SC Administrative Law Court Decisions

This matter comes before the Administrative Law Court (“ALC” or “Court”) pursuant to a request for contested case hearing by the Petitioner, Lexington County Health Services District, d/b/a Lexington Medical Center (“Petitioner” or “District”), seeking adjudication of its claim for a refund of certain sales and use taxes, which refund was denied by the Respondent Department of Revenue (“Department”). After timely notice to the parties, a hearing in this matter was held before me at the Court in Columbia, South Carolina on April 25, 2007, during which the Court received evidence in the form of testimony, documentary exhibits, and written stipulations of the parties. In addition to the written stipulations, during the hearing the parties stipulated to additional evidence in the form of exhibits.[1] Further, the Court heard testimony from the Chief Financial Officer (“CFO”) for the Petitioner, and from Mr. Timothy S. Donovan, Foreign Audit Tax Supervisor, for the Department, both of whom were offered as fact witnesses, and from the parties’ respective expert witnesses, John von Lehe, Esq. for the Petitioner, and Professor William J. Quirk for the Department.

After carefully weighing all the evidence, I find and conclude that Petitioner’s claim for refund must be granted.

FINDINGS OF FACT

Written Stipulations

This Court has before it the written Stipulation of Facts and Applicable Legal Authority of the parties, filed in accordance with ALC Rule 25(C) on October 24, 2006. See Petitioner’s Ex. 1. The stipulations of fact, entered into by the parties, are as follows:

1. Petitioner is an incorporated health services district created pursuant to S.C. Code Ann. § 44-7-2010 et seq. and § 44-7-2150 et seq. (1976, as amended) and various local ordinances.

2. During the refund periods, Petitioner expanded its hospital facilities to include making capital upgrades and additions to real property as well as purchases of new equipment.

3. Vendors selling tangible personal property to the Petitioner collected sales and/or use taxes from the Petitioner. Furthermore, to the extent the Petitioner hired contractors to perform expansion work, the contractors paid sales and/or use taxes on their purchases of materials and passed the costs on to the Petitioner in construction contracts.

4. Beginning in May 2005, the Petitioner filed amended sales and use tax returns claiming entitlement to refunds of sales and use taxes paid to vendors and contractors on its purchases of capital equipment and building materials related to the facility expansion and upgrade. The Petitioner subsequently submitted refund claims for tax periods up to and including August 31, 2006, so that the entire refund period covers April 2002 through August 2006. The Petitioner’s refund claims total $8,389,717.21 and are timely filed in accordance with S.C. Code Ann. § 12-54-85(F) (Supp. 2005).

5. The Department’s Office of Appeals Section denied the Petitioner’s claims for refund and the Petitioner timely protested the division decision.

6. Thereafter, on June 15, 2006, the Department issued its Final Agency Determination denying the Petitioner’s refund claims. At the time, the Petitioner had only submitted refund claims covering the time period April 2002 through October 2002. The parties agree that the Determination should be construed to apply to subsequently filed refund claims such that the Determination covers the entire period April 2002 through August 2006.

7. The Petitioner timely requested a contested case hearing before the ALC to review the Department’s Final Agency Determination.

8. One specific statutory provision at issue here is S.C. Code Ann. § 44-7-2120 (2002), which provides as follows:

44-7-2120. Exemption of districts from State and local taxes.

All properties owned by a district, whether real, personal, or mixed, and the income from the properties, all securities issued by a district and the indentures and other instruments executed as security therefor, all leases made pursuant to the provisions of this article, and all revenues derived from these leases, and all deeds and other documents executed by or delivered to a district, are exempt from any and all taxation by the State or by any county, municipality, or other political subdivision of the State, including, but without limitation, license excise taxes imposed in respect of the privilege of engaging in any of the activities in which a district may engage. A district is not obligated to pay or allow any fees, taxes, or costs to the clerk of court, the Secretary of State, or the register of deeds in any county in respect of its incorporation, the amendment of its certificate of incorporation, or the recording of any document. The gross proceeds of the sale of any property owned by the district and used in the construction and equipment of any health care facilities for a district is exempt from all other and similar excise or sales taxes. It is the express intent of this section that any district authorized under this article incurs no tax liability to the State or any of its political subdivisions except to the extent that sales and use taxes may be payable on the purchases of goods or equipment by the district.

