If a retail merchant gets Class 4 compensation plates for his truck and then uses the same truck on separate trips to haul previously sold merchandise to customers (an exempt use), does he violate the law, and can a police officer rely on the displayed plates as proof the load is lawful?

Plain-English summary

A retail merchant licensed under SDC 57.31 owned a truck under 26,000 pounds gross weight and used it for two kinds of hauls: (1) carrying materials he had not yet sold, which was a "compensated" use that required motor-carrier plates under SDC 44.0426, and (2) delivering already-sold merchandise to customers outside city limits, which was exempt from compensation requirements under SDC 1960 Supp. 44.0422(6). The merchant bought Class 4 compensation plates so he could lawfully do the compensated hauls. The state asked the AG five interlocking questions about whether the plates were required to be removed for exempt hauls, whether the same truck could do both kinds of work, and what a police officer could presume from the plates.

The AG's core move was statutory interpretation history. The Supreme Court in Mitchell Produce Co. v. Morrison had laid down the rule that exemptions from the motor carrier act had to be strictly but reasonably construed. Earlier opinions had read prior versions of the exemption to require "exclusive" use of the vehicle for the exempt purpose. But the 1957 amendment to SDC 44.0422, which restructured the exemptions as a list of "when operating" subsections, had shifted the focus. After 1957, what mattered was how the vehicle was being used on a given haul, not what the vehicle was used for as a general matter.

The 1961 amendment to SDC 44.0422(6), the retail merchant exemption, retained the use-based framing. So a Class 4 plated truck could lawfully do an exempt haul (delivering previously sold merchandise to a purchaser outside a municipality) on Monday and a compensated haul on Tuesday. The applicable rule for each trip was determined by the use on that trip, not by the plates on the truck.

The AG worked through the questions:

Question 1: Was a Class 4 plated truck carrying previously sold merchandise under 26,000 pounds gross in violation of SDC 44.0431 and 44.9927? No. The exempt use was lawful regardless of the plates.

Question 2: Did the compensation application bind the merchant to operate the truck only as a compensated carrier? No. The merchant could still operate the truck in exempt mode for qualifying hauls.

Question 3: Did the merchant need to remove the compensation plates when doing an exempt haul? No. The AG said removal was unnecessary and did not address where removed plates should be kept.

Question 4: Could a law enforcement officer rely on the displayed plates as proof the load was lawful? No. The officer had to actually look at what was being hauled and determine whether the use qualified for an exemption, or, if not exempt, whether the load fell within the weight class authorized by the plates. The plates were not a safe harbor for the operator's actual conduct.

Question 5: Could the truck carry a mixed load (8 tons compensated cargo plus 10,000 pounds of previously sold merchandise) on a single trip as an exempt haul? No. The AG said combining a load requiring compensation with an otherwise exempt load removed that use from the exemption.

Currency note

This opinion applied the motor-carrier compensation provisions as they stood in 1968. Check current South Dakota law before relying on its exemption or plate rules today.

What the opinion meant at the time

For retail merchants who hauled their own goods, the same plated truck could be used for compensated trips and, on separate trips meeting all of subsection 6's requirements, exempt deliveries. The AG said compensation plates need not be removed for an exempt haul.

For law enforcement, displayed compensation plates did not settle whether a particular haul was lawful. The officer had to determine whether the use met the exemption or, if it did not, fell within the limits allowed by the plates.

For trucking-industry attorneys, the opinion distinguished earlier AG interpretations of an exemption that used the word "exclusively." It treated the later "when operating" language as focusing on the vehicle's use for the particular haul.

For a merchant considering the mixed load described in question 5, the AG answered no: hauling cargo requiring compensation together with otherwise exempt merchandise did not fit the exemption.

Common questions

Q: What was the difference between Class 4 and other compensation classes?
A: The quoted SDC 44.0426 provision set Class 4 at seven tons gross weight or under, with annual compensation of one hundred twenty-five dollars. The opinion did not quote the other class rates.

