S.C. REVENUE RULING #91-12
SUBJECT: Refund for Use Tax Collected and Remitted by an
Out-of-State Retailer
(Use Tax)
TAX ANALYST: Steve Hallman
EFFECTIVE DATE: Applies to all periods open under the statute.
SUPERSEDES: All previous documents and any oral directives in
conflict herewith.
REFERENCE: S.C. Code Ann. Section 12-36-1310 (Supp. 1990)
S.C. Code Ann. Section 12-36-1330 (Supp. 1990)
S.C. Code Ann. Section 12-36-1350 (Supp. 1990)
S.C. Code Ann. Section 12-36-1370 (Supp. 1990)
AUTHORITY: S.C. Code Ann. Section 12-4-320 (1976)
S.C. Revenue Procedure #87-3
SCOPE: A Revenue Ruling is the Commission's official
interpretation of how tax law is to be
applied to a specific set of facts. A Revenue
Ruling is public information and remains a
permanent document until superseded by a
Regulation or is rescinded by a subsequent
Revenue Ruling.
Q_u_e_s_t_i_o_n_s_:
1. Is an out-of-state retailer required to collect and remit the South
Carolina use tax on a sale of tangible personal property if delivery
is made to the purchaser in the state where the retailer is located?
2. If an out-of-state retailer is not required to collect the use tax on
such transactions, then can he obtain a refund from the Commission for
use tax erroneously remitted to the State?
3. If an out-of-state retailer is not required to collect the use tax on
such transactions, then can the purchaser obtain a refund from the
Commission for use tax erroneously collected by the out-of-state
retailer?
F_a_c_t_s_:
An out-of-state retailer, who is licensed to collect the South Carolina
use tax, makes delivery to a South Carolina customer outside South
Carolina (e.g. customer pickup, over-the-counter sales, etc.) and the
customer subsequently brings the property into South Carolina for storage,
use or consumption. When audited by the taxing authority of the state
where the retailer is located, the retailer is assessed that state's sales
tax.
D_i_s_c_u_s_s_i_o_n_:
Prior to discussing the various issues, we must review the basic theory of
the use tax - imposition of the tax, liability for the tax, and the
responsibilities of the seller.
Code Section 12-36-1310(A) states:
A use tax is imposed on the storage, use, or other consumption in
this State of tangible personal property purchased at retail for
storage, use, or other consumption in this State, at the rate of
five percent of the sales price of the property, regardless of
whether the retailer is or is not engaged in business in this
State.
Pursuant to Code Section 12-36-1330:
(A) Every person storing, using, or otherwise consuming in this
State tangible personal property purchased at retail, is
liable for the use tax, until the tax is paid to the State.
(B) A receipt from a retailer:
(1) maintaining a place of business in this State, or
(2) authorized by the commission to collect the use tax, is
sufficient to relieve the purchaser from further liability
for tax to which the receipt refers.
* * * *
Code Section 12-36-1350 reads, in part:
(A) Every s_e_l_l_e_r_ making sales of tangible personal property for
storage, use, or other consumption in this State...s_h_a_l_l_...
c_o_l_l_e_c_t_ _t_h_e_ _u_s_e_ _t_a_x_ _f_r_o_m_ _t_h_e_ _p_u_r_c_h_a_s_e_r_...
* * * *
(C) The tax required in this article to be collected by the
seller constitutes a debt owed by the seller to this State.
(emphasis added)
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Further, Code Section 12-36-1370 states:
(A) It is presumed that tangible personal property sold by any
person f_o_r_ _d_e_l_i_v_e_r_y_ _i_n_ _t_h_i_s_ _S_t_a_t_e_ is sold for storage, use,
or other consumption in this State, unless the seller takes
from the purchaser a certificate, signed by and bearing the
name and address of the purchaser, to the effect that the
purchase was for resale.
