SC Department of Revenue
 
 
 
 
 
 
 
 
 
 
 
 
Filing Requirements Nexus

 

Filing requirements / Nexus

BUSINESSES WHICH SELL PRODUCTS OR SERVICES TO CUSTOMERS IN SOUTH CAROLINA MAY HAVE SUFFICIENT CONNECTION, OR NEXUS, TO BE REQUIRED TO FILE TAX RETURNS. THE FOLLOWING INFORMATION ON FILING REQUIREMENTS IS PROVIDED TO ALERT BUSINESSES TO THE DEPARTMENT OF REVENUE'S STANDARDS FOR FILING REQUIREMENTS AND NEXUS, AND TO PROMOTE MAXIMUM VOLUNTARY COMPLIANCE.

THESE BUSINESSES SHOULD FAMILIARIZE THEMSELVES WITH THESE NEXUS STANDARDS TO AVOID PENALTIES AND LENGTHY LOOK BACK PERIODS FOR DELINQUENT TAXES.

Nexus is a sufficient connection between the State and a taxpayer, which allows the State to subject the taxpayer to its taxing jurisdiction and require the taxpayer to file tax returns and pay taxes.

The following describes the applicability of nexus concepts and issues as they relate to sales and use tax and income tax for firms located outside the State of South Carolina:

SALES AND USE TAX

Based on the statute and case law, including various decisions of the U.S. Supreme Court, the following nonexclusive examples would constitute sufficient nexus for the State of South Carolina to require an out of state seller to collect and remit use tax on sales to South Carolina customers:

  1. Out-of-state seller maintains, either directly or by subsidiary, an office, distribution house, warehouse, other place of business, or property in South Carolina.
  2. Out-of-state seller has an agent, salesman, representative, independent contractor, or employee operating in South Carolina, either permanently or temporarily.
  3. Out-of-state seller installs the property it sells in South Carolina.
  4. Out-of-state seller regularly engages in any activity in connection with the lease or rental or servicing of property located in South Carolina.
  5. Out-of-state seller delivers product to South Carolina customers in company vehicles.

If an out-of-state seller determines that its activities constitute nexus with South Carolina and a filing requirement has existed for several years, then the out-of-state seller should contact the Department of Revenue and request consideration for the Voluntary Disclosure Program. Specifics of this program may be found at www.sctax.org under "Voluntary Disclosure." This program offers both penalty relief and limitations on the time of exposure to the tax due.

If an out-of-state seller desires assistance in determining if filing requirements apply, use the Questionnaire Regarding Activities in South Carolina. You may print this form, complete it, have it signed by an officer of the business, and forward it to the name and address indicated on the form. Include a cover letter explaining your need for nexus determination. The Department of Revenue will respond promptly.

If an out-of-state seller does not have the requisite nexus to be required to file returns, the liability for the use tax rests with the purchaser in South Carolina. The Department of Revenue aggressively audits for use tax liabilities. As a convenience for customers, the out-of-state seller may wish to voluntarily register to collect and remit the tax, and thus avoid the exposure of customers to potential use tax audits and associated penalties and interest. An out-of-state seller who does not have nexus but voluntarily registers to collect and remit the use tax is provided a discount of up to $10,000 per fiscal year. All other filers have their discount capped at $3,000 per fiscal year.

Businesses which have nexus and associated filing requirements in South Carolina and who are discovered by audit or other information may be subject to taxes, penalties and interest for periods back to 1986.

To discuss nexus, questionnaires, or voluntary disclosure, contact the following DOR employees:

John Swearingen Sue Strickland
Phone: 803 898-5617 Phone: 803 898-5235
Fax: 803 896-0066 Fax: 803 896-0066
E-mail: SweariJ@sctax.org  E-mail: StrickS@sctax.org

 

Mailing Address:

South Carolina Department of Revenue

Attn: Nexus/Discovery

P.O. Box 125

Columbia, South Carolina 29214


Nexus Creating Activities for Sales and Use Taxes

RR07-3



INCOME TAX FOR BUSINESSES

(Includes "C" and "S" Corporations, partnerships, limited liability companies, and sole proprietors)

Public Law 86-272 in general prohibits a state from imposing an income tax on income derived within the state from interstate commerce if the only business activity within the state consists of the solicitation of orders of tangible personal property by or on behalf of a business by its employees or representatives. Such orders must be sent outside the state for approval or rejection and if approved, must be filled by shipment or delivery from a point outside the state to be within the purview of Public Law 86-272.

The prohibition in Public Law 86-272 does not exempt those businesses which sell real estate, intangibles or services. Examples: photographic development, licensing patents or trademarks, fabrication of material, and architectural and engineering services. Such businesses deriving income in South Carolina must file returns.

In addition, even a business selling tangible personal property in South Carolina, and having employees or independent contractors operating in the state, may have a filing requirement and income tax liability created by certain additional activities. Based on statute, federal law and numerous U. S. Supreme Court decisions, the Department of Revenue has issued Revenue Ruling 97-15, which outlines activities which constitute nexus for income tax purposes and also those which do not.

Basically, if a business engages in activity other than solicitation of orders, and the activity serves an independent business function other than solicitation of orders, and the activity is not trivial, the protection of Public Law 86-272 is lost and the business is required to file income tax returns.

If an out of state seller desires assistance in determining if filing requirements apply, use the Questionnaire Regarding Activities in South Carolina. You may print this form, complete it, have it signed by an officer of the business, and forward it to the name and address indicated on the form. Include a cover letter explaining your need for nexus determination. The Department of Revenue will respond promptly.

As in sales and use tax, if a business determines that its activities constitute nexus with South Carolina and a filing requirement and an income tax liability has existed for several years, then the business should contact the Department of Revenue and request consideration for the Voluntary Disclosure Program. Specifics of this program may be found at www.sctax.org under "Voluntary Disclosure." This program offers both penalty relief and limitations on the time of exposure to the tax due.

Businesses which have nexus and associated filing requirements in South Carolina and who are discovered by audit or other information may be subject to taxes for periods back to 1986.

To discuss nexus, questionnaires, or voluntary disclosure, contact the following DOR employees:

John Swearingen Sue Strickland
Phone: 803 898-5617 Phone: 803 898-5235
Fax: 803 896-0066 Fax: 803 896-0066
E-mail: SweariJ@sctax.org  E-mail: StrickS@sctax.org

 

Mailing Address: South Carolina Department of Revenue

Attn: Nexus/Discovery

P.O. Box 125
Columbia, South Carolina 29214

 

Protected Activities (Public Law 86-272)

RR97-15

Nexus Creating Activities for Income Tax RR03-4
Nexus (Income Tax) RR08-1
Nexus Questionnaire



 
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