue that while this standing holding is

technically correct, they are classified as retailers in this transaction only

because they have erroneously been denied a wholesaler exemption. We

find this argument is not preserved because although the operators raised

it to the circuit court, that court failed to rule on the issue and operators

failed to call this omission to the circuit court's attention in a Rule 59(e),

SCRCP, motion. Talley v. South Carolina Higher Educ. Tuition Grants

Comm., 298 S.C. 483, 347 S.E.2d 99 (1986). Were we to reach the merits

of this claim, however, we would agree the sale of the bingo cards is

merely incidental to the true object of the transaction between the

operators and the players. We therefore affirm the denial of this refund

request.





For the reasons given above, the order of the circuit court is

affirmed in part and reversed in part, and the matter remanded to the

Department of Revenue for appropriate action.





AFFIRMED IN PART; REVERSED IN PART; AND

REMANDED.





TOAL, MOORE, WALLER, and BURNETT, JJ., concur.










244-253 (Jan/Feb. 1996). The parties have not argued that we should not

apply this analysis in this appeal.



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