9. The goods and equipment purchased by the Petitioner for which it is claiming refunds of sales and use taxes are itemized in Exhibit A.[2]

Other Findings of Fact made by the Court

Having observed the witnesses and reviewed all exhibits presented at the hearing and closely passed upon their credibility, and having taken into consideration the burden of persuasion by the parties, I make the following Findings of Fact, in addition to those stipulated to by the parties, by a preponderance of the evidence:

10. Beginning in 2002, Petitioner undertook a clinical expansion project which resulted in increasing the size of Petitioner’s main campus from 600,000 square feet to over one million square feet. The expansion consisted primarily of the addition of a five-story bed tower with an increase of ninety patient rooms, the replacement and addition of operating rooms, and the replacement of the radiology department. During this project, Petitioner was engaged in expanding its hospital facilities to include making capital upgrades and additions to real property, as well as purchasing new equipment. All expenditures were in furtherance of Petitioner’s mission to provide health care to the citizens of the district.

11. In order to finance the construction, Petitioner utilized its authority to issue hospital revenue bonds. The first issuance occurred on December 19, 2002 and was for $149,390,000. The second issuance occurred on May 20, 2004 and was for $60,000,000.00. All but approximately $20,000,000.00 to $30,000,000.00 of the revenues generated by the first bond issuance were used for the construction and purchase of equipment for Petitioner’s facilities, while the entire proceeds of the second bond issuance were used in the clinical expansion project or other hospital construction.[3] Because the cost of the construction projects actually exceeded available bond revenues, some of the costs of the construction were funded from the Petitioner’s general fund.

12. In April of 2005, the Department notified the Petitioner it intended to conduct a three week sales tax audit in the field at Petitioner’s premises. On the third day of the audit, Petitioner was questioned by the Department auditors about its payment of sales tax on food sales in its cafeteria. Petitioner responded by handing to the auditors a copy of § 44-7-2120 (2002). After some conversation between the parties and a reading of the code section by the auditors, a Department field auditor indicated that, based on the language regarding exemption from sales and use tax for construction, Petitioner might be entitled to a substantial refund. The auditor further explained the refund claims process, including instructions on how to complete the refund form and what documentation would be needed.

13. Petitioner complied with the documentation requirements outlined by the field auditor by producing all of the backup invoices related to its payments to the vendors and contractors working on the clinical expansion project. These documents included invoices which showed itemizations for the payment of sales taxes on those purchases. These were the same invoices provided by Petitioner to the bond trustee in order to draw down bond proceeds to pay for the ongoing construction.

14. After the parties’ discussion concerning the exemption statute had concluded, the Department’s field auditors left. Several days later they returned to Petitioner’s premises and advised Petitioner that the field audit was complete and that no adjustments were needed. Further, they handed to Petitioner a settlement statement and asked Petitioner to acknowledge that no adjustments were needed. Based upon its earlier discussion with the field auditor, Petitioner declined to sign the settlement statement because it believed it was entitled to a refund of the sales and use taxes paid on purchases for the recent construction projects.

15. Petitioner filed its first claim for refund in this case in May 2005. Petitioner filed refund claims totaling $8,389,717.21 in the aggregate, which equates to the amount of five percent sales tax Petitioner paid on all of the invoices for the equipping and constructing of the facility for April 2002 through August 2006.

16. In response to Petitioner’s refund claims, the Department and Petitioner met in June of 2005 to exchange information. At that meeting the Department advised Petitioner it would need letters of assignment or rights for refund to make its claim. The Department took no position on the merit of Petitioner’s claims at the June 2005 meeting.

