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S.A.L.T. Select Developments: South Carolina

Baker Donelson's S.A.L.T. Select Developments will identify important state and local tax developments from South Carolina.

Overview

State and local taxes impact almost every taxpayer. S.A.L.T developments in any one jurisdiction can be frequent and sometimes confusing. Where multiple jurisdictions are involved, staying current with state and local tax developments can be overwhelming for any taxpayer.

To assist you with staying current on a periodic basis, Baker Donelson's S.A.L.T. Select Developments will identify one or more recent state and local tax developments from South Carolina.

October 2020

Updates Reported – On October 10, 2020, the South Carolina Department of Revenue issued Revenue Ruling #20-4 addressing whether the sales and use tax applied to tariffs imposed by the federal government under certain circumstances. The Department recognized in the Ruling that some retailers are increasing the sales price of tangible personal property sold to consumers, or are adding a separate fee to the invoice, in order to recover some or all of the costs of paying a tariff directly to the federal government or to a supplier who passed along some or all of the cost of the tariff to the retailer. The Department stated in the Ruling that the sales price is essentially the total proceeds or value proceeding or accruing from the sale of tangible personal property, without deductions for expenses. The Department recognized that expenses that are not deductible include, among other expenses, excise taxes imposed by the United States on manufacturers or importers. However, the Department also recognized that sales price for these purposes does not include any tax imposed by the United States with respect to retail sales, except for manufacturers or importers excise taxes.

Based upon reasoning in the Ruling, the Department concluded that a charge or an increase in a sales price by a retailer of tangible personal property for the cost, or any part of the cost, of a tariff imposed by the federal government is included in the sales price subject to the sales and use tax, absent some other exemption that may be applicable. However, when a product is purchased from a foreign entity by a person who will use or consume the product, the determination of whether the cost of the tariff is included in the sales price for these tax purposes depends on whether the payment of the tariff was the responsibility of the purchaser or someone else. Where the purchaser is the importer and is personally liable for the tariff, the cost of the tariff is not included in the sales price according to the Department since the purchase of the item and the payment of the tariff according to the Department are two separate and distinct transactions. However, where a seller is the importer and a portion or all of the cost of the tariff is recovered from the purchaser, then that charge is includable in the sales price and subject to the tax. More information can be found here.

September 2020

Coronavirus Tax Payment and Return Filing Responsibilities - Updates Reported (September 30): The South Carolina Department of Revenue issued Information Letter # 20-24, dated August 26, 2020, effective from March 13 through December 31, 2020, expanding until December 31, 2020 the relief set forth by the Department in its Information Letter # 20-11. That Letter announced temporary relief regarding a business's establishment of nexus (both income and sales) solely because an employee is temporarily working in a different work location due to COVID-19. See our S.A.L.T. Select Developments, Supplement # 6 (June 2, 2020), for a summary of the previously announced temporary relief. That relief was effective from March 13 through September 30, 2020; however, Information Letter # 20-24 extends that relief through December 31, 2020. More information can be found here.

August 2020

Coronavirus Tax Payment and Return Filing Responsibilities - Updates Reported (August 20): On August 5, 2020, the South Carolina Department of Revenue issued Information Letter #20-23 addressing certain extraordinary charges imposed by retailers due to COVID-19. The Information Letter stated that, in order to recover a portion of the lost sales revenue during the pandemic, or to recover some of the costs incurred to implement necessary health and safety measures, some retailers are increasing the sales price of items sold to consumers or may add a separate fee to the customer's bill such as a COVID-19 surcharge or fee or a handling charge. The purpose of this Information Letter is to remind retailers and consumers of the application of the sales/use taxes to an additional COVID-19 surcharge or fee, a handling fee, a takeout charge or a similar charge. The Information Letter stated that the sales tax is 6% (plus applicable local sales tax) of the gross proceeds of sales upon every person engaged in South Carolina in the business of selling tangible personal property at retail. Therefore, under South Carolina law, a COVID-19 surcharge or fee, a handling fee, a takeout charge, or similar fee charged by the retailer as part of the sale of tangible personal property, is includable in the gross proceeds of sales and subject to the tax, unless otherwise exempt. The Information Letter then goes on to provide several examples of when the tax applies and when a potential exemption may apply. One such example is a restaurant that sells hot meals for dine-in or takeout, and, because of the increased inventory and operating costs due to COVID-19, the restaurant adds an additional 10% COVID-19 surcharge to each order. Since that surcharge is part of the gross proceeds of sales, the basis or measure upon which the sales tax is calculated would include that surcharge. More examples and other information can be found here.

