Do you pay the Infrastructure Maintenance Fee or sales tax when you buy a trailer in South Carolina?

Official title

Opinion addressing the application of the Infrastructure Maintenance Fee to trailers.

Requester

Requested by Mr. Adam J. Neil, Deputy Director, Tax Policy Services, South Carolina Department of Revenue.

Plain-English summary

The South Carolina Department of Revenue (DOR) asked the Attorney General how to tax the sale of trailers: with the Infrastructure Maintenance Fee (IMF) or with sales tax. In 2021, Act No. 70 replaced the old "max tax" with the IMF, which applies to vehicles and items that must be registered with the DMV. Items subject to the IMF are exempt from sales tax, and the uncapped sales tax continues to apply to road-use items that do not have to be registered. The hinge for trailers is a registration exemption in § 56-3-130 for "boat trailers under twenty-five hundred pounds, farm trailers and other utility trailers which are privately owned and not for hire." DOR wanted to know what "for hire" means.

The AG agreed with DOR's narrowed reading. DOR had previously treated "privately owned and not for hire" as equal to "personal use," so any business-use trailer was registered and paid the IMF, which caused confusion. DOR now reads "for hire" to mean using the trailer to transport someone else's property for compensation, not just any business use. Because the IMF statutes do not define "for hire," the AG applied the plain-meaning rule and looked at how the phrase is used elsewhere, the dictionary definition, the federal "for-hire motor carrier" definition (49 C.F.R. § 390.5T), a state "for hire motor carrier" definition (§ 44-96-40(14)), and out-of-state cases (Brown v. Nat'l Motor Fleets from Alabama and Armstrong v. Denver Saunders from Colorado) holding that "operated for hire" means hauling goods or people for pay, not leasing a vehicle for the user's own work. The AG concluded DOR's interpretation is reasonable and likely the one a court would adopt, while noting it defers to the SCDMV (the agency that decides which vehicles must be registered) and that the SCDMV does not object to DOR's reading.

The AG then answered the two follow-on tax questions. A trailer that is "not for hire" and so exempt from registration is subject to sales tax rather than the IMF, because the sales-tax exemption only covers items that actually owe the IMF. And if a buyer already paid sales tax on a trailer and later registers it with the DMV, the AG concluded the Legislature did not intend to charge both sales tax and the IMF on the same item under the same ownership; consistent with that, the SCDMV does not assess the IMF when the owner shows proof of paid sales tax.

What this means for you

Trailer dealers and buyers

The opinion supports taxing a privately owned trailer that is "not for hire" (not used to haul others' property for pay) with sales tax, because it is exempt from registration under § 56-3-130 and therefore not subject to the IMF. A trailer used to transport other people's goods for compensation is "for hire," must be registered, and pays the IMF instead of sales tax. The AG cautioned this remains subject to the SCDMV's interpretation, which it said aligns with DOR's.

Department of Revenue and SCDMV

The opinion endorses DOR's narrowed reading of "for hire" as reasonable and likely correct, while reaffirming that the office defers to the SCDMV on which vehicles must be registered and thus owe the IMF. It frames the SCDMV, not DOR or the AG, as the agency whose interpretation controls in practice.

Owners who paid sales tax then register later

The opinion concludes that paying both sales tax and the IMF on the same trailer under the same ownership is not what the Legislature intended. It notes the SCDMV does not assess the IMF at registration when the owner shows proof that sales tax was already paid.

Common questions

What's the difference between the IMF and sales tax on a trailer?
The IMF applies to trailers that must be registered with the DMV; those are exempt from sales tax. A trailer that is exempt from registration (privately owned and "not for hire") is taxed with sales tax instead. You generally pay one or the other, not both.

What does "for hire" mean here?
The AG read "for hire" to mean using the trailer to transport someone else's property for compensation, not just using it in your own business. A trailer you use to haul your own goods is "not for hire," even if your use is commercial.

If I use my trailer in my business, is it "for hire"?
Not necessarily. Under the interpretation the AG endorsed, business use alone does not make a trailer "for hire." It is "for hire" only if used to transport the property of others for a fee.

I paid sales tax on my trailer. Will I owe the IMF if I register it later?
The AG concluded the Legislature did not intend an owner to pay both on the same trailer, and noted the SCDMV does not assess the IMF at registration if the owner shows proof of paid sales tax.

Is this the final word?
No. AG opinions are persuasive, not binding, and the office stressed it defers to the SCDMV on which vehicles must be registered. The opinion says the SCDMV does not object to DOR's reading, which makes a court more likely to adopt it, but a court could still decide differently.