17. In July 2005, the Department orally advised Petitioner that it intended to deny Petitioner’s claims. On August 23, 2005, Petitioner received the Department’s written denial of its claims. See Respondent’s Ex. 3.[4]

18. After receipt of the denial letter, Petitioner continued to pursue with the Department its appeal rights. In mid-January, 2006, the Department met with Petitioner regarding the claims. Subsequent to the meeting, the Department denied Petitioner’s appeal in a letter dated January 30, 2006. See Petitioner’s Ex. 3. The Department stated in the letter that the “refund request includes sales tax paid to vendors. Administratively [Petitioner] will have to gain assignments from the vendors in order to have a right to the refund. Although the Office of Appeals believes that no refund is due, it will notify [Petitioner] by separate letter what assignments will be needed should [Petitioner] prevail at a different level of appeal.” See Petitioner’s Ex. 3.[5]

19. Although Petitioner never received notification from the Department concerning the assignments needed to complete its refund claims, at the hearing Petitioner had obtained and made available to the Court all appropriate assignments for the total amount of the claims pending in this matter.

20. On June 15, 2006, the Department issued its Final Agency Determination, concluding that § 44-7-2120 does not exempt Petitioner from the payment of sales and use taxes on its purchases of new equipment and other tangible personal property used for capital upgrades and additions to real property. See Respondent’s Ex. 5.

21. Other than Petitioner, there are only three other regional health service districts in the State of South Carolina.

CONCLUSIONS OF LAW and DISCUSSION

Based upon the above written Stipulations and Findings of Fact, I conclude the following as a matter of law:

1. The Court has jurisdiction over this matter pursuant to Art. I, § 22 of the South Carolina Constitution, S.C. Code Ann. §§ 1-23-610 and 12-60-10, et seq. (1976, as amended).

2. Petitioner has standing under the law to bring this action as a “Taxpayer” because it is a “Person,” as defined by S.C. Code Ann. § 12-36-30 (1976, as amended), who is liable for a tax or who is responsible for collecting and remitting a tax, as defined by S.C. Code Ann. § 12-2-20 (1976, as amended).

3. Taxpayer bears the burden of proof in this administrative proceeding. TNS Mills, Inc. v. S.C. Dep’t of Revenue, 331 S.C. 611, 618, 503 S.E. 2d 471, 475 (1998). Further, the standard of proof in administrative proceedings is a preponderance of the evidence. Anonymous v. State Bd. of Med. Exam’rs, 329 S.C. 371, 375, 496 S.E.2d 17, 19 (1998).

4. The trier of fact must weigh and pass upon the credibility of evidence presented. See S.C. Cable Television Ass’n v. S. Bell Tel. and Tel. Co., 308 S.C. 216, 222, 417 S.E.2d 586, 589 (1992). The trial judge who observes a witness is in the best position to judge the witness’s demeanor and veracity and to evaluate the credibility of his testimony. See Woodall v. Woodall, 322 S.C. 7, 10, 471 S.E.2d 154, 157 (1996).

5. Where an expert’s testimony is based upon facts sufficient to form the basis for an opinion, the trier of fact determines its probative weight. Berkeley Elec. Coop. v. S.C. Pub. Serv. Comm'n, 304 S.C. 15, 20, 402 S.E.2d 674, 677 (1991); Smoak v. Liebherr-America, Inc., 281 S.C. 420, 422, 315 S.E.2d 116, 118 (1984). A trier of fact is not compelled to accept an expert’s testimony, but may give it the weight and credibility he determines it deserves. Florence County Dep't. of Social Servs. v. Ward, 310 S.C. 69, 72-73, 425 S.E.2d 61, 63 (Ct. App. 1992). Generally, expert testimony consisting merely of legal conclusions on the ultimate issue is inadmissible and must be disregarded. Dawkins v. Fields, 354 S.C. 58, 65-66, 580 S.E.2d 433, 437 (2003).