July 2020

Coronavirus Tax Payment and Return Filing Responsibilities - Updates Reported (July 27): The South Carolina Department of Revenue on July 6, 2020 issued Information Letter #20-18 announcing a simplified method for businesses to claim a refund of the South Carolina admissions tax. Under the State's laws, an admission tax of 5 percent is paid for the right to enter into or use a place of amusement. The amusement tax return includes the revenue from paid admissions as well as the admissions tax for the month the patron is issued the ticket or is notified that the patron will receive a ticket to attend the event. The return and tax are due to the Department on or before the twentieth day of the following month. However, due to the unprecedented closings of businesses and social distancing measures in place for South Carolina residents because of the pandemic, the Department noted that many spectator sports events and concerts have been cancelled or postponed. The Department also noted that it is likely that refunding pre-event ticket payments due to the pandemic may continue into the summer and fall for many large events. While a monthly admissions tax return could be amended many times as the business continually issues refunds over an extended period of time, the Department announced a temporary but more simplified claim for refund procedure which would allow businesses to file a request no more than once a month for a refund of paid admissions tax as the refunds are issued to ticketholders. Under the simplified approach, a business may file a claim if it has refunded the admissions tax to the ticket purchaser. This simplified procedure applies to admissions tax refunds for events scheduled for March 31 through December 31, 2020 which are impacted by the pandemic and where the business had refunded the ticketholder through December 31, 2020. A claim under this simplified approach must be submitted on Form L-3060, "Admissions Tax Claim for Refund Due to COVID-19" – a copy of which is attached to the Notice. This Form can be submitted by email or regular mail to the address in the Notice, but cannot be submitted more than once per month. Questions regarding this simplified admissions tax refund procedure should be directed to the Department at the telephone number in the Notice. More information can be found here.

June 2020

Coronavirus Tax Payment and Return Filing Responsibilities - Updates Reported (June 25): The South Carolina Department of Revenue has very recently published Information Letters #20-12 and #20-13. In Information Letter #20-12, the Department established the interest rate to be applied to underpayments of taxes at the rate of 3 percent for the period beginning July 1, 2020 through September 30, 2020 (down from 5 percent for the earlier period through June 30, 2020). In Information Letter #20-13, the Department confirmed that the federal economic impact payments to South Carolina taxpayers will not be taxable for South Carolina income tax purposes. Further, the Department stated that since federal income taxes are not deductible in arriving at individual South Carolina taxable income, the federal income tax refund (or the stimulus payment in the form of a rebate or refundable tax credit) is not includable in arriving at South Carolina taxable income. Separately, the Department published a News Release in early June reminding taxpayers that the South Carolina motor fuel user fee, which helps support road, bridge and infrastructure construction in South Carolina, will increase from 22¢ to 24¢ per gallon beginning July 1. More information can be found here, here and here.

Coronavirus Tax Payment and Return Filing Responsibilities - Updates Reported (June 2): The South Carolina Department of Revenue issued Information Letter # 20-11 on May 15, 2020, addressing potential withholding and nexus repercussions from decisions made by employers to allow employees to work remotely from their home or other locations. According to this Information Letter, and effective for the tax relief period from March 13 through September 30, 2020, the Department will not use the temporary change of an employee's work location during the COVID-19 relief period to impose a South Carolina withholding requirement under that State's laws. This relief does not apply to workers whose status changes from temporary to permanent status during this period. With respect to employees temporarily changing work locations to outside South Carolina, the Information Letter states that a South Carolina business's withholding requirements are not affected by the current shift of employees working on the employer's premises in South Carolina to teleworking from outside of that State. Accordingly, the Information Letter further states that wages of nonresident employees temporarily working remotely in another state instead of at their South Carolina business location are still subject to South Carolina withholding. With respect to an out-of-state business with employees temporarily working from a South Carolina location, the Information Letter provides that such out-of-state business is not subject to South Carolina's withholding requirements solely due to the shift of employees working on the employer's location outside of South Carolina to teleworking from within South Carolina. In that regard, the wages of a South Carolina resident employee temporarily working remotely from South Carolina instead of at the normal out-of-state business location are not subject to South Carolina withholding if the employer is withholding income taxes on behalf of the other state. Further, the Information Letter states that the Department will not use changes in an employee's temporary work location due to the remote work requirements during this relief period (that is, March 13 through September 30, 2020) as a basis for establishing nexus or altering apportionment of income. More information can be found here.

