Was South Carolina’s nonprofit religious-bookstore sales tax exemption unconstitutional?

Plain-English summary

A South Carolina senator asked whether the state’s sales-tax exemption for certain nonprofit organizations was unconstitutional because it could cover religious bookstores while for-profit sellers paid tax. In April 2002, the AG predicted that an equal-protection challenge to the exemption in § 12-36-2120(41) would fail. He relied on the presumption that statutes are constitutional, tax cases allowing rational classifications and the distinction between nonprofit organizations and for-profit businesses.

The opinion discussed a bill, S.841, that had been introduced to exclude religious bookstore sales from this exemption. It did not say the bill had passed. The AG added that the General Assembly could change the exemption. His conclusion was a prediction about the law as it stood in 2002, not a court ruling.

Currency note

This opinion was issued in 2002. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Historical summary

Nonprofit sellers and for-profit retailers

The AG said the exemption applied to qualifying nonprofit organizations, including those selling religious literature, where the statutory conditions were met. He concluded that treating nonprofit and for-profit sellers differently would likely withstand the equal-protection challenge presented.

Legislators and taxpayers

The letter distinguished constitutional review from a policy choice to narrow the exemption. It described proposed legislation removing religious bookstore sales from the exemption and said the legislature could change the law.

Common questions

Did the AG find the nonprofit bookstore exemption unconstitutional? A: No. He predicted a court would likely uphold it against the equal-protection argument presented.

Did all religious-bookstore sales qualify for the exemption? A: The opinion addressed sales by organizations satisfying the nonprofit exemption’s conditions, not every religious-bookstore sale.

Had the proposed exclusion for religious bookstores become law? A: The opinion described S.841 as an introduced bill and did not say it had been enacted.

Background and statutory framework

Section 12-36-2120 listed sales-tax exemptions. Subsection (41) tied one exemption to organizations qualifying under specified property-tax categories, with net proceeds used for exempt purposes and no private benefit. The AG invoked South Carolina tax decisions holding that different treatment of rationally distinct classes does not by itself violate equal protection.

Citations and references

• 12-36-2120(41): the sales-tax exemption challenged in the request.
• § 12-37-220: property-tax categories referenced by that exemption.
• Senn Trucking Co. v. Wasson and State v. Byrnes: tax-classification cases cited by the AG.

Official title

Concerning the constitutionality of a particular exemption from collection of the sales tax. Specifically, if state law allows a sales tax exemption for non-profit corporations which sale religious materials is unconstitutional.

Requester

The Honorable Hugh K. Leatherman, Sr., Senator, District No. 31

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/april-17-2002/
• Original PDF: https://www.scag.gov/wp-content/uploads/2013/04/02apr17leatherman.pdf

Original opinion text

The State of South Carolina

OFFICE OF THE ATTORNEY GENERAL
CHARLES M. CONDON
ATIORNEY GENERAL

i.

April 17, 2002

The Honorable Hugh K. Leatherman, Sr.
Senator, District No. 31
11 1 Gressette Building
Columbia, South Carolina 29202
Re:

Informal Opinion

Dear Senator Leatherman:
You have requested on behalf of a constituent of yours an opm1on concerning the constitutionality of a particular exemption from collection of the sales tax . Your constituent believes that the state law which allows a sales tax exemption for non-profit corporations which sell religious materials is unconstitutional, constituting unlawful discrimination in violation of the Equal Protection Clause. Law I Analysis

•
iJ}.1

S. C. Code Ann. Sec. 12-36-2120 enumerates various exemptions to the collection of state sales tax. Section 12-36-2120(41) exempts items sold by non-profit organizations. Such Section provides for an exemption as follows: items sold by organizations exempt under Section 12-37-220A(3) and (4) and B(5), (6), (7), (8), (12), (16), (19), (22), and (24), if the net proceeds are used exclusively for exempt purposes and no benefit inures to any individual. An organization whose sales are exempted by this item. 1

1

Section 12-3 7-220 provides a long list of general exemptions from ad valorem taxation. Among property exempted is property of charitable trusts and foundations used exclusively for charitable purposes, property of groups such as the YMCA or Salvation Army, property of the Boy's or Girl's Scouts, property of fraternal societies, and property of eleemosynary associations or organizations. Thus, § 12-37-220 makes items sold by organizations exempt from taxation for ad valorem taxation also exempt from the sales tax. REMBERT C. DENNIS BUILDING

•

POST OFFJCE Box J 1549

•

COLUMBIA ,

s.c. 29211-1549

•

TELEPHONE: 803-734-3970

•

FACSIMILE: 803-253-6283

The Honorable Hugh K. Leatherman, Sr.
Page 2
April 17, 2002

A Bill has been introduced in the General Assembly (S.841) which would add a sentence to 12-36-2120(41 ). This Amendment states that "the exemption provided by this item does not extend to religious bookstore sales." In other words, the proposed legislation would eliminate the sales tax exemption for religious bookstore sales by non-profit organizations.

