Ed Robinson Laundry & Dry Cleaning, Inc. v. South Carolina Department of Revenue

Chief Justice TOAL:

I respectfully dissent because I disagree with the majority on both issues I and II. In my opinion, there is no rational basis for treating dry cleaning services differently from other services. I would also find that when viewed in the light most favorable to Robinson, a genuine issue of material fact exists as to whether the sixty-one exceptions to the sales tax are arbitrary and capricious and thus violate the Equal Protection Clause. Fleming v. Rose, 350 S.C. 488, 567 S.E.2d 857 (2002).

I

In my view, the sales tax violates the rational basis test and thus violates equal protection. Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 93 S.Ct. 1001, 35 L.Ed.2d 351 (1973); Bibco Corp. v. City of Sumter, 332 S.C. 45, 504 S.E.2d 112 (1998). Because I believe that dry cleaning services are part of the same class as other service providers, I would hold that the statute treats “similarly situated” entities differently. Further, I would hold that there is no rational basis for singling out dry cleaners — to the exclusion of other services— for sales tax purposes. Finally, I am not persuaded by the assertion that since the sales tax statute exempts dry cleaners’ start-up machinery and equipment costs, S.C.Code Ann. § 12-26-2120(24), dry cleaners are obligated to pay a sales tax on their services. While the trial judge’s statement that the majority quoted, “[ujnlike most service industries, dry cleaners have high startup costs as a result of heavy machinery and equipment” may have been true in the 1950’s,5 it certainly is not the case in today’s economy. All service industries incur *128significant startup costs, whether they come in the form of equipment, labor, rent, or other overhead costs. I find no reason today for singling out dry cleaners’ startup costs as a justification for imposing a sales tax upon their services when all other services also are faced with high costs to enter the marketplace, yet a sales tax is not levied on their services. Therefore, in my view, segregating dry cleaning services from all other services does not rationally relate to a legitimate government purpose.

II

I would also find that Robinson raised a genuine issue of material fact as to whether the 61 exemptions found in S.C.Code Ann. § 12-46-2120, in toto, amount to an arbitrary classification of different entities for tax purposes that is unconstitutional. See City of Laurens v. Anderson, 75 S.C. 62, 64, 55 S.E. 136, 137 (1906) (for a law to be deemed constitutional, it “must possess two indispensable qualities: [f|irst, it must be framed as to so extend to and embrace equally all persons who are or may be in the like situation and circumstances; and secondly, the classification must be natural and reasonable, not arbitrary and capricious.”). Although this Court ruled in 1951 that the then 19 exemptions to the sales tax were not a “tyrannical exercise of arbitrary power,” it is my view that they would conclude that 61 exemptions would rise to that level. State ex rel. Roddey v. Byrnes, 219 S.C. 485, 515, 66 S.E.2d 33, 46 (1951).

The State attempted to pigeonhole 33 of the exemptions into six neat categories for tax classification purposes in an effort to illustrate that the exemptions are not arbitrary and capricious. In my opinion, the whimsical nature of the other 28 exemptions renders this legislation arbitrary and capricious. For example, broadcasting companies fare well under the statute, as “all supplies, technical equipment, machinery, and electricity sold to radio and television stations, and cable television systems, for use in producing, broadcasting, and distributing programs” are exempted from the sales tax. S.C.Code Ann. § 12-36-2120(26). The same purchases are tax-free for motion picture companies. S.C.Code Ann. § 12-36-2120(43). Vacation time-sharing plans are exempt. S.C.Code Ann. § 12-36-2120(31). Promotional direct mail *129advertising materials are also exempt. S.C.Code Ann. § 12-36-2120(58).

Based on the foregoing reasoning, I would hold that the legislature had no rational basis for singling out dry cleaners from other services for sales tax purposes, and I would reverse the trial judge’s grant of summary judgment and remand the exemption issue to determine whether the entire retail tax exemption statute is unconstitutional based on its whimsical treatment of various entities for tax purposes.

Acting Justice DIANE S. GOODSTEIN, concurs.

. The original statutes providing for the exemption for start-up supply and machinery costs and for the tax on dry cleaning services were enacted in the 1950's.