April 2020

Coronavirus Tax Payment and Return Filing Responsibilities - Further Updates Reported (April 16): On April 13, 2020, the South Carolina Department of Revenue issued Information Letter #20-8, which provides additional relief to certain taxpayers as a result of the COVID-19 pandemic. According to this Information Letter, an additional extension to July 15, 2020 now applies to:

  • All taxpayers that have an income tax, franchise tax, or corporate license fee filing or payment deadline (either originally or pursuant to a valid extension) between April 1, 2020 and July 15, 2020;
  • Taxpayers that have estimated payments due on or after April 1, 2020 and before July 15, 2020; and
  • Taxpayers that have a claim for refund deadline due between April 1, 2020 and July 15, 2020.

Further, under certain circumstances taxpayers can seek an additional extension to file their return by filing the appropriate extension form by July 15, 2020, provided that the additional extension date may not go beyond the original statutory extension date.

This additional relief does not change the previously announced extension until June 1, 2020 to file certain other returns and pay certain other taxes that are otherwise due between April 1 and June 1, 2020, such as the state sales and use taxes; local sales and use taxes collected by the Department; property tax returns filed with the Department; withholding taxes; motor fuel user fees; state accommodation taxes; and beer, wine, and liquor taxes.

Further, this additional relief does not apply to any current audit, appeals, or litigation matters. However, a taxpayer may request an extension of time to file a protest of a proposed assessment by submitting a written request for extension to the Audit Section of the Department.

Finally, this additional relief does not apply to current collection matters, including payments due under any payment plan previously entered into with the Department.

More information can be found here.

March 2020

Coronavirus Tax Payment and Return Filing Responsibilities - Further Due Date Changes Reported (March 25): On March 23, 2013, the South Carolina Department of Revenue issued Information Letter #20-4 re-addressing much of the filing and payment relief previously granted in Information Letter #20-3. The Department recognized in Letter #20-4 that the Internal Revenue Service had extended until July 15, 2020 the original due date for filing federal income tax returns (or extensions) and making income tax payments originally due on April 15. Because of the extension from the IRS, Letter # 20-4 noted that the Governor of South Carolina directed the Department to conform to the new federal tax deadline of July 15. Accordingly, the Department has extended the tax relief for South Carolina 2019 income tax returns (that is, individual, C corporation, trust returns) originally due on April 15 to provide the same relief granted by the IRS. The Department stated that taxpayers will have until July 15 to file South Carolina income tax returns and pay income taxes due, which will also include quarterly estimated payments due on April 15. Interest or penalties related to this tax relief is waived according to Notice #20-4. With respect to various other South Carolina taxes, Letter #20-4 stated that the previous relief granted in Letter #20-3 will remain in effect for purposes of filing and payments due between April 1, 2020 and June 1, 2020. Those other taxes that continue to have the June 1 filing and payment relief include state sales and use taxes, local sales and uses taxes collected by the Department, property tax returns filed with the Department, withholding taxes, motor fuel user taxes, state accommodation taxes, beer, wine and liquor taxes, possibly among other taxes. Notice #20-4 expressly states that this relief does not apply to tax returns filed with a county or municipality. The Department further stated that the relief granted under these Notices do not require any additional forms or call to the Department to qualify for the relief. The Department also referenced that an additional extension of time to file income tax returns to October 15, 2020 is available as referenced in the Notice. Find more information here.