Q: How did SDC 44.0431's overweight penalty work?
A: If a carrier operated a vehicle that weighed (with its load) more than the gross weight specified on the compensation application, the carrier was deemed to have agreed to the higher weight class and had to pay the higher compensation for the full term of the certificate. This was treated as compensation, not as a penalty, so it did not bar separate prosecution for the underlying violation.

Q: What counted as "previously sold merchandise" for the exemption?
A: The opinion did not define that phrase beyond quoting subsection 6. For this exemption, it listed transport of the employer's previously sold merchandise to a purchaser outside a municipality, in a vehicle under 26,000 pounds gross weight owned by a licensed merchant or operated by the merchant's employee. It did not decide whether a particular transaction counted as a prior sale.

Q: Why didn't the AG just answer question 3?
A: Because the AG's answers to questions 1 and 2 meant that removing compensation plates for an exempt haul was unnecessary. He therefore did not answer the question of where removed plates should be kept.

Q: What must an officer check when a plated truck's operator claims the retail-merchant exemption?
A: The AG said the officer could not rely on the displayed plates. The officer had to determine whether the truck's use met the exemption and, if it did not, whether the haul was within the limits allowed by the plates. The opinion did not discuss a citation procedure.

Q: Did the opinion address what records the merchant should keep to prove exempt-use status?
A: No. The opinion did not address recordkeeping or impose any specific recordkeeping requirements.

Background and statutory framework

The opinion described SDC 44.0420 to 44.0431 as statutes requiring compensation for unusual use of the highways. It quoted the annual compensation provision and its Class 4 gross-weight rate.

The "motor carrier" definition was broad ("any person, copartnership or corporation owning, controlling, operating, or managing any motor vehicle... for the transportation of persons or property over the public highways"), followed by exemptions. Subsection 6 covered a qualifying merchant vehicle transporting previously sold merchandise to a purchaser outside a municipality.

The 1957 amendment's "when operating" language mattered to the AG's reading. The opinion cited earlier AG interpretations of a prior exemption that expressly required exclusive use. The later language led the AG to focus on the truck's use during a particular haul.

Mitchell Produce Co. v. Morrison was the leading case on exemption construction. The Court there said that exemptions "should be strictly, but reasonably, construed; they extend only so far as their language fairly warrants, and all doubts should be resolved in favor of the general provision rather than the exception." That formula governed.

The questions and answers here concerned the retail-merchant exemption in subsection 6.

Citations and references

Statutes:

• SDC 44.0420 to 44.0432 (motor carrier chapter)
• SDC 1960 Supp. 44.0422 (motor carrier definition and exemptions), as amended
• SDC 1960 Supp. 44.0422(6), as amended by Chapter 235 of the 1961 Session Laws (retail merchant exemption)
• SDC 1960 Supp. 44.0426, as amended (compensation classes and rates)
• SDC 1960 Supp. 44.0431 (overweight; higher class compensation owed)
• SDC 57.31 (retail merchant licensing)

Cases:

• Mitchell Produce Co. v. Morrison, 63 S.D. 127, 257 N.W. 47 (exemption construction rule)
• Paddock v. Balgord, 2 S.D. 100, 48 N.W. 840 (1891) (party claiming exemption must show entitlement)

Prior AG opinions:

• 1945-46 AGR 92 (earlier "exclusive use" reading of SDC 44.0422)
• 1951-52 AGR 240 (same)
• 1959-60 AGR 55 (post-1957 reading of subsection 6)

Treatises:

• 59 CJ 1092 (rules of exemption construction)
• 82 CJS Statutes § 384 (amendments may clarify or alter prior law)

Source

• Landing page: https://atg.sd.gov/OurOffice/OfficialOpinions/opinionhtml.aspx?id=1748

Original opinion text

Compensation Plates. Compensation Plates.

You have requested an official opinion of this office based upon the following factual situation:

"A merchant engaged in retail sales business, and licensed under SDC 57.31 operates a truck in course of such business for hauling of materials not previously sold and also of previously sold merchandise. Said merchant applies for, and obtains, a compensation certificate for such truck for Class 4 operations. After issuance of such compensation certificate and plates, the merchant uses such truck in transporting, in separate hauling operations, materials not previously sold (compensated hauls) and merchandise previously sold (exempt hauls.)"