Although this Court has reviewed in detail the testimony and exhibits of the expert witnesses, each of whom provided helpful information on the interpretation of the applicable statutes at issue, it is mindful of the rule that matters of law, and more specifically South Carolina tax law, are within the province of the Court. This Court must decide matters of South Carolina tax law, and it has not allowed any statement by either of the expert witnesses to influence that decision. Any and all statements, written or oral, that constitute opinions on the law of this state are only opinions and are not admissible as evidence. Notwithstanding, the Court has taken into consideration certain statements by the expert witnesses which are factual in nature and which may help this Court in determining the intention of the South Carolina legislature.

5. Petitioner’s claims for refund which are the subject of this case were timely and appropriately filed with the Department and all necessary assignments were procured for the refunds sought herein.

6. Under S.C. Code Ann. § 44-7-2120 (2002), the sale of construction materials and other equipment to be used in the construction and equipping of the health care facilities owned by regional health care districts are exempt from sales and other similar excise taxes.

7. Petitioner’s claims for refund in this case fall within the exemption provided for in § 44-7-2120 and must be granted.

8. Pursuant to ALC Rule 29(C), issues raised in the proceedings but not addressed in this order are deemed denied.

9. The sole issue for determination in this case is whether the Petitioner, as a health services district, is exempt under the law from paying sales or use taxes on the sales and purchases of materials used in the construction and equipping of additions, expansions, or renovations of heath care facilities owned by Petitioner. The applicable section of the Regional Health Services District Act (“Act”) at § 44-7-2120, provides as follows:

§ 44-7-2120. Exemption of districts from State and local taxes.

All properties owned by a district, whether real, personal, or mixed, and the income from the properties, all securities issued by a district and the indentures and other instruments executed as security therefor, all leases made pursuant to the provisions of this article, and all revenues derived from these leases, and all deeds and other documents executed by or delivered to a district, are exempt from any and all taxation by the State or by any county, municipality, or other political subdivision of the State, including, but without limitation, license excise taxes imposed in respect of the privilege of engaging in any of the activities in which a district may engage. A district is not obligated to pay or allow any fees, taxes, or costs to the clerk of court, the Secretary of State, or the register of deeds in any county in respect of its incorporation, the amendment of its certificate of incorporation, or the recording of any document. The gross proceeds of the sale of any property owned by the district and used in the construction and equipment of any health care facilities for a district is exempt from all other and similar excise or sales taxes. It is the express intent of this section that any district authorized under this article incurs no tax liability to the State or any of its political subdivisions except to the extent that sales and use taxes may be payable on the purchases of goods or equipment by the district.

(Emphasis added).

Petitioner opines that the above statute, read as a whole and in light of the purpose of the Act, provides an exemption from the payment of sales and use taxes on materials purchased and used in the construction and equipping of a district’s health care facilities. Petitioner construes the first sentence of § 44-7-2120 to state an exemption from various property and income taxes and from “license excise taxes imposed in respect of the privilege of engaging in any of the activities in which a district may engage,” which description includes sales and use taxes. Petitioner views this introductory sentence as expressing the General Assembly’s general intent that districts, as governmental entities, operate free from the imposition of taxes. Thus, this general introductory statement is consistent with the title of this section of the law. See Joytime Distrib. & Amusement Co., Inc. v. State, 338 S.C. 634, 649, 528 S.E.2d 647, 655 (1999) (citing Lindsay v. S. Farm Bureau Casualty Ins. Co., 258 S.C. 272, 188 S.E.2d 374 (1972) (“It is proper to consider the title or caption of an act in aid of construction to show the intent of the legislature.”)).

As to the specific exemption claimed, Petitioner points to the third sentence of § 44-7-2120, emphasized above, as creating a limited exemption from sales and use tax for sales involving property to be used in the construction or equipping of district health care facilities. Petitioner cites the history of the Act, its general purpose to establish a unique entity - a public hospital corporation - to provide health care to the public in lieu of county governments, and the other specific provisions of the Act that relate to the authority of a district to issue revenue bonds and to use the proceeds to build and equip health care facilities in the district's charge as proof that the General Assembly intended to grant a special limited exemption from the payment of sales tax on sales and purchases of property used in the construction and equipping of health care facilities.

