SC Department of Revenue
Use Tax





Public Affair Office                 Phone (803) 898-5464

Contact: Danny Brazell              Fax  (803) 898-5446






Feb. 27, 2003

Use tax can be reported on state income tax returns

      If you've made a recent out-of-state purchase from the Internet, a catalog or TV home shopping network, you could owe South Carolina a use tax on that purchase. If you do owe the use tax, there is a convenient way to pay by using the use tax line on the South Carolina state income tax return.

      The use tax is due on out-of-state purchases where no sales tax equal to South Carolina's has been paid to another state. If, for example, you purchased a computer in another state and brought it back to South Carolina, you would owe South Carolina a 5% use tax (or 6 or 7% in local sales tax counties) if no tax were paid to the other state. If you paid less in sales tax than South Carolina's 5% (plus any local sales tax), you would owe South Carolina the difference.  However, some out-of-state vendors have registered with the South Carolina Department of Revenue to collect the state sales tax and you should retain your receipt for verification should the need arise.

      The use tax is not a new tax. It has been around as long as the sales tax and every state that has a sales tax also has a use tax. Like the sales tax, use tax revenues help pay for public education in South Carolina.

      One reason for having a use tax is to even the playing field for South Carolina retailers. South Carolina retailers must collect a sales tax and, without the use tax, would be at a disadvantage to out-of-state retailers who do not collect the tax. 

      If you make an out-of-state purchase, you are required to voluntarily pay the tax and you can do so easily on the South Carolina SC1040 and SC1040A income tax forms. If you are due a refund, the use tax line on the tax return Line 12 on the SC1040A and Line 20 on the SC1040 -- will reduce your refund by the amount you owe in use tax. If you owe the state money, you can add the use tax to the balance you owe and pay it at the same time. And like the income tax, you have until April 15 to pay the amount of use tax you owe.

      The use tax also can be reported on the South Carolina UT-3 Use Tax form, which is available at the Department of Revenue web site, Failing to report the tax may lead to additional penalties and interest added to your use tax liability.

      The use tax line was added to the state income tax return three years ago to make it easier for taxpayers to report the tax. The use tax is the state's most unreported tax and a 2001 University of Tennessee study estimated South Carolina may lose as much as $153 million each year in unreported use tax on out-of-state purchases.

      Because the revenue is used for education, the Department of Revenue has stepped up efforts to both collect the tax and educate the public about it. With the boom in catalog and Internets sales, many electronic shoppers are unaware they may have a use tax obligation when they make out-of-state purchases.





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