Coronavirus Tax Payment and Return Filing Responsibilities - Changes Reported (March 19): On March 17, the South Carolina Department of Revenue issued Information Letter #20-3 addressing tax relief for persons and businesses impacted by the coronavirus. Under this Information Letter, the Department states that tax relief postpones various tax filing and payment deadlines starting on April 1, and as a result, affected individuals and businesses will have until June 1 to file and pay taxes for returns that are due between April 1 and June 1. The Department states that this relief is being extended to individuals and businesses located in South Carolina who have been impacted by coronavirus, taxpayers who have businesses in South Carolina with offices in South Carolina, taxpayers whose tax records are located in South Carolina, and taxpayers whose returns are prepared by tax professionals impacted by coronavirus. Further, the Information Letter states that taxpayers who have been impacted by coronavirus may be eligible for the relief with respect to any taxes administered by the Department or tax returns filed with the Department (such as income tax returns, sales and use tax returns, admission tax returns, motor fuel user fee returns, and others) and that the due date for the returns and payments due after April 1 have been postponed until June 1, together with waiver of penalties and interest due as a result of any extensions.

Additionally, the Information Letter states that returns filed electronically by impacted taxpayers through MyDORWAY do not require any action to qualify for this relief. Taxpayers filing by mail should write "CORONAVIRUS" or "COVID-19" at the top of any paper return relying on the relief or complete the "disaster area" checkbox if one is provided on the return. Find more information here.

Updated Voluntary Disclosure Program: On February 21, 2020, the South Carolina Department of Revenue issued Revenue Procedure #20-2 (RP 20-2), the subject of which being "Voluntary Disclosure of Nexus." The purpose of this RP 20-2 is to update Revenue Procedure #09-2 concerning the Department's Voluntary Disclosure Program so as to reflect recent changes in nexus standards, in particular referencing the Department's Revenue Ruling #18-14 entitled "Retailers Without a Physical Presence (Remote Sellers) – Economic Nexus." As noted in RP 20-2, the Department's Voluntary Disclosure Program is for taxpayers that may have nexus with South Carolina but are not registered with the Department to collect or remit taxes. The taxpayer or the taxpayer's representative must initiate a contact with the Department and meet conditions specified in RP 20-2 in order to be considered for the Program. The request may be made by the taxpayer or the taxpayer's representative on a named or unnamed basis. The Program is not available under certain circumstances such as if the taxpayer has been contacted by the Department to schedule an audit; the taxpayer is already involved in an audit or litigation with the Department; the taxpayer has requested an advisory opinion regarding matters relating to nexus; or among other disqualifying circumstances. Upon approval of the taxpayer's request to participate in the Program, the Department will abide by the following: (i) accept the filing of tax returns and payment of required taxes for the "applicable look-back period"; (ii) apply interest in accordance with South Carolina law; (iii) waive penalties from the returns being filed late and payments being made late; and (iv) reserve the right to audit the taxpayer's books and records according to the Program. In turn, under the Program the taxpayer has numerous responsibilities, including to register with the Department and file all returns and pay all taxes and interest for the applicable look-back period, and continue to file and pay taxes for periods ending after that look-back period, among other responsibilities. The applicable look-back period is generally the three immediately preceding ended tax years (or corresponding monthly/quarterly periods), but can be different depending upon the circumstances. Examples to assist in explaining the applicable look-back period are provided in RP 20-2.

Refer to Revenue Procedure #20-2 for more details.

February 2020

Sales and Use Tax: The South Carolina Department of Revenue issued Private Letter Ruling #20-1, dated January 16, 2020, advising as to the application of the sales and use tax to a certain online software subscription service. The taxpayer in this Ruling provided a cloud-based business management software service to medical equipment suppliers, where the cloud-based platform collected the customers' billing and revenue data and provided inventory management and reporting analytics based on this stored data. The taxpayer did not manipulate the customer's data, but rather the customers manipulated their own data for purposes of generating claim submissions to Medicare, Medicaid and other commercial payers and to generate reporting analytics. All reports are self-generated by the customer and not provided by the taxpayers. The Department held that these cloud-based services constitute "communications" and therefore also constitute "tangible personal property" as defined under South Carolina law for purposes of the sales and use tax. Specifically, the Department noted that its Regulation 117-329.4 lists examples of taxable communications, which includes application service providers – that is, a company that provides customer access or use of software on the company's website. Accordingly, the Department concluded in this Ruling #20-1 that the charges for access and use of software via the taxpayer, as an application service provider, are subject to the tax. 

