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SD high court frees Agar hunting lodge from taxes

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Mitchell South Dakota 120 South Lawler 57301

By Nora Hertel

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PIERRE (AP) — The South Dakota Supreme Court freed a hunting lodge near Agar from paying back taxes and interest in a decision on Thursday.

The state Department of Revenue imposed the taxes after an audit, claiming the Paul Nelson Farm owed use taxes for food, beverages and ammunition it bought for hunters using the lodge.

The high court ruling states that those items purchased for resale to customers did not qualify for use tax.

The disputed taxes and interest amount to about $17,400. The audit extended from November 2006 to October 2009. Auditors determined the lodge owed an additional $12,000 that was not contested in this case.

The Paul Nelson Farm offers packages that include guided hunting, lodging, ammunition, bird cleaning and packaging, buffet meals and beverages.

A lower court had relieved the lodge of its tax liability on food, but not the other categories. The Department of Revenue challenged the ruling, saying the lodge was the end consumer of the goods. But the Supreme Court reviewed the full case upon request by Paul Nelson Farm and ruled entirely in the lodge's favor.

"The Department compares Paul Nelson Farm to a janitor, who uses cleaning supplies to enhance or improve the service purchased by his customer. However, this analogy ignores the actual transfer of goods in this case," states the decision. "A janitor's customer never gains a right or interest in the janitor's cleaning supplies."

The hunting packages cost between $4,395 and $5,895 and included a 5 percent sales tax in 2007.

Lodge owner Paul Nelson was still reviewing the ruling Thursday morning.

"I'm happy with it," Nelson said. "I know it was the best decision."

The Department of Revenue declined comment, saying it also was still reviewing the impact of the decision.

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