ORDERS:
ORDER AND DECISION
STATEMENT OF THE CASE This matter came before me for a hearing on August 15, 1995 at 10:00 a.m. in Columbia,
South Carolina pursuant to petitioner's appeal of a determination by the respondent to assess and levy
personal property taxes against a pleasure boat, M.Y. "ARGUS" (hereinafter "ARGUS"), for the tax
years 1993, 1994 and 1995.
At the hearing, each party was allowed to enter into the record any evidence they wished in
support of their respective positions. Neither party presented any testimony. After review of all the
evidence, the arguments of counsel, and the submission of proposed findings of fact and conclusions
of law in accordance with Rule 29A(8) of the Rules of Procedure of the Administrative Law Judge
Division ("ALJD"), I find that the levy and assessment of ad valorem property taxes against the
ARGUS for the tax years 1993, 1994 and 1995 are rescinded and cancelled.
STIPULATIONS
The parties stipulated to the following:
1) Brush Island Corporation is made a party-petitioner with Orestes G. Christophides
(hereinafter "Mr. Christophides") in this action.
2) Brush Island Corporation (hereinafter "Corporation"), a Delaware corporation, whose sole
shareholder is Mr. Christophides, is the owner of the pleasure boat named "ARGUS."
3) The ownership of the boat by the Corporation instead of Orestes G. Christophides does
not affect the issue before this tribunal, which is the determination of ad valorem personal property
taxation of the ARGUS.
4) The tax notices and bills forwarded to petitioner for the years 1994 and 1995 pertaining
to the levy and assessment of ad valorem property taxes against the ARGUS are deemed cancelled
by the respondent and have been "deactivated" from respondent's files and records. Thus, the sole
issue is the assessment of ad valorem personal property taxes against the pleasure boat ARGUS for
the tax year 1993.
5) The documents and facts referenced in and attached to respondent's "Request To Admit"
are correct.
EXHIBITS
By agreement of the parties, the following were placed into evidence:
1) Affidavit of Orestes G. Christophides dated August 14, 1995.
2) Affidavit of Orestes G. Christophides, excepting paragraphs 5, 8, 12 & 14 (which
respondent objected to) together with a one page exhibit, dated July 28, 1995.
3) Charleston County Auditor's Update Report with photographs of petitioner's pleasure
boat "ARGUS" dated March 12, 1992.
4) Charleston County Auditor's Update Report with photographs of petitioner's pleasure
boat "ARGUS" dated March 30, 1993.
5) Letter with attachments from Mr. Christophides, president of Brush Island
Corporation, to the Charleston County Treasurer dated March 7, 1994.
FINDINGS OF FACT
After consideration and review of all the evidence, by a preponderance of the evidence, I make
the following findings:
1. This Division has personal and subject matter jurisdiction.
2. Notice of the date, time, place and nature of the hearing was timely given to all parties.
3. Orestes G. Christophides is a resident and citizen of the State of Connecticut. He
owns no real property in South Carolina.
4. Brush Island Corporation is a corporation organized and existing pursuant to the laws
of the State of Delaware, with its principle place of business located in the State of Connecticut. It
is the sole owner of the pleasure boat named "ARGUS."
5. Orestes G. Christophides is the sole shareholder of the Corporation.
6. The ARGUS is used primarily as a charter vessel, travelling once or twice each year
from its home port in Greenport Long Island, New York ("Greenport"), where it remains berthed for
approximately fifty percent (50%) of each year, to Florida or the Caribbean.
7. The Corporation rented a slip at the Ripley Light Marina in Charleston County for the
ARGUS from approximately November 17, 1992 to May 14, 1993. During part of this period, the
ARGUS underwent repairs and maintenance while at its berth. Before and after this stay in
Charleston, South Carolina, and throughout the period the slip was rented at the Marina, the ARGUS
was engaged in interstate commerce, as a charter vessel conveying passengers and cargo up and down
the east coast of the United States and in the Caribbean.
8. The ARGUS was berthed at the Ripley Light Marina in Charleston County, South
Carolina on December 31, 1992.