Background and statutory framework

Act No. 70 of 2021 created the Infrastructure Maintenance Fee. Section 56-3-627 of the South Carolina Code requires the owner or lessee of each vehicle or item, including each trailer or semitrailer, that must be registered under the chapter to pay the IMF upon first titling or registration, and the DMV may not issue a title or registration until the fee is collected. Under § 12-36-2120(83), items subject to the IMF are exempt from sales tax. Section 56-3-110 requires registration of vehicles and trailers operated on state highways, but § 56-3-130 exempts certain privately owned trailers "not for hire" from registration. Sales tax is imposed by § 12-36-910, with exemptions in § 12-36-2120, including for items subject to the IMF.

Because "for hire" is undefined in the IMF statutes, the AG applied South Carolina's statutory-construction rules, looking to legislative intent and the plain meaning of the words, citing Mid-State Auto Auction of Lexington, Inc. v. Altman, 324 S.C. 65, 476 S.E.2d 690 (1996), Hodges v. Rainey, 341 S.C. 79, 533 S.E.2d 578 (2000), and Perry v. Bullock, 409 S.C. 137, 761 S.E.2d 251 (2014). It compared the federal "for-hire motor carrier" definition (49 C.F.R. § 390.5T) and a state definition (§ 44-96-40(14)), and out-of-state authority including Brown v. Nat'l Motor Fleets, Inc., 276 Ala. 493, 164 So. 2d 489 (1963), and Armstrong v. Denver Saunders Sys. Co., 84 Colo. 138, 268 P. 976 (1928), both reading "operated for hire" to mean transporting persons or property for compensation rather than leasing a vehicle for the user's own work. Under the deference doctrine recognized in Kiawah Dev. Partners, II v. S.C. Dep't of Health & Env't Control, 411 S.C. 16, 766 S.E.2d 707 (2014), the AG deferred to the SCDMV as the agency that determines which vehicles must be registered, and noted the SCDMV does not object to DOR's interpretation.

Citations

Statutes and regulations:
- Act No. 70 (2021) (created the Infrastructure Maintenance Fee)
- section 56-3-627 of the South Carolina Code (Supp. 2023), incl. § 56-3-627(C)(2)(d) (IMF imposition; non-dealer exclusion)
- section 12-36-2120(83) (sales-tax exemption for items subject to the IMF)
- Section 56-3-110 of the South Carolina Code (2018) (registration requirement)
- section 56-3-130 of the South Carolina Code (2018) (registration exemption for "not for hire" trailers)
- S.C. Code Ann. § 12-36-910 (2014) (sales tax)
- 49 C.F.R. § 390.5T (federal "for-hire motor carrier" definition)
- S.C. Code Ann. § 44-96-40(14) (2018) ("for hire motor carrier" definition)

Cases:
- Mid-State Auto Auction of Lexington, Inc. v. Altman, 324 S.C. 65, 476 S.E.2d 690 (1996)
- Hodges v. Rainey, 341 S.C. 79, 533 S.E.2d 578 (2000)
- Perry v. Bullock, 409 S.C. 137, 761 S.E.2d 251 (2014)
- Brown v. Nat'l Motor Fleets, Inc., 276 Ala. 493, 164 So. 2d 489 (1963)
- Armstrong v. Denver Saunders Sys. Co., 84 Colo. 138, 268 P. 976 (1928)
- Kiawah Dev. Partners, II v. S.C. Dep't of Health & Env't Control, 411 S.C. 16, 766 S.E.2d 707 (2014)

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/opinion-addressing-the-application-of-the-infrastructure-maintenance-fee-to-trailers/
• Original PDF: https://www.scag.gov/media/mvmjc2ld/neila-os-10957-final-opinion-10-7-2024-pdf.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

ALAN WILSON

ATTORNEY GENERAL

October 7, 2024

Adam J. Neil, Esq.

Deputy Director

Tax Policy Services

South Carolina Department of Revenue
P.O. Box 125

Columbia, South Carolina 29214-0575

Dear Mr. Neil:

We received your letter requesting an opinion concerning the application of the Infrastructure
Maintenance Fee (“IMF”) to trailers. In your letter, you explain:

In 2021, via Act No. 70, the General Assembly amended the former “max tax”
statute and created the Infrastructure Maintenance Fee (“IMF”). As part of that
change in the law, the General Assembly applied the IMF to vehicles that had
to be registered with the DMV, but the uncapped sales tax continued to apply
to sales of certain items that were used on the public roads of the state but that
did not have to be registered with the DMV.

You state you are specifically seeking our assistance with “how the sale of trailers should be taxed-
whether IMF or sales tax.” Specifically, you pose the following three questions:

1. Isa trailer that is “for hire” limited to those trailers that are used to transport
   the property of a third-party for a fee, rather than a trailer that is used in the
   owner’s business?