(B) It is also presumed that tangible personal property r_e_c_e_i_v_e_d_
i_n_ _t_h_i_s_ _S_t_a_t_e_ by its purchaser was purchased for storage,
use, or other consumption in this State.(emphasis added)
In B_a_n_k_ _o_f_ _A_m_e_r_i_c_a_ _N_a_t_i_o_n_a_l_ _T_r_u_s_t_ _a_n_d_ _S_a_v_i_n_g_s_ _A_s_s_o_c_i_a_t_i_o_n_ _v_._ _S_t_a_t_e_ _B_o_a_r_d_
o_f_ _E_q_u_a_l_i_z_a_t_i_o_n_, 26 Cal. Rptr. 348, 209 Cal. App. 2d 780 (1962), the
question of whether a use tax liability is imposed upon the retailer or
consumer was addressed by the court in California. In reaching its
decision, the court considered language from portions of the California
statute relative to use tax that is very similar to language found at
Sections 12-36-1310, 12-36-1330, and 12-36-1350 of the Code of Laws of
South Carolina. The finding states in part:
...A_s_ _w_e_ _h_a_v_e_ _h_e_r_e_i_n_a_b_o_v_e_ _d_i_s_c_u_s_s_e_d_ _t_h_e_ _u_s_e_ _t_a_x_ _i_s_ _a_ _t_a_x_ _l_e_v_i_e_d_
u_p_o_n_ _t_h_e_ _p_u_r_c_h_a_s_e_r_._ _I_t_ _i_s_ _n_o_t_ _a_ _t_a_x_ _o_n_ _t_h_e_ _r_e_t_a_i_l_e_r_;_ _n_o_r_ _d_o_e_s_ _i_t_
s_h_i_f_t_ _t_o_ _h_i_m_ _b_e_c_a_u_s_e_ _h_e_ _h_a_s_ _t_h_e_ _d_u_t_y_ _t_o_ _c_o_l_l_e_c_t_ _i_t_ _f_r_o_m_ _t_h_e_
c_o_n_s_u_m_e_r_._ The retailer is merely the agent through which the
collection is made... The provision making the tax a debt of the
retailer to the State, where he is required to collect it, is
part of a valid statutory scheme making the retailer an agent of
the State for collection, and its effect, where such collection
is not made, is merely to hold the collection agent liable for
his default in the performance of his duty as such. (Brandtjen &
Kluge v. Fincher, supra, 44 Cal. App.2d Supp. 939, 942-943, 111
P.2d 979.) As said in Brandtjen & Kluge, "the unpaid tax may yet
be collected by the state from the purchaser under sections * * *
which provide proceedings looking to such collection." T_h_e_
l_i_a_b_i_l_i_t_y_ _o_f_ _t_h_e_ _r_e_t_a_i_l_e_r_ _i_s_ _n_o_t_,_ _t_h_e_r_e_f_o_r_e_,_ _f_o_r_ _t_h_e_ _u_s_e_ _t_a_x_
i_t_s_e_l_f_ _b_u_t_ _f_o_r_ _a_n_ _a_m_o_u_n_t_ _e_q_u_i_v_a_l_e_n_t_ _t_o_ _i_t_ _b_e_c_a_u_s_e_ _o_f_ _t_h_i_s_ _d_e_f_a_u_l_t_
i_n_ _h_i_s_ _d_u_t_y_ _a_s_ _c_o_l_l_e_c_t_i_o_n_ _a_g_e_n_t_._ _T_h_e_ _t_a_x_p_a_y_e_r_ _i_s_ _t_h_e_ _p_e_r_s_o_n_
u_l_t_i_m_a_t_e_l_y_ _l_i_a_b_l_e_ _f_o_r_ _t_h_e_ _t_a_x_ _i_t_s_e_l_f_, and not the person who pays
the tax liability. (See Colorado Bank v. Bedford, 310 U.S. 41, 60
S.Ct. 800, 84 L.Ed. 1067) And, as pointed out in Brandtjen &
Kluge, t_h_e_ _r_e_t_a_i_l_e_r_ _i_s_ _m_e_r_e_l_y_ _p_a_y_i_n_g_ _t_h_e_ _d_e_b_t_ _o_f_ _a_n_o_t_h_e_r_ _w_h_e_n_ _h_e_
p_a_y_s_ _t_h_e_ _p_u_r_c_h_a_s_e_r_'_s_ _t_a_x_, and as such stands in a position
analogous to that of a surety for the purchaser so as to entitle
him to reimbursement. Accordingly, t_h_e_ _l_i_a_b_i_l_i_t_y_ _o_f_ _t_h_e_ _r_e_t_a_i_l_e_r_
under section 6204, by virtue of its wording and as construed by
the cases, i_s_ _f_o_r_ _a_ _d_e_b_t_ _r_a_t_h_e_r_ _t_h_a_n_ _f_o_r_ _t_a_x_e_s_....(emphasis
added)
In summary, the purchaser is the taxpayer and has the liability for the
use tax unless he has a receipt showing the tax was paid to an
out-of-state retailer who is required or authorized to collect the tax or
the purchase was for resale. The retailer acts as a collection agent for
the State and is not the party liable for the tax, but has a debt to the
State for an amount equivalent to the tax he is required to collect.
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R_e_t_a_i_l_e_r_'_s_ _R_e_q_u_i_r_e_m_e_n_t_ _t_o_ _C_o_l_l_e_c_t_ _a_n_d_ _R_e_m_i_t_ _U_s_e_ _T_a_x_
The first issue to be addressed is whether or not the out-of-state
retailer is required to collect and remit the use tax when the South
Carolina purchaser travels to the out-of-state retailer's location to
accept delivery.
In M_i_l_l_e_r_ _B_r_o_s_._ _C_o_._ _v_._ _S_t_a_t_e_ _o_f_ _M_a_r_y_l_a_n_d_, 347 U.S. 340, 74 S.Ct. 535
(1954), the United States Supreme Court considered the power of a state to
impose a duty upon an out-of-state merchant to collect and remit a
purchaser's use tax. The opinion states in part:
...liability [for the use tax] arises only upon importation of
the merchandise to the taxing state, an event which occurs after
the sale is complete and one as to which the vendor may have no
control or even knowledge, at least as to merchandise carried
away by the buyer....
