Did South Carolina sales tax apply both when someone leased a car and when they later bought it?

Plain-English summary

A senator asked whether sales tax was due both on leasing a car and on buying that same car at the end of the lease, including when the lessee was the buyer. The AG answered yes. The 1998 Sales and Use Tax Act defined a sale to include a rental or lease as well as a transfer of title or possession. Each was a distinct retail transaction subject to tax; the identity of the car and buyer did not eliminate the tax on the later sale.

The AG also rejected an impermissible double-taxation objection. He characterized sales tax as an excise on the privilege of selling at retail, not a property tax on the vehicle. The separate lease and purchase therefore did not tax the same subject in the prohibited sense. The letter cited the then-applicable five-percent rate and a three-hundred-dollar vehicle transaction cap; those figures describe 1998 law only.

Currency note

This opinion was issued in 1998. 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.

Common questions

Q: Did sales tax paid on the lease remove tax on a later purchase? A: No. The AG said the lease and later purchase were separate taxable transactions.

Q: Did it matter that the former lessee bought the car? A: No. The letter said the law did not relax the second tax requirement when the same person participated in both transactions.

Q: Was taxing both transactions impermissible double taxation? A: The AG said no. The tax applied to distinct retail transactions, not twice to the car as property.

Background and statutory framework

The opinion read Section 12-36-100 to include leases and title transfers within “sale and purchase.” It cited § 12-36-910 for the general retail sales tax and § 1236-2110(A)(2), as extracted from the PDF, for the then-applicable motor-vehicle cap. It relied on State v. Byrnes and Atkinson Dredging Company v. Thomas to distinguish an excise on retail sales from prohibited double taxation of property.

Citations and references

Statutes discussed: Section 12-36-100; § 12-36-910; § 1236-2110(A)(2) (PDF extraction). Cases discussed: State v. Byrnes; Greystone Catering Co., Inc. v. South Carolina Department of Revenue and Taxation; Atkinson Dredging Company v. Thomas.

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/february-6-1998/
• Original PDF: https://www.scag.gov/wp-content/uploads/2013/11/98feb6reese.pdf

Original opinion text

The State of South Carolina

OFFICE OF THE ATTORNEY GENERAL
CHARLES MOLONY CONDON
ATTORNEY GENERAL

February 6, 1998

The Honorable Glenn G. Reese
Senator, District No. 11
11 7 Sun Valley Drive
Boiling Spring, South Carolina 29316
Dear Senator Reese:
Your opinion request has been forwarded to me for reply. You have enclosed information from one of your constituents concerning the payment of sales tax on an automobile. You have asked this Office to review the enclosed information and determine whether sales tax should be paid when leasing a car and again when buying the same car at the end of the lease period. Your constituent has also raised a question concerning whether such taxation is double taxation. In general, the sales tax is an imposition upon the privilege of the business of selling at retail and measured by the amount of business done, which is a clear case of an excise tax to which the constitutional provisions relating to property taxes are irrelevant. State v. Byrnes, 219 S.C. 485, 66 S.E.2d 33 (1951). Thus, the court has recognized that the sales tax is not a property tax. Op. Any. Gen. dated December 22, 1967. The South Carolina Sales and Use Tax Act is found in Section 12-36-5 et seq. of the South Carolina Code of Laws. Section 12-36-100 of the Code defines sale and purchase as any transfer, exchange, or barter, unconditional or otherwise, of tangible personal property for consideration including: a transaction in which possession of tangible personal property is ( 1) transferred but the seller retains title as security for payment, including installment and credit sales; (2) REMBERT

c. DENNIS BUILDING

a rental, lease, or other form of agreement;
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POST OFFICE Box 11549

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COLUMBIA. S.C. 29211-1549

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TELEPHONE:

803- 734-3970

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FACSIMILE: 803-253-6283

The Honorable Glenn G. Reese
Page 2
February 6, 1998
(3)

a license to use or consume; and

(4)

a transfer of title or possession, or both.

Under the Act, a sales tax, equal to five percent of the gross proceeds of sales, is imposed upon every person engaged or continuing within this State in the business of selling tangible personal property at retail. S.C. Code Ann. § 12-36-910. However, the maximum tax imposed by the chapter is three hundred dollars for each sale of a motor vehicle made after June 30, 1984, or lease of such executed after August 31, 1985. § 1236-2110(A)(2) (emphasis added). As you can see, not only does the statutory definition of "sale" include the leasing of tangible personal property, but the statute specifically addressing motor vehicles also sets out that the leasing of a motor vehicle is subject to taxation. Thus, if an individual leases a motor vehicle, that transaction is subject to taxation. The tax is imposed on the privilege of engaging in such transaction not on the property subject to the sale. Further, if an individual buys a motor vehicle, that transaction is also subject to taxation for the same reason. The fact that sales tax may have been paid on the lease of a motor vehicle does not remove the requirement that the sale of the same motor vehicle is also subject to taxation. The law does not relax this requirement if the individual is the same in both transactions. This is no different from a situation in which an individual leases a motor vehicle and pays the requisite sales tax on the lease and the motor vehicle is then sold to another individual. In that case, there would be no question as to whether such sale would be subject to the sales tax.

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Your constituent has also questioned whether this taxation constitutes impermissible double taxation. There is no per se prohibition on double taxation. Greystone Catering Co., Inc. v. South Carolina Department of Revenue and Taxation, S.C. - , 486 S.E.2d 7 (1997). Double taxation in the prohibited sense can exist only if the subject of both taxes is the same, if both taxes are imposed upon the same property, for the same purpose, by the same state or government, during the same tax period. Atkinson Dredging Company v. Thomas, 266 S.C. 361, 223 S.E.2d 592 (1976). As previously stated, a sales tax is not a tax on property, but on the privilege of the business of selling at retail. In this case, the fact that the property and parties are the same in both transactions is not determinative. The focus must be paid to the reality under the law that these are two entirely distinct transactions and it is the privilege to sell at retail which is the subject of taxation. The situation raised by your constituent would not constitute double taxation any more than the imposition of sales tax on the sale of any other used vehicle where the sales tax has been paid on a prior sale.

The Honorable Glenn G. Reese
Page 3
February 6, 1998
With kindest regards, I remain
Very truly yours,

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Paul M. Koch
Assistant Attorney General
REVIEWED AND APPROVED BY:

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~b C. Williams, III
epu;Attomey General