Finally, Petitioner points to the last sentence of § 44-7-2120 which states, “[i]t is the express intent of this section that any district authorized under this article incurs no tax liability to the State or any of its political subdivisions except to the extent that sales and use taxes may be payable on the purchases of goods or equipment by the district.” Petitioner contends that this summary sentence affirms the broad nature of the tax exemptions given in the introductory sections and recognizes the limited nature of the exemption related to construction in that a district “may” have to pay sales or use tax when it makes ordinary purchases of goods and equipment, i.e., those not related to the “construction” of new or additional or renovated facilities.

The Department agrees that § 44-7-2120 creates a limited exemption from sales and use taxes for health services districts; however, the Department interprets the third sentence of the statute to apply only when a district sells tangible personal property owned by it to a subsidiary or other related district entity or to another health services district for use in the constructing or equipping of district facilities. In that regard, the Department interprets the phrase in the first sentence of § 44-7-2120, “license excise taxes imposed in respect of the privilege of engaging in any of the activities in which a district may engage,” as referring to business licenses only, not to sales or other excise taxes. The Department further contends that the last sentence’s reference to a district's paying no taxes “except to the extent that sales and use taxes may be payable on the purchases of goods or equipment by the district” directs that districts must pay sales taxes on all purchases of goods and equipment.

Petitioner asserts that health services districts are not in the business of selling construction materials and equipment to other districts or to their own subsidiaries and that, under the Act, a district is only allowed to build, maintain, equip, and operate health care facilities “in its charge.” S.C. Code Ann. § 44-7-2060(7) (2002). Further, Petitioner’s Chief Financial Officer indicated that in sixteen years of working with Petitioner she was unaware of any sales of goods or equipment to other health services districts.[6]

As Petitioner’s expert, Mr. von Lehe, opined, in the unlikely event a sale of goods by a district to a parent or subsidiary or a related entity occurred, that transaction would be excluded as a “casual sale” pursuant to S. C. Code Regs. 117-322, entitled "Casual or Isolated Sales Exempt.” S.C. Code Ann. Regs. 117-322. In other words, Petitioner argues that the Department's interpretation of the sales tax exemption language in § 44-7-2120 requires one to assume that the General Assembly intended to create a nullity or an absurdity because there would be no reason to create a specific exemption for an event that would not likely happen and, if it did, would already be exempt from taxation.

The case law in South Carolina is replete with guidance for construing statutory provisions. Primary among them is the rule that:

Regarding statutory construction, all rules are ‘subservient to the one that the legislative intent must prevail if it can be reasonably discovered in the language used, and that language must be construed in the light of the intended purpose of the statute.’ Kiriakides v. United Artists Commc'ns, Inc., 312 S.C. 271, 440 S.E.2d 364 (1994). Nonetheless, however plain the ordinary meaning of the words used in a statute may be, we will reject that meaning when to accept it would lead to a result so plainly absurd that it could not possibly have been intended by Legislature or would defeat the plain legislative intention. Id.

Baggerly v. CSX Transp., Inc., 370 S.C. 362, 373, 635 S.E.2d 97, 103 (2006). Another crucial rule of statutory construction is that the court should not consider the particular clause being construed in isolation, but should read “it in conjunction with the purpose of the whole statute, and in light of the object and the policy of the law." S.C. Coastal Council v. S.C. State Ethics Comm'n, 306 S.C. 41, 44, 410 S.E.2d 245, 247 (1991).

Keeping these overall principles in mind, I conclude that § 44-7-2120 creates an exemption from the payment of sales and use taxes for sales of property used in constructing and equipping health care facilities owned by a health services district. Support for this conclusion is found in examination of the purpose of the Act in which the exemption is given.