Refer to this Ruling #20-1 for more details.

November 2019

Unemployment Insurance Tax: South Carolina Governor McMaster announced on November 7, 2019 that the 2020 South Carolina unemployment insurance tax rates for businesses will on average be 34 percent lower than the comparable rates in 2019. This announcement referenced that the South Carolina Unemployment Insurance Trust Fund is now at a level sufficient to withstand a recession that is the equivalent of the average of the last three recessions, and that reducing business taxes reflects South Carolina's dedication to making that State appealing for companies to do business and create jobs in the State. The full text of this announcement, together with a link to the 2020 tax rate chart, can be found here.

October 2019

2019 Tax Legislative Update: On September 10, 2019, the South Carolina Department of Revenue published Information Letter #19-23, which provides a Legislative Update of significant changes in tax and regulatory laws enacted during the 2019 Legislative Session. This Update is divided into categories which include (among others) income taxes and corporate license fees; property taxes and fees in lieu of property taxes; sales and use taxes; as well as miscellaneous matters including administrative and procedural topics. This 52-page Update is intended by the Department to be a summary of the main points of this legislation, but is not intended to be an interpretation by the Department. The Department refers readers to the full text of the legislation for specific details and requirements. Nevertheless, this Update provides a central location at which a summary of significant changes in tax laws can be efficiently reviewed. Refer to Information Letter #19-23 for more details.

September 2019

Sales Tax: In August, the South Carolina Department of Revenue published for public comment a draft Revenue Ruling which expands on an earlier published Ruling for the purposes of addressing whether this State's sales tax applies to the Universal Service Fund Surcharge, the Dual Party Relay Charge and the 911 Service Charge billed to customers by telephone service providers. While the commentary period for this draft Ruling closed on August 29, 2019, the draft as currently prepared indicates that the Universal Service Fund Surcharge billed by telephone service providers would be subject to the sales and use tax with certain exceptions, while the Dual Party Relay Charge and the 911 Service Charge would not be subject to the tax. Refer to this draft Ruling for more guidance relative to the factual background and reasoning for these conclusions.

Refer to Information Letter #19-18 for more details.

August 2019

Sales Tax: In a reversal of previous Information Letter #19-18, South Carolina Department of Revenue issued Information Letter #19-21 on August 1, 2019 advising that the sales and use tax exemption for certain energy efficient manufactured homes in South Carolina would not terminate on July 1, 2019, but rather would continue pursuant to legislative action that extends the exemption until June 30, 2020. The Legislature had previously extended the nonrefundable income tax credit through June 30, 2020 for any person purchasing such a manufactured home from a licensed South Carolina dealership. Refer to Information Letter #19-21 for more details. Refer to Information Letter #19-18 for more details.

July 2019

Sales Tax: Beginning July 2, 2019, and as addressed by the South Carolina Department of Revenue in Information Letter #19-18, sales of manufactured homes meeting or exceeding the energy efficiency requirements or designations of the U.S. Environmental Protection Agency and Department of Energy are no longer exempt and will be subject to the sales and use tax in South Carolina. This previously existing exemption was not extended by the 2019 Legislative Session in South Carolina, even though the Legislature did extend for one year through June 30, 2020 a nonrefundable income tax credit to any person purchasing such a manufactured home from a licensed South Carolina dealership.

Refer to Information Letter #19-18 for more details.

June 2019

Gas Tax: On June 6, 2019, the South Carolina Department of Revenue issued a News Release alerting taxpayers that effective July 1, 2019 through June 30, 2020, the motor fuel user fee would increase from 20¢ per gallon to 22¢ per gallon, with increases thereafter effective July 1, 2020, July 1, 2021 and July 1, 2022. The foregoing increases are pursuant to legislation enacted in 2017, and such legislation is reviewed in the Department's Information Letter #17-8, which can be found here.

For more information about state and local tax developments in South Carolina, please contact:

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