Thus, an out-of-state retailer cannot be required to collect this State's
use tax unless delivery is made to the purchaser within South Carolina.
R_e_f_u_n_d_ _t_o_ _O_u_t_-_o_f_-_S_t_a_t_e_ _R_e_t_a_i_l_e_r_ _F_o_r_ _U_s_e_ _T_a_x_
C_o_l_l_e_c_t_e_d_ _a_n_d_ _P_a_i_d_ _I_n_ _E_r_r_o_r_
As for whether an out-of-state retailer may obtain a refund of use tax
erroneously collected and paid, the Supreme Court of South Carolina in
F_u_r_m_a_n_ _U_n_i_v_e_r_s_i_t_y_ _v_._ _L_i_v_i_n_g_s_t_o_n_, 244 S.C. 200, 136 S.E.2d 254 (1964), an
admissions tax case, ruled:
... A withholding or collection agent who has reimbursed himself
by withholding or collecting the amount of the taxes from a third
person is not entitled to a refund of such taxes. In such case,
the right to a refund is in the "taxpayer" from whom the funds
were withheld or collected....
Since the purchaser is liable for the use tax (Code Section 12-36-1330)
and, therefore, is the "taxpayer" (see Code Section 12-36-40 and B_a_n_k_ _o_f_
A_m_e_r_i_c_a_ _N_a_t_i_o_n_a_l_ _T_r_u_s_t_ _a_n_d_ _S_a_v_i_n_g_s_ _A_s_s_o_c_i_a_t_i_o_n_ _v_._ _S_t_a_t_e_ _B_o_a_r_d_ _o_f_
E_q_u_a_l_i_z_a_t_i_o_n_, supra), the right to a refund of use tax is that of the
purchaser, not the retailer.
This discussion would not be complete without a review of so-called
"assignments".
In S_l_a_t_e_r_ _v_._ _S_o_u_t_h_ _C_a_r_o_l_i_n_a_ _T_a_x_ _C_o_m_m_m_i_s_s_i_o_n_, 280 S.C. 584, 314 S.E. 2d 31
(S.C. App. 1984), the Court of Appeals of South Carolina held that:
...The law of South Carolina has long recognized that a chose in
action can be validly assigned in either law or equity. F_o_r_r_e_s_t_ _
v_._ _W_a_r_r_i_n_g_t_o_n_, 2 Desaus. Eq. 254 (1804).
While our Supreme Court has apparently not ruled specifically on
the assignability of a claim for tax refund, the greater weight
of authority allows such a claim to be assigned....
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Having established that the right to a refund may be assigned, it must be
determined if the taxpayer (the purchaser) has any rights to assign.
Again quoting from Code Section 12-36-1310, the "use tax is imposed on the
storage, use, or other consumption in this State of tangible personal
property purchased at retail for storage, use, or other consumption in
this State...." Therefore, unless a particular transaction is exempted or
excluded, the use tax is due upon the property being stored, used or
consumed in this State. Once the purchaser has stored, used or consumed
the property in South Carolina, the purchaser (the taxpayer) has no refund
rights to assign to the out-of-state retailer as the tax is due.
R_e_f_u_n_d_ _t_o_ _P_u_r_c_h_a_s_e_r_ _F_o_r_ _U_s_e_ _T_a_x_
E_r_r_o_n_e_o_u_s_l_y_ _P_a_i_d_ _t_o_ _R_e_t_a_i_l_e_r_
The third question concerns whether or not the purchaser (the retailer's
South Carolina customer) may be given a refund for use tax erroneously
collected by the out-of-state retailer.
As previously stated, Code Section 12-36-1330 imposes the use tax upon
"[e]very person storing, using, or otherwise consuming in this State
tangible personal property purchased at retail...." Therefore, once the
purchaser has stored, used or consumed tangible personal property in this
State, the use tax is due and a refund is not warranted. (Since the
purchaser has paid the tax to the out-of-state retailer who, in turn, has
remitted it to South Carolina, the purchaser has no further liability.)
C_o_n_c_l_u_s_i_o_n_s_:
1. An out-of-state retailer is n_o_t_ required to collect this State's use
tax when a South Carolina customer takes delivery of tangible personal
property in the state where the retailer is located.
2. An out-of-state retailer may n_o_t_ obtain a refund for use tax
erroneously collected from the purchaser and remitted to this State.
3. A purchaser may obtain a refund for use tax erroneously paid to an
out-of-state retailer if the property is not, in fact, stored, used or
consumed in South Carolina.
However, a purchaser may n_o_t_ obtain a refund for use tax erroneously
paid to an out-of-state retailer if the property is, in fact, stored,
used, or consumed in South Carolina.
NOTE: Code Section 12-36-1310(C) allows the purchaser to take "as a
c_r_e_d_i_t_ against the use tax due this State" any "sales or use tax...
d_u_e_ _a_n_d_ _p_a_i_d_ in [another] state." To take the credit, the purchaser
must substantiate payment of the other state's tax.
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