S.C. Code Ann. §§ 44-7-2010 through 44-7-2130, entitled “Regional Health Services Districts,” and §§ 44-7-2150 through 44-7-2157, entitled “Incorporation of Health Services Districts,” set forth a framework whereby one or more counties or municipalities can form a separate governmental entity, a distinct “body politic and corporate,” to provide health services to the residents of the district. The available legislative history of this statute reveals that the Regional Health Services District Act was originally passed as 1976 Act No. 490. [7] This original Act consisted of what is now codified as §§ 44-7-2010 through 44-7-2110. In 1978 Act No. 519, the General Assembly amended the Act to grant regional hospital districts the authority to issue revenue bonds pursuant to the Hospital Revenue Bond Act. This amendment added § 44-7-2060(15) to the codified law.

In 1984, in the same budget legislation that contained the Education Improvement Act, the General Assembly made substantial amendments and additions to the Regional Health Services District Act, including adding the article allowing the incorporation of health services districts and adding § 44-7-2120, providing for the tax exemption at issue in this case. In the preamble to this amendment, found at 1984 Act 512, § 35, the General Assembly makes the following findings:

(1) . . . publicly-owned hospitals and other health care facilities furnish a substantial part of the indigent, reduced rate care, and other health care services furnished to residents of the State by hospitals and other health care facilities generally;

(2) . . . as a result of current significant physical and budgetary limitations and restrictions, the State and its various counties and municipalities are no longer able to provide, from taxes and other general fund monies, all the revenues and funds necessary to operate these publicly-owned hospital and other health care facilities in an adequate and efficient manner . . . .

* * *

It is therefore the intent of the General Assembly by passage of this act to promote the public health of the people of the State:

(a) by authorizing the several counties and municipalities in this State to form public corporations whose corporate purpose is to acquire, own, and operate health care facilities as that term is defined in this act . . . .

With this statement of its findings and intent, the General Assembly then amends the Regional Health Services District Act in several important respects, all of which are designed to maximize the spending power of the district to provide health care to the public. Section 8 of the original Act (§ 44-7-2080) is amended to add a provision that clarifies that any expenditure made by or on behalf of a district is for a “public purpose” and shall not be considered to be made for the benefit of a private party such as would be prohibited under the Constitution or other statutes. The definition of “health care facilities” is added to incorporate and cross-reference the lengthy list of facilities defined in the Hospital Revenue Bond Act (§ 44-7-1430(f)) as being eligible for financing through bond issues.

Finally, the General Assembly adds the provision codified as § 44-7-2120, entitled “Exemption of districts from State and local taxes.” When this section is read as a whole and in light of the General Assembly’s findings that “as a result of current significant physical and budgetary limitations and restrictions, the State and its various counties and municipalities are no longer able to provide, from taxes and other general fund monies, all the revenues and funds necessary to operate these publicly-owned hospital and other health care facilities in an adequate and efficient manner,” one must conclude that the purpose of giving the tax exemptions is to further a district’s ability to build, equip, operate and maintain health care facilities.

Additionally, it is obvious that the General Assembly recognized that funding for the acquisition, construction, or renovation of a district’s health care facilities would likely come from the issuance of revenue bonds. As noted, the General Assembly amended the Regional Health Services District Act in 1978 to allow such financing and in 1984 to expand the definition of a district’s “health care facilities” to include all of the various types of entities eligible for bond financing. It is not logical to conclude that the General Assembly in § 44-7-2120 extended numerous broad tax exemptions related to property and to facility leases yet intended to require five percent of a district’s bond proceeds earmarked for the construction of health care facilities to be paid to the State in sales or use tax.