You have then presented the following specific questions for consideration:

"1. If such compensated truck is used for hauling previously sold merchandise with gross weight under 26,000 lbs. but over 8 tons (Class 4), is such operation in violation of SDC 1960 Supp. 44.0431 and 44.9927?

"2. Is such merchant's application for compensation certificate in respect to such truck considered to be a definite election to operate such truck as a compensated motor carrier under SDC 44.04 and acts amendatory thereto, regardless of any exempt use thereof under SDC 1960 Supp. 44.0422 and acts amendatory thereto?

"3. Is operator of such truck entitled to remove from such truck the compensation plates issued when engaged in transporting previously sold merchandise under SDC 1960 Supp. 44.0422 (6) as amended by 1961 Session Laws, Chapter 235? If so, where should compensation plates be kept during such period of removal?

"4. Is a law enforcement officer entitled to rely upon the displayed compensation plates as evidence of lawful and authorized compensated weight when such truck is found transporting goods on the public highway, even if the particular operator of said truck claims the transported merchandise is previously sold merchandise and also claims the said truck is therefore exempt under SDC 1960 Supp. 44.0422 (6), amended?

"5. Can such merchant legally transport on such truck a load of materials consisting of 8 tons of compensated load and 10,000 pounds of previously sold merchandise?"

The controlling statutes for this situation are those statutes which require compensation for the unusual use of the highways (SDC 44.0420 to 44.0431) and more specifically SDC 1960 Supp. 44.0422 as amended.

This is a broad statute setting forth conditions which require the purchase of compensation plates followed by twelve exceptions. The pertinent portions of this section are as follows:

"The term 'motor carrier', when used in Sections 44.0420 to 44.0432 of SDC 44.04 and amendments thereto shall mean any person, copartnership or corporation owning, controlling, operating, or managing any motor vehicle, trailer, semitrailer, or motor propelled or trailed vehicle chassis for the transportation of persons or property over the public highways of this state.

"Provided, however, the following shall not be considered within the definition of 'motor carriers', to-wit:

"(6) when operating a motor vehicle of less than 26,000 pounds gross weight owned by a merchant licensed under SDC 57.31 and amendments thereto or his commissioned paid employee and used in transporting his employer's previously sold merchandise to a purchaser outside the limits of a municipality and in returning exchanged property."

SDC 44.0426 1960 Supp., as amended, provides:

"Every person or corporation except as otherwise provided in this section, desiring to operate a motor vehicle, trailer, or semitrailer, upon the public highways of this state as a motor carrier, in consideration of the unusual use of such public highways by such person or corporation and in addition to the regular license fee or taxes imposed upon motor vehicles in this state, shall, if a carrier of property, pay to the county treasurer of the county of which the applicant is a resident, or to the Department of Motor Vehicles, if applicant is not a resident of this state, the compensation provided for herein annually.

"Class 4, Gross weight seven tons or under, one hundred twenty-five dollars per year."

And SDC 44.0431 1960 Supp. provides:

"Any motor carrier who shall operate upon the public highway any motor vehicle the weight of which together with its load shall exceed the gross weight of such vehicle specified in his application and authorized in the compensation certificate, shall be thereby deemed to have specified such greater weight and to have agreed to pay compensation accordingly, and shall forthwith pay the amount by which the correct compensation therefor, for the full term of the authorized operation of such motor vehicle under his certificate, or permit, exceeds the amount of compensation actually paid. Such additional amount shall be compensation and not a penalty or fine, and the payment thereof shall not constitute a defense or bar to conviction for such, or any other violation of this chapter. The obligation to pay such compensation shall be calculated and incorporated in the judgment of any court wherein a motor carrier has been convicted of any crime involving the overweight operation of any motor vehicle upon the highways of this state, and failure to obtain the compensation and present the court with a receipt indicating payment therefor within a time specified by the court shall be punishable by contempt proceedings for the purpose of this chapter, in determining the gross weight of vehicles or vehicle, the load combined, a variation of five percent, but not to exceed one thousand pounds in excess of the maximum weights herein provided, is hereby allowed, without such variation constituting a violation of this chapter."