CONCLUSIONS OF LAW AND DISCUSSION
Based upon the foregoing Findings of Fact, I conclude, as a matter of law, the following:
General Law
1. S.C. Code Ann. § 1-23-600 (Supp. 1994) grants jurisdiction to the Administrative
Law Judge Division to hear contested cases under the Administrative Procedures Act.
2. Pursuant to S.C. Code Ann. § 12-39-340 (1976), the county auditor is responsible for
ascertaining that all personal property subject to ad valorem taxation by the Constitution or general
law is listed and assessed according to manuals, guidelines and rules and regulations promulgated by
the Commission (now the Department of Revenue and Taxation).
3. S.C. Code Ann. § 12-39-350 (Supp. 1994) provides that the county auditor shall
adopt valuations of the county assessor and the Commission.
4. S.C. Code Regs. 117-119 and 117-119.1 (1976) provide to the county auditor
assessment guidelines for usage in assessing the value of personal property.
5. Prior to August 1, 1995, S.C. Code Regs. 117-129 (1976) provided the procedure
whereby an owner of personal property could appeal a valuation of the county auditor to the South
Carolina Tax Commission for review. Effective August 1, 1995, the South Carolina Revenue
Procedures Act establishes the procedure for personal property tax assessment protests, appeals and
refunds where the county auditor assigned the value. S.C. Code Ann. §§ 12-60-2910 through 12-60-2940 (Supp. 1994).
6. S.C. Code Ann. § 12-37-210 (1976) defines property which is taxable in South
Carolina as follows:
All real and personal property in this State, personal property of
residents of this State which may be kept or used temporarily out of
the State, with the intention of bringing it into the State, or which has
been sent out of the State for sale and not yet sold, and all moneys,
credits and investments in bonds, stocks, joint-stock companies or
otherwise of persons resident in this State shall be subject to taxation.
7. Pursuant to S.C. Code Ann. §§ 5-37-710, 890 and 900 (1976), residents of this State
are required annually to list for taxation all tangible personal property which they own, or which is
in their control or possession on December 31st preceding the relevant tax year. Such personal
property shall be taxed at the place where the owner resides at the time of listing.
8. S.C. Code Ann. § 12-37-220(B)(17) (Supp. 1994) provides that pursuant to the
provisions of Section 3 of Article X of the State Constitution, there is exempt from ad valorem
taxation personal property with "no situs" status as defined in Article 7 of Chapter 37 of Title 12.
9. Article 7 of Chapter 37 of Title 12 entitled "Personal Property in Transit" deals with
two types of "no situs" personal property. The first, described in S.C. Code Ann. § 12-37-1110(a)
(1976), is property "which is moving in interstate commerce through or over the territory of this
state." The second type of "no situs" personal property, described in subsection (b) of that same
Code section, deals with property "which was consigned to a warehouse . . . within this State from
without this State for storage in transit to a final destination outside of this State . . . " The ARGUS
fits in neither category of personal property.
10. S.C. Code Ann. § 12-37-1110 (1976) further provides that "such property is deemed
to have acquired no situs in this State for taxation . . . "
11. In general, personal property which belongs to a nonresident which is within the
borders of a state for a temporary purpose, "not employed in a business conducted there and not
intended to remain permanently within the State . . . is not taxable within the State." 84 C.J.S.
Taxation § 120 (1954). Tangible personal property of a nonresident, however, may be taxable when
it is brought into the State for use.
Commerce Clause and Due Process Clause
12. When personal property is engaged in interstate commerce and is subject to taxation
in more than one state, the United States Supreme Court has established a four-part test to determine
if the tax complies with the requirements of the Commerce Clause of the United States Constitution.
The purpose of the test is to ensure that a State's tax burden is not placed upon a person who does
not benefit from services provided by the State. The four-part test set forth in Complete Auto
Transit, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed. 2d 326 (1977), is as follows:
1) the tax is applied to an activity with a substantial nexus with
the taxing state;
2) the tax is fairly apportioned;
3) the tax does not discriminate against interstate commerce;
4) the tax is fairly related to the services provided by the State.
13. The Due Process Clause and the first prong of the Complete Auto test require "some
definite link, some minimum connection, between a state and the persons, property, or transaction
it seeks to tax." Geoffrey, Inc. v. South Carolina Tax Comm'n, ___ S.C. ___, 437 S.E.2d 13 (1993).