The Department argues that the exemption in question was passed in conjunction with the Education Improvement Act, which provided funding for schools by imposition of an additional penny sales tax, and that the General Assembly would have been in the frame of mind to preserve a school funding source, i.e., the payment of sales tax by a health services district. As pointed out by the Department’s expert, Professor Quirk, it is not uncommon for other governmental entities to pay sales tax. While the Court agrees that school funding would have been an important consideration of the General Assembly at the time, there is simply no evidence that the General Assembly would have intended to use a district's funds earmarked for construction and equipping of health care facilities, i.e., its bond proceeds, to support funding for education. To the contrary, the Petitioner’s interpretation of the exemption as providing a limited carve out from sales taxes associated with the construction and equipping of health care facilities, while leaving intact a district’s obligation to pay sales and use taxes on ordinary purchases, is in harmony with both the Education Improvement Act’s goals and the General Assembly’s stated goals with regard to easing the “current significant physical and budgetary limitations and restrictions” on providing health care to the citizens of the State.

Finally, the Department asks this Court to take notice of a similar exemption provision found in Alabama law which states in pertinent part:

Further, the gross proceeds of the sale of any property used in the construction and equipment of any health care facilities for an authority, regardless of whether such sale is to such authority or any contractor or agent thereof, shall be exempt from the sales tax imposed by Article I of Chapter 23 of Title 40 and from all other sales and similar excise taxes now or hereafter levied on or with respect to the gross proceeds of any such sale by the state or any county, municipality or other political subdivision or instrumentality of any thereof . . . .

Ala. Code § 22-21-333 (1975). The Department contends that this Alabama provision must have been the model for the South Carolina exemption and, therefore, this Court can be guided with respect to the differences in the language used in the Alabama and South Caroline versions of the exemption. Specifically, the Department argues that South Carolina’s addition of the “owned by the district” language with reference to type of property which is the subject of an exempt sale and its deletion of the “regardless of whether such sale is to such authority or any contractor or agent thereof” language found in the Alabama statute is evidence that South Carolina intended its sales tax exemption to apply only to inter-district sales.

While the Court recognizes that the language of the Alabama statute is analogous and, in some parts, even identical to the South Carolina statute, any attempt to glean the intent of the South Carolina General Assembly from comparison with the Alabama law would be pure speculation. Alabama’s language may be more detailed in describing the construction exemption offered; however, it does not compel the conclusion that South Carolina’s law provides any less of an exemption. While § 44-7-2120 does not explicitly mention contractors and agents, neither does it explicitly limit the sales tax exemption to sales by a district to a parent or subsidiary or related entity or to another district as is urged by the Department. See Edwards v. Campbell, 369 S.C. 572, 577, 633 S.E.2d 514, 517 (2006) (citing Buist v. Huggins, 367 S.C. 268, 625 S.E.2d 636 (2006) (“[I]f the Legislature [had intended a certain result in a statute] ‘it could have plainly said so.’”)).

It is clear that Alabama has determined that health services districts (authorities) should be supported in their critical efforts to provide health care to the public. It is no less clear that the South Carolina General Assembly intends the same result in this State.

Petitioner asks this Court to construe § 44-7-2120 to read “the gross proceeds of the sale of any property [to be] owned by the district and used in the construction and equipment of any health care facilities for a district is exempt from all other and similar excise or sales taxes.” The Department urges a much narrower construction which would limit application of the sales tax exemption to inter-district transactions that rarely occur and that are likely already exempt from taxation. When examined in light of the expressed intent of the General Assembly and in light of the other provisions in the Act, I conclude that the only reasonable construction of § 44-7-2120 is that the sale of construction materials and other equipment to be used in the construction and equipping of the health care facilities owned by a regional health services district are exempt from sales and other similar excise taxes.

ORDER

Based upon the findings, analysis, and conclusions set forth above,

IT IS HEREBY ORDERED that Petitioner’s claims for refund covering the period April 2002 through August 2006 filed in this matter are granted. Therefore, the Department is directed to pay Petitioner the refunds due in the amount of $8,389,717.21, plus all applicable interest, within thirty (30) days of the date of this order.

AND IT IS SO ORDERED.

________________________________

Marvin F. Kittrell

Chief Administrative Law Judge

January 4, 2008

Columbia, South Carolina