Most Frequently Asked SALES TAX Questions

1. Are freight charges taxable?

Freight charges are taxable unless the shipping is billed F.O.B. point of origin.

2. If Company A (located in California) makes a sale to Company B (located in New Jersey) but ships the merchandise to Company C (located in South Carolina); who is responsible for the South Carolina Tax?

This is a third party drop shipment scenario. Company A is considered to be making a nontaxable sale for resale to Company B. Company C is liable for the South Carolina use tax unless it has a receipt (invoice) showing payment of the South Carolina tax to Company B.

3. If I am leasing a car can I pay all of the sales tax up front or do I have to pay it monthly?

There is an option available for payment of the sales tax up front.

4. If I lease a car and then decide to buy the car, why do I have to pay taxes again? This is double taxation. I protest!

The sales tax is a transaction tax; this is not double taxation. The lease of the car is one taxable transaction; the sale of the car is a separate taxable transaction.

5. Are warranties taxable?

Effective for sales or renewals on or after October 1, 2005, Code Sections 12-36-910(B) and 12-36-1310(B) impose the sales and use tax on the:

gross proceeds accruing or proceeding from the sale or renewal of warranty, maintenance, or similar service contracts for tangible personal property, whether or not such contracts are purchased in conjunction with the sale of tangible personal property.

As such, charges for sales or renewals of warranty, maintenance, or similar service contracts (whether optional or mandatory) for tangible personal property are subject to the sales and use tax effective October 1, 2005.  However, charges for motor vehicle extended service contracts and motor vehicle extended warranty contracts are exempt from the sales and use tax under Code section 12-36-2120(53).

Note: The tax does not apply to the withdrawal from inventory of tangible personal property for use in replacing defective part under a warranty contract if:

1) tax was paid on the sale or the renewal of the warranty contract and the customer is not charged for any labor or material when the part is replaced; or,

2) the warranty contract is given without charge at the time of the original purchase of the defective property, and the tax was paid on the sale of the defective part or on the sale of the property of which the defective part was a component, and the customer is not charged for any labor or material when the part is replaced.

If both conditions set forth in Item 1 are not met, or if all three conditions set forth in Item 2 are not met, then tax is due on the withdrawal from inventory of the tangible personal property for use in replacing a defective part under the warranty contract.  The tax would be based on the fair market value of the property withdrawn from inventory.

For a more detailed discussion of this issue, see SC Revenue Ruling #05-12.

6. Are computer software contracts taxable?

Effective for sales or renewal on or after October 1, 2005, Code Sections 12-36-910(B) and 12-36-1310(B) impose the sales and use tax on the:

gross proceeds accruing or proceeding from the sale or renewal of warranty, maintenance, or similar service contracts for tangible personal property, whether or not such contracts are purchased in conjunction with the sale of tangible personal property.

As such, a charge for the sales or renewal of a warranty, maintenance, or similar service contract for computer software what was delivered in tangible form (tangible personal property) is subject to the sales and use tax, whether or not such contract was purchased in conjunction with the sale of computer software that was delivered in tangible form. A charge for the sale or renewal of a warranty, maintenance, or similar service contract for comptuer software that was delivered solely by electronic means is not subject to the sales and use tax, provided no part of the software (including back-up diskettes and tapes) that is covered by the maintenance agreement is to acquire services and is not to acquire tangible personal property (e.g. software updates provided by tangible means).

For a more detailed discussion of this issue, see SC Revenue Ruling #05-13.

7. Are churches exempt from sales tax?

Churches are not exempt from sales tax on anything purchased for their own use. Churches may obtain an exemption for fundraising sales.

8. What is the tax rate?

The statewide South Carolina sales and use tax rate is 6%.

9. What are the local option counties? When did the county begin imposing the local option tax? When can the county eliminate the local option tax?

Certain counties have imposed an additional 1% local option tax. Please refer to Sales and Use Tax Rates of SC (ST-427) to obtain which counties have local option tax and the date of impositions.

The local option tax may only be eliminated by referendum at least two years after imposition in each county.

10. How do you complete the sales and use tax return?

Instructions are available for assistance in completion of the return. You may also call (803) 898-5788 in Columbia or one of the nine Taxpayer Service Centers in the State.

11. If my non-profit organization holds an exemption certificate in another state, will South Carolina honor it and exempt me from South Carolina sales tax?

No. Non-profit organizations are taxable on all items purchased for their own use. Certain qualifying organizations are exempt on items to be sold (such as fundraisers). Application Form ST-387 must be completed.

If I present my exemption certificate can I stay in South Carolina hotels free of the tax?

South Carolina does not recognize other state's exemption certificates issued to non-profit organizations for staying in hotels free of the tax.

12. What are deductions?

Deductions are these transactions considered nontaxable by law. These include sales for resale, out-of-state deliveries and trade-ins. A complete list of deductions is available from the Department of Revenue.

13. What is your fiscal year?

The South Carolina fiscal year is July 1 through June 30.

14. How can I take a credit on my return?

There is no provision for taking a credit on the return. Deductions should be increased by the appropriate amount to reflect any credit due for current period or an amended return should be submitted for previous periods.

15. How do I submit an amended return?

An amended return is submitted by marking a return "amended" and forwarding to the Department of Revenue.

16. Are delivery charges taxable? Why?

Delivery charges are considered part of the sales price and are subject to the tax.