14. In the landmark case of Atkinson Dredging Co. v. Thomas, 266 S.C. 361, 223 S.E.2d
542 (1976), the South Carolina Supreme Court upheld the validity of the December 31st levy date
for determining the tax situs of nonresident personal property located in this State on that date. The
taxpayer's property was a dredge located in Charleston Harbor from September 11, 1970 until
February 5, 1971 where it performed dredging operations. Atkinson was a corporation organized
and existing under the laws of the state of Florida, maintaining its principal place of business in
Chesapeake, Virginia. However, the issue in Atkinson was not one of tax situs but one of
apportionment of personal property tax required by the due process clause. Thus, this case is
distinguished from Atkinson wherein the taxpayer acknowledged it was not engaged in interstate
commerce during the period the dredge was located in South Carolina nor did it rely on the
commerce clause of the United States Constitution to avoid the levy.
15. In order to establish a permanent situs in a State to allow taxation, it has been held that
sixty days is sufficient. Ray v. Board of County Commissioners, 252 P.2d 899 (Kan. 1953). In this
case, the ARGUS was continuously berthed during the year 1992 within the borders of the State of
New York and the State of South Carolina, except when chartered. The evidence supports the
conclusion that the ARGUS established a permanent location or situs for personal property taxation
purposes in each state while berthed therein. Further, it was engaged in interstate commerce
throughout the entire year of 1992 and through May 14, 1993 when it left Charleston, engaging in
economic activity through charter trips which carried it into other states and international waters, all
while berthed in the two states.
16. As to whether the tax is fairly apportioned, the United States Supreme Court in
Goldberg v. Sweet, 488 U.S. 252, 109 S.Ct. 522 (1989), explained how to make the determination.
We determine whether a tax is fairly apportioned by examining
whether it is internally and externally consistent . . . . To be internally
consistent, a tax must be structured so that if every State were to
impose an identical tax, no multiple taxation would result . . . . The
external consistency test asks whether the State has taxed only that
portion of the revenues from the interstate activity which reasonably
reflects the instate component of the activity being taxed.
Goldberg, at 589. The Goldberg case dealt with an activity which was being taxed (interstate phone
calls), rather than with personal property which was engaged in interstate commerce. However, the
court made clear that taxation of physical objects which are engaged in interstate commerce is also
subject to the external consistency test. See generally footnote 14 and related text, Goldberg, at 590.
17. Further, the clear implications of the Court's decision in Atkinson when it addresses
the case of Billings Transfer Corp., Inc. v. County of Davidson, 170 S.E.2d 873 (N.C. 1969), is that
where property is engaged in interstate commerce, and it is physically present in more than one state,
it is subject to ad valorem personal property taxation in more than one state, the taxes must be
apportioned between the states. This is in accord with Complete Auto.
However, the Court in Atkinson also stated that "there is no statute in this State authorizing
the apportionment of ad valorem taxes levied on personal property. Consequently, the Court opined
that if the tax levied on Atkinson's equipment could not be constitutionally levied on a non-apportionment basis, it must fail." Atkinson at p. 594.
18. In order to resolve the issues raised in the second prong, this Court must address the
issues in the third and fourth prongs of the Complete Auto test in one discussion. The third prong
prohibits a State from imposing a discriminatory tax on interstate commerce and the fourth prong is
whether the tax is fairly related to the presence and activities of the taxpayer within the State.
The test in the third prong prohibits discrimination against interstate commerce by allocating
a larger share of the tax burden to personal property used in interstate commerce versus intrastate
commerce. There is no distinction in South Carolina between the classification of personal properties
used either in interstate or intrastate commerce. Thus, it is concluded that the ad valorem tax against
the ARGUS does not discriminate in favor of intrastate commerce at the expense of interstate
commerce.
19. As to the fourth prong, the Court in Atkinson, quoting State of Wisconsin v. J.C.
Penney Co., 311 U.S. 435, 61 S.Ct. 246, 85 L.Ed. 267 (1940) stated the following:
A state is free to pursue its own fiscal policies, unembarrassed by the
Constitution, if by the practical operation of a tax the state has exerted
its power in relation to opportunities which it has given, to protection
which it has afforded, to benefits which it has conferred by the fact of
being an orderly, civilized society.
