SOUTH CAROLINA DEPARTMENT OF REVENUE
Public Affairs Office
Contact: Danny Brazell
Phone: (803) 898-5464
FOR IMMEDIATE RELEASE
March 2, 2004
Income tax form convenient way
To report state’s little known use tax
South Carolina shoppers making purchases from the Internet, shopping catalogs or from television shopping networks may be a little surprised to find they could owe the state a use tax on their purchases.
The use tax is close cousin to the state’s 5% sales tax and must be reported and paid to the Department of Revenue by anyone making purchases from out-of-state vendors if no sales tax equal to South Carolina’s sales tax is paid to the state where the purchase is made. It has been estimated in studies that South Carolina loses more than $153 million each year in unreported use tax, which means the state’s education system also loses out each year. All use tax revenue, like the state’s sales tax revenue, is earmarked for education initiatives.
For convenience, and to encourage shoppers to report and pay the use tax, the South Carolina Department of Revenue has for the past few years added a line to the state income tax form that allows taxpayers to report and pay the
tax. This year the use tax line is line 14 on the SC1040A short form and line 20
on the SC1040 long form.
The use tax is 5% (plus any local use tax imposed by a county) of the total price of the items purchased out of state. By using the use tax line on the income tax form, you can, somewhat painlessly, pay the tax by reducing your income tax refund by the amount of the use tax you owe, or increasing your balance due by that amount. For example, if you made a $200 Internet purchase in 2003, your South Carolina use tax liability would be $10. Your 2003 tax year state refund amount would be reduced by $10. Your liability will be more if you live in a county imposing a local sales and use tax.
You can also report the use tax on Department of Revenue Form UT-3, which can be downloaded at the Department’s website, www.sctax.org.
The use tax is not a new tax and has been around as long as the state’s sales tax. Every state that has a sales tax also has a use tax. One of the reasons the state imposes the use tax is so South Carolina merchants, who must collect the 5% sales tax and any local tax, are not operating at a disadvantage to out-of-state retailers who may not collect a sales tax. In recent years, the Department of Revenue has made an effort to register out-of-state retailers to collect the sales and use tax for South Carolina and is working with other states to improve the exchange of sales information. The Department also has stepped up efforts to educate the public to the use tax, which for years has been the state’s most underreported tax.