Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Rent-A-Center East, Inc. v. South Carolina Department of Revenue

Court of Appeals of South Carolina

January 16, 2019

Rent-A-Center East, Inc., and Rent Way, Inc., Appellants,
v.
South Carolina Department of Revenue, Respondent. Appellate Case No. 2016-001210

          Submitted October 2, 2018

          Appeal From The Administrative Law Court Harold W. Funderburk, Jr., Administrative Law Judge

          John C. Von Lehe, Jr. and Bryson Moore Geer, both of Nelson Mullins Riley & Scarborough, LLP, of Charleston, for Appellants.

          Lauren Acquaviva and Sean Gordon Ryan, both of Columbia, for Respondent.

          OPINION

          THOMAS, J.

         Rent-A-Center East, Inc. and Rent Way, Inc. (collectively, Taxpayers) appeal the decision of the Administrative Law Court (ALC) finding the gross proceeds from Taxpayers' rental of tangible personal property included fees from the sale of "Optional Liability Waiver Provisions" (Waivers). On appeal, Taxpayers argue the ALC erred in (1) failing to apply the appropriate rules of statutory construction to the applicable taxing statutes; (2) finding the Waivers were taxable when no imposition statute imposes a tax on waivers; (3) relying on the measure of tax statute when no imposition statute was invoked; (4) finding the Waiver proceeds were part of Taxpayers' gross proceeds of sale; (5) failing to determine whether the intangible Waivers were subject to sales tax; and (6) finding the "Consumer Rental-Purchase Agreements" (Rental Agreements) and Waivers constituted a single agreement or transaction. We affirm.

         FACTS/PROCEDURAL HISTORY

         Taxpayers operate retail stores in South Carolina from which customers can rent-to-own durable consumer goods such as televisions, computers, appliances, and furniture. A customer who rented goods from Taxpayers was required to enter into a Rental Agreement. Under the Rental Agreement, the customer chose a weekly, monthly, or semi-monthly rental term and made rental payments accordingly. A customer could acquire ownership of a rental item by making all term payments for a specified number of rental terms. The customer could also unilaterally terminate the Rental Agreement at any time by returning the rental property and paying any overdue fees. The Rental Agreement contained a "Risk of Loss and Damages" section which provided the customer was responsible for the fair market value of the rental property if it was lost, stolen, damaged, or destroyed.

         Taxpayers also offered customers a Waiver. The Waiver gave the customer the option to pay an additional fee along with the rental term payment-weekly, monthly, or semi-monthly. If a customer chose to pay the Waiver fee, Taxpayers would waive the customer's liability for the value of the rental property in the event of certain enumerated conditions: lightning, fire, smoke, windstorm, theft, or flood. The Waiver provided Taxpayers would waive the customer's liability only if the customer "paid all periodic rental payments including the liability waiver fee through the date of loss and . . . complied with all other terms of [the] Rental Agreement . . . ." Either the customer or Taxpayers could terminate the Waiver at any time without notice; the termination became effective at the end of the rental term. The Waiver further stated it was "an additional part of the Rental Agreement."

         The South Carolina Department of Revenue (the Department) audited Rent-A-Center East, Inc.'s sales tax returns for the period April 1, 2007 through October 31, 2010; the Department audited Rent Way, Inc. for the period April 1, 2007 through October 31, 2009.[1] The audits showed Taxpayers properly paid sales taxes on proceeds from the Rental Agreements. However, Taxpayers did not pay sales taxes on proceeds from the Waivers. The Department determined Rent-A-Center East, Inc. owed $521, 694.93 plus interest; Rent Way, Inc. owed $192, 158.64 plus interest. Taxpayers submitted payment in the amount of $919, 585.55 for all taxes and interest owed and timely requested a contested hearing before the ALC.

         After a hearing, the ALC found the Rental Agreements and Waivers were "fundamentally interconnected" because the Waivers were described as "provisions" of the Rental Agreements, the Waivers could not be entered into independently of the Rental Agreements, and the Waiver fees were calculated based on the term payment of the Rental Agreements. The ALC went on to find the true object of the transaction was "to obtain the use of an item while minimizing the financial risk of its damage, loss, or destruction." The ALC concluded the Waivers were subject to sales tax and ordered Taxpayers to remit payment of $851, 622.31 plus accrued interest to the Department.[2] This appeal followed.

         STANDARD OF REVIEW

         This court's standard of review is set forth in section 1-23-610(B) of the South Carolina Code (Supp. 2018), which provides:

The review of the [ALC]'s order must be confined to the record. The court may not substitute its judgment for the judgment of the [ALC] as to the weight of the evidence on questions of fact. The court . . . may affirm the decision or remand the case for further proceedings; or, it may reverse or modify the decision if the substantive rights of the petitioner have been prejudiced because the finding, conclusion, or decision is:
(a)in violation of constitutional or statutory ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.