2. Isa trailer that is “not for hire” excepted from the registration requirement
   in S.C. Code Ann. § 56-3-110, such that a purchase is subject to sales tax
   rather than the owner paying the Infrastructure Maintenance Fee at the time
   of registration?

3. Ifthe trailer owner pays sales tax at the time the trailer is purchased, is that
   owner exempt from paying the Infrastructure Maintenance Fee if the trailer
   is later registered with the DMV?

Law/Analvysis

As you mentioned in your letter, section 56-3-627 of the South Carolina Code (Supp. 2023)
provides for how and when the IMF is charged. Subsection (A) of this provision states:

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October 7, 2024

In order to account for the necessary road maintenance caused by each item
traversing the roads of this State, in addition to the registration fees imposed by
this chapter, the owner or lessee of each vehicle or other item that is required to
be registered pursuant to this chapter must pay an infrastructure maintenance
fee upon first titling or registering the vehicle or other item. Also, the owner or
lessee_of cach trailer or semitrailer must pay the fee upon first titling or
registering the trailer or semitrailer. The Department of Motor Vehicles may
not issue a title or registration until the infrastructure maintenance fee has been
collected. The infrastructure maintenance fee must be credited to the
Infrastructure Maintenance Trust Fund.

(emphasis added). Thus, trailers required to be registered with the DMV are subject to the IMF.
According to section 12-36-2120(83) (Supp. 2023), items subject to the IMF under section 56-3-
627 are exempt from sales tax.

Section 56-3-110 of the South Carolina Code (2018) specifies which vehicles must be registered
and licensed in South Carolina and states as follows: “Every motor vehicle, trailer, semitrailer,
pole trailer and special mobile equipment vehicle driven, operated or moved upon a highway in
this State shall be registered and licensed in accordance with the provisions of this chapter.”
However, as you mention, section 56-3-130 of the South Carolina Code (2018) provides an
exemption from registration for “[b]oat trailers under twenty-five hundred pounds, farm trailers
and other utility trailers which are privately owned and not for hire . . . .” (emphasis added).

We understand in the past, the Department of Revenue took the position in Information Letter 22-
17 that the phrase “privately owned and not for hire” equated to personal use thereby concluding
that trailers used in a business are subject to the IMF and thereby exempt from sales tax. However,
as you mentioned, this led to

confusion among both consumers and trailer dealers. For example, trailer
dealers were not accustomed to inquiring about the use of the trailer at the time
of the sale. Also, it was unclear what should happen when an owner initially
purchases the trailer for personal use but converts the trailer to business use at
a later date.

You suggest that the term “for hire” is more limited than just a general business use. You state:

We are confident that “for hire” means that the trailer is used to transport the
property of other for compensation, rather than business use more broadly.
Consequently, a trailer “not for hire” is any trailer that is not used to transport
people or property for a fee even if the owner uses the trailer for its own
commercial purposes.”

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October 7, 2024

Employing the rules of statutory interpretation, we find your revised interpretation is reasonable.
In our review of the statute governing the IMF, we did not find a definition for the phrase “for
hire.” Therefore, we believe the meaning of such a phrase must be determined using the rules of
statutory construction, the primary of which is the ascertain the intent of the Legislature. Mid-State
Auto Auction of Lexington, Inc. v. Altman, 324 S.C. 65, 69, 476 S.E.2d 690, 692 (1996).

Under the plain meaning rule, it is not the court’s place to change the meaning
of a clear and unambiguous statute. In re Vincent J., 333 S.C. 233, 509 S.E.2d
261 (1998) (citations omitted). Where the statute’s language is plain and
unambiguous, and conveys a clear and definite meaning, the rules of statutory
interpretation are not needed and the court has no right to impose another
meaning. Id. at 233, 509 S.E.2d at 262 (citing Paschal v. State Election
Comm’n, 317 S.C. 434, 454 S.E.2d 890 (1995)). “What a legislature says in the
text of a statute is considered the best evidence of the legislative intent or will.
Therefore, the courts are bound to give effect to the expressed intent of the
legislature.” Norman J. Singer, Sutherland Statutory Construction § 46.03 at 94
(5th ed. 1992).

Hodges v. Rainey, 341 8.C. 79, 85, 533 S.E.2d 578, 581 (2000).