In the case of Mitchell Produce co v. Morrison, 63 SD 127, 257 NW 47, our Supreme Court has stated in the following language how the exemptions of 44.0422 are to be interpreted.

"The machinery adopted by the Legislature to accomplish its objects was to provide for the payment of compensation by motor carriers as defined in the act; to establish a broad and comprehensive definition of the term 'motor carriers'; and then to exempt out from the definition and operation of the act certain specific transportations. Respondent, being admittedly a motor carrier within the broad definition of the act, but claiming the protection of one of the exceptions, must show itself clearly within the terms of the exception. Paddock v. Balgord (1891) 2 SD 100, 48 NW 840. The canons of statutory construction with reference to exceptions from a general provision are well understood, and to cite authorities in relation to that point seems unnecessary. The applicable principle is well stated in 59 CJ 1092, as follows: 'Exceptions, as a general rule, should be strictly, but reasonably, construed; they extend only so far as their language fairly warrants, and all doubts should be resolved in favor of the general provision rather than the exception.' "

Exemption of No. 6 of SDC 1960 Supp. 44.0422 or the similar provision in the SDC of 1939 has been the subject of previous Attorney General opinions.

In 1945-46 AGR 92 this office interpreted the provision exempting from compensation plates, vehicles "exclusively used by a person who delivers in his own vehicle goods and merchandise in pursuance to bona fide sales at retail to the consumers thereof, residing outside the limits of cities and towns" (SDC 44.0422, as amended by Chapter 160, Session Laws of 1943) and held that such exemption did not include a vehicle which not only delivered sold goods but also carried goods to be sold directly from the vehicle. This holding was based upon the word "exclusively" in the above statute.

Again, in 1951, the above statute was the subject of an opinion of this office and again because it was not stated that the vehicle was used in the "exclusive" manner, it was held that the vehicle was not exempt. (1951-52 AGR 240)

In 1957, SDC 44.0422 was amended and exemption No. 6 was set out as it is presently, and since then has been subjected to interpretation only once from this office in which opinion it was held not applicable to the situation presented. (1959-60 AGR 55). The Supreme Court subsequent to this amendment had another occasion to interpret an exemption of SDC 44.0422 and although the exemption was not the one involved in the situation you presented, the language of the Court provides reasoning upon which this opinion can be predicated. The Court stated:

"An amendment is usually designed either to alter the operation and effect of earlier provisions or to clarify their meaning. 82 CJS Statutes S 384. There are in the 1957 amendment changes in substance, but they are not here material. It would also appear that the legislature intended a clarification of the prior statute. It sets out each of the eleven exceptions in a subsection beginning with the words 'when operating', which indicates a purpose to exempt motor vehicles primarily on the basis of their use."

Thus it can be reasoned that it is not the vehicle, but the use to which the vehicle is put that determines whether or not it comes within the exemptions.

Therefore, the requirements that must be met before a use can qualify under exemption No. 6 must be:

1. A motor vehicle of less than 26,000 pounds gross weight;

Owned by a merchant licensed under SDC 57.31 or his... employee;

Transporting employer's previously sold merchandise (and in returning exchanged merchandise);

To a purchaser;

Outside the limits of a municipality.

If a vehicle complies with the requirements and is used in the above manner it is exempt from compensation. The fact that at other times the same vehicle is used for purposes which are not exempt and for which compensation plates are purchased and displayed on the vehicle does not remove it from the exempt status when used as above.

Upon the above reasoning your question No. 1 would be answered in the NEGATIVE.

Question No. 2 is also answered in the NEGATIVE.

For the reason that the first two questions are answered in the negative, it is unnecessary for the compensation plates to be removed when the vehicle is used for an exempt haul and question No. 3, therefore, need not be answered.

In answer to question No. 4 it is my opinion that a law enforcement officer cannot rely upon the displayed plates, but must determine if the use to which the vehicle is being put is exempt, or if not exempt, within the limits allowed by the compensation plates.

Question No. 5 is answered in the NEGATIVE for the reason that such a use, (hauling a load that requires compensation along with a load that would otherwise be exempt) removes the use from the strict interpretation to be given to the exception.