Northwestern Public Service Co. v. Housing & Redevelopment Commission

HENDERSON, Justice

(dissenting).

State government and municipal government have a commonality of existence; to serve the people. South Dakota seeks to impose a cannibalistic tax upon one of its political subdivisions. HRC, however, refuses to capitulate to this cannibalism. Rather, it is trying to serve the people by providing dwelling accommodations for lower-income families as authorized by SDCL ch. 11-7.1 The State, having originally authorized HRC to take care of its needy citizenry, maintains that it shall impose a tax on HRC’s efforts of assistance.

Prior to July of 1979, neither NWPS nor the State made any attempts to collect a gross receipts tax from HRC on the sale of electricity. In fact, HRC received a letter from the State Department of Revenue in June of 1974 which declared that HRC was *518exempt from all gross receipts sales tax provisions. At the bureaucratic direction of the Department of Revenue, however, NWPS was compelled to add a 4-cent sales tax and a 1-cent city sales tax to its charges for electricity provided to HRC.

It has been stipulated that HRC is a political subdivision; that is, a municipal corporation. See SDCL 11-7-7. Municipal corporations are specifically exempted from sales and service taxes as stated in SDCL 10-45-10:

There are hereby specifically exempted from the provisions of this chapter and from the computation of the amount of tax imposed by it, the gross receipts from sales of tangible personal property to the United States, to the state of South Dakota, to public or municipal corporations in the state of South Dakota, to any relief agency, which shall mean a nonprofit charitable organization which devotes its resources exclusively to the relief of the poor and distressed or underprivileged, and has been recognized as an exempt organization under Section 501(c)(3) of the Internal Revenue Code, or to any Indian tribe.

As the majority notes, the pivotal question is whether “tangible personal property” includes electricity. I maintain that it does. The words “tangible personal property” are not defined anywhere in SDCL ch. 10-45. In the chapter dealing with use taxes, however, SDCL 10-46-1(5) states (emphasis mine): “ ‘Tangible personal property’ means tangible goods, wares, merchandise, gas and electricity when furnished or delivered to consumers or users within this state.”2 With regard to the construction and effect of statutes, this Court is bound by SDCL 2-14-4, which provides (emphasis mine): “Whenever the meaning of a word or phrase is defined in any statute such definition is applicable to the same word or phrase wherever it occurs except where a contrary intention plainly appears.” Hence, notwithstanding the lack of definition of “tangible personal property” in SDCL ch. 10-45, the definition of said phrase in SDCL 10-46-1(5) is applicable to the present case. Moreover, several of our neighboring states have concluded that commercially produced electricity is a manufactured product and personal property. See Hetherington v. Camp Bird Mining, Leasing & Power Co., 70 Colo. 531, 202 P. 1087 (1921); State v. Hardin County Rural Electric Cooperative, 226 Iowa 896, 285 N.W. 219 (1939); Minnesota Power & Light Co. v. Personal Prop. Tax, Etc., 289 Minn. 64, 182 N.W.2d 685 (1970); State v. Interstate Power Co., 118 Neb. 756, 226 N.W. 427 (1929).

The majority’s “dichotomous treatment” argument concerning impositions as compared with exemptions simply does not wash in face of our express statutory guidelines and supportive case authority. We have recently expressed that “statutes which impose taxes are to be construed liberally in favor of the taxpayer and strictly against the taxing body.” Nash Finch Company v. South Dakota Department of Revenue, 312 N.W.2d 470, 472 (S.D.1981). I submit that SDCL 10-45-10 should be interpreted and applied to all governmental agencies in a uniform manner. Is it consistent, logical or equitable to hold that HRC is required to pay tax on electricity while other municipal corporations are not? Additionally, does it make sense for the State to tax a subdivision of itself which was originally created to provide low-cost services to the needy? Cannibalism is abhorrent in any form. Under the majority’s holding, the State is providing benefits with its right hand then usurping those same benefits with its left.

I further believe that SDCL 11-7-723 similarly exempts HRC from the gross re*519ceipts tax on electricity for the same reasons expressed in regard to SDCL 10-45-10, SDCL 10-46-1(5) and cited case law. These three statutes are consistent and inextricably impale the State’s position, a position founded upon need arising from a diminishing state treasury. Our State Legislature, elected by the people, sheltered these commissions; the Department of Revenue, surely not elected representatives of the people, have sabotaged the shelter and the Legislature’s will. Thus, I would hold that HRC is exempt from the payment of gross receipts tax on electricity.

. HRC obtained financing for this project by a loan from the United States Government. HRC is not in the business of selling electricity. Each tenant occupies a dwelling or apartment based upon a written lease which obligates HRC to furnish electricity, hot water and gas at no charge to the tenant; each tenant pays rent based on 25% of his or her income. Electricity is provided as per SDCL 11-7-59(3). Each fiscal year HRC is required by federal law to go through a budgetary process. The Federal Department of Housing and Urban Development reviews all operating expenses of HRC, to include expenses for gas and electricity. A subsidy from this federal agency is then determined and if current expenses are higher, the subsidy is increased. In effect, then, the State desires to tax money appropriated by the United States Congress for electricity furnished to the needy. Neither federal law nor state law can justify this procedure.

. It is interesting to note that the State in its brief expresses that fuel oil is tangible personal property but is “unlike electric service” and is therefore exempt. I contend that both are energy and both are capable of producing heat and power.

. SDCL 11-7-72 provides (emphasis mine):

The properties of a commission are declared to be public properties used for essential public and governmental purposes, and such properties and the commission shall be exempt from all taxes and special assessments of the city, *519the county, the state or any political subdivision thereof[.]
To me, “all” means “all”; it does not mean “some.” And it means nothing less than all.