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Lockwood Greene Engineers, Inc. v. South Carolina Tax Commission
Citations: 293 S.C. 447; 361 S.E.2d 346; 1987 S.C. App. LEXIS 391Docket: 1026
Court: Court of Appeals of South Carolina; October 12, 1987; South Carolina; State Appellate Court
Lockwood Greene Engineers, Inc. is contesting a tax refund claim against the South Carolina Tax Commission regarding the interpretation of "gross receipts from within this State" in Section 12-7-1190 of South Carolina law. The circuit court favored the Commission’s interpretation, which views the phrase as relating to where services are performed (the 'place of activity'), rather than where payments originate (the 'origin of payment'). For tax years 1981-1983, Lockwood calculated its income tax based on the ratio of its receipts from payors in South Carolina to its total receipts, while the Commission calculated it based on the ratio of receipts from services performed in South Carolina to total receipts. The dispute resulted in a tax difference of $151,547, which Lockwood paid under protest. The court upheld that the allocation statutes aim to impose tax based on the business conducted within the state, affirming the 'place of activity' view as a reasonable interpretation. The court noted that an engineering firm’s business in a state is best measured by the services performed by its personnel there, rather than the location of the client. Lockwood argued that a 1972 amendment to the statute clarified the interpretation to focus on the payment source; however, the court maintained that the purpose of the statute aligns with the Commission’s view. The statute lacks legislative history, making it challenging to ascertain the General Assembly's precise intent. It is likely that the 1972 amendment aimed to clarify the phrase "total gross receipts of such year within and without the State." Before the amendment, there was ambiguity regarding whether "receipts [from] in this state" equated to "receipts [from] within this state." The amendment clarifies that these phrases are synonymous. Lockwood contends that the Tax Commission has applied the statute inconsistently, citing guidelines related to finance companies and media broadcasters; however, these are deemed not comparable to Lockwood’s situation. Instead, guidelines for law firms, accounting firms, entertainment and sports companies, and hospital management companies focus on the location of service provision, aligning with Lockwood's case. Consequently, the court affirms the circuit court's order, with no need to consider Lockwood's alternative interpretation, and finds no constitutional merit in Lockwood's arguments.