Understanding South Carolina Sales and Use Taxes
Understanding and complying with the sales tax requirements in the states in which you do business is absolutely essential. More states are taxing services, as well as retail sales, so no business owner can afford to be in the dark. In addition, you may find that you are liable for use taxes for products purchased out of state. This article answers some of the basic questions regarding sales tax in South Carolina.
South Carolina imposes a 6 percent tax on retail sales of tangible personal property. In addition, the following services are taxable in South Carolina:
- the rental of transient sleeping accommodations for less than 90 continuous days (this is taxed at 7 percent);
- property manufactured in the state for in-state use or consumption
- sales of electricity
- telephone services, etc.
- furnishing laundry, cleaning, dyeing, or pressing services
Leases. The terms retailer and seller include persons renting, leasing, or furnishing tangible personal property for a consideration. The gross receipts received from the rental or lease of tangible personal property are subject to sales or use tax in South Carolina.
Liability for Tax Rests with the Seller
In South Carolina, the sales tax is imposed on persons engaged in the business of selling tangible personal property at retail in the state. A retailer may add the tax to the sales price, but the seller's inability to collect or the customer's refusal to pay the tax does not relieve the retailer of the tax liability.
Absorbing the tax is not permitted. It is against South Carolina law to refund or offer to refund all or any part of the amount collected, or to absorb the amount of use tax required to be added to the sales price and collected from the purchaser. As a seller, it is also against the law for you to advertise directly or indirectly that you will absorb the use tax that is required to be added to the sales price.
South Carolina does not specifically address whether a retailer can use the no advertising strategy on sales tax. South Carolina rules do state that the retailer may add the sales tax to the sales price, but the failure to add the tax to the sales price and collect from the purchaser does not relieve the retailer of liability from the tax.
Tax Permits Are Required
In South Carolina, retailers must obtain a license for each permanent branch and pay a $50 license fee. The license fee for artists and craftsmen selling their products at shows is $20. Transient or temporary retailers must pay a $50 fee for a retail license. The tax permits are obtained from the South Carolina Department of Revenue and Taxation.
Many Items Are Exempt from Tax
South Carolina has many specific items that are exempt from sales tax. For example, certain prescription medications are exempt from South Carolina sales tax. Also, unprepared food items purchased with U.S. Department of Agriculture food coupons are exempt from the general state sales tax. You'll want to check and see if you are exempt from the sales tax. An exemption certificate may be issued by a purchaser of a nontaxable item. The exemption certificate may be based on the type of transaction (such as a resale exemption ) or on the item itself.
Purchases for Resale Are Exempt from Tax
Generally, the seller has the burden of showing that a sale is not a taxable retail sale. However, if the seller receives a resale certificate signed by the purchaser stating that the property is purchased for resale, the liability for the sales tax shifts from the seller to the purchaser. If you are a purchaser of property or services under the resale exemption you must provide a resale certificate to the seller.
Requirements for resale exemption certificates. A resale certificate must include the purchaser's name, address, and the retail sales tax license number. State Form ST-8A, Resale Certificate, may be used in the state of South Carolina. Resale certificates are valid for one location as long as no change in ownership or location occurs.
Resale Certificates Can Function as Blanket Certificates
In South Carolina it's not necessary that a resale certificate be obtained for each purchase. Only one resale certificate must be maintained per customer. However, the seller still has the responsibility of reexamining subsequent purchases to determine if they are for goods to be resold by the purchaser in accordance with the resale certificate that is on file.
Physical Presence Triggers Tax Liability
South Carolina has a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if you have physical presence within South Carolina. To determine if you have physical presence, ask yourself the following:
- Do I have retail facilities, a warehouse, or any office space in South Carolina? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
- Do my employees or I enter South Carolina for purposes of taking and transmitting orders from South Carolina? If your employee or independent contractor goes into South Carolina to take or transmit orders, your business may have physical presence in South Carolina. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
- Do my delivery vehicles frequently enter South Carolina for purposes of delivering property? Frequent deliveries in South Carolina by your trucks will give you physical presence in South Carolina.
How to Recoup Excess Tax Payments
A taxpayer may apply to the South Carolina Department of Revenue and Taxation for the refund of sales or use tax. The application must be made in writing within three years from the date the tax was due.
South Carolina Imposes Use Tax on Out of State Purchases
South Carolina imposes a use tax on persons storing, using, or consuming tangible personal property purchased at retail. The person is relieved of liability if they obtain a receipt from a retailer maintaining a place of business in South Carolina or who is authorized to collect use tax for the state. Also, you are generally allowed a credit for sales or use tax paid in another state for tangible personal property used in South Carolina. The amount of the credit may not exceed the amount of the South Carolina tax.