Featured Chrome Extensions:

Casey IRACs are produced by an AI that analyzes the opinion’s content to construct its analysis. While we strive for accuracy, the output may not be flawless. For a complete and precise understanding, please refer to the linked opinions above.

Keywords

equityappealburden of proofcorporation
statutecorporationoverruledrespondentappellant

Related Cases

Maxitrol Co. v. Department of Treasury, 217 Mich.App. 366, 551 N.W.2d 471
View Case »
Commerce and Industry Ins. Co. v. Department of Treasury, 495 Mich. 913, 840 N.W.2d 347 (Mem)
View Case »
Peterson Produce Co. v. Cheney, 237 Ark. 600, 374 S.W.2d 809
View Case »
Lone Star Steel Co. v. Dolan, 668 P.2d 916
View Case »
Bellemar Parts Industries, Inc. v. Tracy, 88 Ohio St.3d 351, 725 N.E.2d 1132, 2000 -Ohio- 343
View Case »
Justia Law Link
LexisNexis Link
Westlaw Link
CourtListener Link
Oyez Link

Covington Fabrics Corp. v. South Carolina Tax Commission, 264 S.C. 59, 212 S.E.2d 574

Facts

Covington Fabrics Corporation, a New York corporation, engaged in a unitary business both within and outside South Carolina. The South Carolina Tax Commission assessed additional corporate income taxes and license fees based on a three-factor apportionment formula, which included property, payroll, and sales. The corporation contested the assessment, arguing that the allocation of income to South Carolina was unconstitutional. The case was referred to a Master in Equity, who recommended denying the corporation's claims, leading to an appeal.

The appellant, a corporation existing under the laws of the State of New York, engages in a unitary business both within and without this State and is therefore subject to income and corporate license taxation by this State.

Issue

Whether the South Carolina Tax Commission properly applied the sales factor of the apportionment formula and whether such application resulted in an unconstitutional tax.

The question to be decided in this case are whether the respondent properly applied the sales factor of the apportionment formula contained in Sections 65-279.3 through 65-279.6 of the Code and, if such formula was correctly applied, and it produce an unconstitutional result.

Rule

A state has the right to impose a tax on apportioned income derived from business conducted partly within and without the state, and the burden is on the corporation to prove that the apportionment formula results in an unconstitutional tax.

It is well settled that a state has a right to impose a tax on apportioned income derived from business conducted partly within and without the state.

Analysis

The court applied the three-factor formula to determine the corporation's net income and found that the allocation of approximately 55.5% of the corporation's income to South Carolina was reasonable. The court emphasized that while exactness in apportionment is desirable, a reasonable approximation suffices. The corporation failed to provide clear and cogent evidence that the apportionment resulted in taxing extraterritorial values.

The corporation must establish its contention that the statutes impose an unconstitutional tax by ‘clear are cogent evidence.’

Conclusion

The Supreme Court affirmed the lower court's judgment, ruling that the apportionment of income was reasonable and did not violate constitutional provisions.

The exceptions of the appellant are overruled, and the judgment below is, Affirmed.

Who won?

South Carolina Tax Commission prevailed because the court found that the tax assessment was properly applied and the corporation did not meet its burden of proof regarding the unconstitutionality of the tax.

Covington Fabrics Corporation, the appellant herein, brought this action against the South Carolina Tax Commission, the respondent herein, pursuant to Sections 65-2661 and 65-2662, Code of 1962, as amended, to recover the sum of $36,227.32, together with interest thereon, being additional corporate income taxes and corporate license fees assessed by the respondent against the appellant.

You must be