L
I

I

It is the fact that such exemption currently applies to nonprofit organizations which operate religious bookstores, as well as the sales of religious literature by such organizations which concerns your constituent. He believes such distinction between sales by for-profit corporations and nonprofit organizations violates the Equal Protection Clause of the Constitution. Of course, in considering an act of the General Assembly, it is presumed that the act is constitutional in all respects. Moreover, such an act will not be considered void unless its unconstitutionality is clear beyond any reasonable doubt. Thomas v. Macklen, 186 S.C. 290, 195 S.E. 539 (1937); Townsend v. Richland County, 190 S.C. 270, 2 S.E.2d 777 (1939). All doubts of constitutionality are generally resolved in favor of constitutionality. While this Office may comment upon potential constitutional problems, it is solely within the province of the courts of this State to declare an act unconstitutional or to make necessary findings of fact prior to finding a legislative enactment unconstitutional. Op. Atty. Gen., No. 87-62 (June 15, 1987). In Senn Trucking Co. v. Wasson, 280 S.C. 279, 312 S.E.2d 252 (1984), our Supreme Court commented upon the issue of whether sales tax exemptions violate the Equal Protection Clause. The Court noted that

'

[o]ur Supreme Court in State v. Byrnes, 219 S.C. 485, 66 S.E.2d 33 ( 1951) explained the role of equal protection in evaluating the sales tax exemptions. To invalidate a tax statute for discrimination, in the absence of specific constitutional inhibition, exemption from its terms must be purely arbitrary, which cannot be fairly said of the exemptions contained in the Act before us. It was said in Marshall v. Tax Comm., supra, (178 S.C. [57] at page 62, 182 S.E. [96] at page 98) upon the authority of numerous cited decisions of the U.S. Supreme Court: ''The plaintiff must be able to satisfy the court that the classification (of income for State taxation) has its origin in nothing better than whim and fantasy and tyrannical exercise of arbitrary power, before the tax in question will be stricken down." In the Byrnes case, referenced by the Court in Senn, the Court provided the following additional analysis concerning exemptions from the sales tax:

The Honorable Hugh K. Leatherman, Sr.
Page 3
April 17, 2002

[i]n Gregg Dyeing Co. v. Query, supra, this Court quoted with approval the following from the leading case of Hart Refineries v. Harn1on, 278 U.S. 499. 49 S.Ct. 188, 189. 73 L.Ed. 475: Statutes which tax one class of property while exempting another class necessarily result in imposing a greater burden upon the property taxed than would be the case of the omitted property were included. But such statutes do not create an inequality in the constitutional sense. Nor is the imposition of an excise tax upon one occupation or one activity from which other and different occupations
... are exempt, a denial of equal protection. It is enough if all in the same class are included and treated alike.

I

66 S.E.2d at 45.

I

Thus. the Court has made it quite clear that an Equal Protection argument made against a particular sales tax exemption will, in all likelihood, not be successful. Based upon the strong presumption of constitutionality which must be given to any act of the General Assembly. the Senn and the Byrnes cases and the fact that a rational distinction exists between a non-profit organization and a for-profit business, it is my opinion that a constitutional attack upon the exemption contained in subsection (41) of§ 12-36-2120(41) would fail. In other words, the referenced provision(§ 1236-2120(41) would likely be upheld as constitutional. Of course, the General Assembly could change or modify such exemptions and your constituent may wish to pursue that option. This letter is an informal opinion only. It has been written by a designated Assistant Attorney General and represents the position of the undersigned attorney as to the specific question asked. It has not, however, been personally scrutinized by the Attorney General and not officially published in the manner of a formal opinion. Sincerely,

Robert D. Cook
Assistant Deputy Attorney General
RDC/an