. . . .
That test is whether property was taken without due process of law,
or, if paraphrase we must, whether the taxing power exerted by the
state bears fiscal relation to protection, opportunities and benefits
given by the state. The simple but controlling question is whether the
state has given anything for which it can ask return."
311 U.S. at 444, 61 S.Ct. at 249.
20. Petitioners received continuous protection and benefits from each state during the
periods the ARGUS was located therein. They received a wide range of benefits, including receipt
of police and fire protection, medical, recreational, educational marine facilities, public roads and
mass transit, and the other advantages of civilized society. The Court in Atkinson said that it applied
the test for due process laid down in J.C. Penny or more to the point, whether Charleston County has
"given anything for which it can ask return." Atkinson at p. 595. In response to Atkinson's argument
of the inequity of paying taxes for a full year but receiving benefits for only a portion of the year, the
Court stated that "there are many cases, both State and Federal, which hold that taxes otherwise
lawful, are not invalidated by reason of the fact that the resulting benefits are unequally shared." Id.
In Atkinson, the taxpayer paid ad valorem taxes both in South Carolina and in Virginia for the same
tax year. However, our Court held that due process was not violated by reason of the fact Atkinson's
personal property taxes for 1971 were not apportioned.
21. Since the petitioners received continuous protection and benefits for their boat during
the periods it was located in each state in 1992, it is subject to ad valorem property taxation by both
the domiciliary state of New York, and the non-domiciliary state of South Carolina and must be
apportioned on the basis of the amount of time berthed at each location. However, because there is
no statutory authority in South Carolina for apportioning ad valorem personal property taxes, the
Charleston County tax levy and assessment against the ARGUS for the year 1993 must be rescinded.
"No Situs" Property 22. Petitioners argue that pursuant to S.C. Code Ann. § 12-37-1110 (1976), the ARGUS
qualified as "no situs" personal property and that it was personal property moving in interstate
commerce through the State of South Carolina which is exempt from ad valorem personal property
taxation pursuant to S.C. Code Ann. § 12-37-220(B)(17) (Supp. 1994).
23. From a thorough reading of Article 7, Chapter 37 of Title 12, it is clear that §§ 12-37-1110 through 12-37-1150 (1976 and Supp. 1994) apply only to personal property which is being
shipped and is in transit through the State, either in vehicles, planes or other means of transportation
or is in storage in warehouses for storage pending further shipment.
Vehicles, boats, etc. used in interstate commerce are not included in the definition of personal
property in this Article which are exempt from taxation.
24. Accordingly, it is concluded that:
a) the ARGUS is not exempt from personal property taxation as defined in S.C.
Code Ann. §§ 12-37-1110 through 12-37-1150 (1976 and Supp. 1994). The evidence establishes
a "tax situs" in South Carolina for part of 1993, while engaged in interstate commerce, establishing
a continuous presence in this State.
b) The ARGUS received numerous benefits from the County of Charleston while
berthed at a Marina there. The tax is applied to an activity with a substantial nexus with South
Carolina; the tax does not discriminate against interstate commerce; and the tax is fairly related to the
services provided by the State. But, because the tax can not be fairly apportioned pursuant to South
Carolina law, it does not comply with the requirements of the Commerce Clause of the United States
Constitution.
ORDER
Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby:
ORDERED that the levy and assessment of ad valorem personal property taxes against the
ARGUS for the tax year 1993 is rescinded and cancelled, and it is further
ORDERED that the Charleston County Auditor shall rescind and cancel the tax notices and
bills forwarded to the petitioner for the tax year 1993 and have them deactivated from respondent's
files and records and, it is further
ORDERED that the tax notices and bills forwarded to petitioner for the tax years 1994 and
1995 pertaining to the levy and assessment of ad valorem personal property taxes against the ARGUS
are rescinded and cancelled, having previously been cancelled by the respondent and deactivated
from respondent's files and records.
AND IT IS SO ORDERED.
_______________________________
Marvin F. Kittrell
Chief Judge
Columbia, South Carolina
September 18, 1995
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