“When interpreting an undefined statutory term, the Court must look to its usual and customary
meaning.” Perry v. Bullock, 409 §.C. 137, 140-41, 761 S.E.2d 251, 253 (2014). Webster’s Online
Dictionary defines the term “for hire” as “available for use or service in return for payment.”
https://www.merriam-webster.com/dictionary/hire (last visited September 16, 2024). This
definition indicates a trailer “for hire” is a trailer available for use in return for payment. In your
letter, you reference the definition of “for-hire motor carrier” in the federal transportation
regulations, which provides “a person engaged in the transportation of goods or passengers for
compensation.” 49 C.F.R. § 390.5T. We note a similar definition under state law defining a “for
hire motor carrier” for purposes of the South Carolina Solid Waste Policy and Management Act
as “a company operating a fleet of vehicles used exclusively in the transportation of freight for
compensation.” S.C, Code Ann. § 44-96-40(14) (2018). While neither of these definitions apply
to the IMF, they indicate, at least in regard to motor carriers for hire, that “for hire” involves
transporting people or goods for payment, rather than just generally conducting business.
Moreover, we note that other South Carolina statutes containing the phrase “for hire” also involve
the transport of people or property. See eg., S.C. Code Ann. § 56-3-670 (2018) & § 56-5-225
(2018) (pertaining to farm trucks and describing them as “not used to transport persons or property
for hire.”’).

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While we did not find any South Carolina caselaw interpreting the term “for hire,” we found other
jurisdictions have considered the meaning of this phrase. For example, the Supreme Court of
Alabama considered what “for hire” means in terms of imposing a license tax on trucks, truck-
tractors, trailers, and semi-trailers “operated for hire.” Brown v. Nat’] Motor Fleets. Inc., 276 Ala.
493, 494, 164 So. 2d 489, 490 (1963). That court concluded:

The term ‘operate for hire’ has a well-known and definite meaning in the
jurisprudence of this country. The term means in law, in commercial usage, and
in ordinary parlance, the transportation of persons or property for compensation
and could not possibly apply to a lessor, such as the appellee, which leases the
vehicles to a lessee to carry his own goods or products,—Armstrong v. Denver
Saunders System Co., 84 Colo. 138, 139, 268 P. 976 (1928); City of Sioux Falls
v. Collins, 43 §.D. 311, 178 N.W. 950 (1920); People v. Heckman Trucking
Co., Inc., 277 N.Y. 480, 14 N.E.2d 801 (1938); State v. L. P. Gas Transport
Co., Inc., 260 Ala. 637, 71 So.2d 839 (1954); 80 A. L. R. 574.

Id. at 494, 164 So, 2d at 490.

The Supreme Court of Colorado had a similar interpretation of the phrase “for hire” as used in a
Colorado statute imposing a registration fee motor vehicles used “in the transportation of
passengers for hire.” Armstrong v. Denver Saunders Sys. Co., 84 Colo. 138, 139, 268 P. 976, 977
(1928) (quoting S. L. 1927, chapter 135). That court was asked whether the fee applied to those
who lease motor vehicles to persons for their own use. The court determined:

... 1 seems clear that in the first clause the phrase ‘operated for hire’ could not
include a truck or trailer rented to one who was to use it in his own work. The
lessor of an automobile is not operating it any more than the lessor of a farm is
cultivating it or the lessor of a horse is driving it. The whole statute thus
becomes clear and consistent, and the result is that carriers of freight or
passengers are taxed, but lessors of vehicles are not.

Id. at 141, 268 P. at 977.

While certainly a court could adopt a broader definition of “for hire” to include any kind of
business use, we believe the plain meaning of the phrase in addition to similar interpretations in
other jurisdictions support your interpretation that “for hire” for purposes of section 56-3-130
means the use of a trailer to transport property of another for compensation. Nonetheless, this
Office typically defers to the interpretation of the administrative agency charged with the
enforcement of the statute. Op. Att’y Gen., 2004 WL 736929 (S.C.A.G. Mar. 23, 2004). The
“deference doctrine” as adopted by our courts instructs that “courts defer to an administrative
agency’s interpretations with respect to the statutes entrusted to its administration or its own
regulations ‘unless there is a compelling reason to differ.’” Kiawah Dev. Partners. II v. S.C. Dep’t

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October 7, 2024

of Health & Env’t Control, 411 S.C. 16, 34, 766 S.E.2d 707, 718 (2014) (quoting S.C. Coastal
Conservation League v. S.C. Dep’t of Health & Env’t Control, 363 S.C. 67, 75, 610 S.E.2d 482,
486 (2005)). In this case, the South Carolina Department of Motor Vehicles (““SCDMV”) is the
administrative agency entrusted to determine what vehicles must be registered and therefore, what
vehicles are subject to the IMF. As such, while we believe your interpretation is sound and
reasonable, we generally defer to the SCDMV and its interpretation of the meaning “for hire” as
used in section 56-3-130. See Op. Att’y Gen., 2010 WL 2678687 (S.C.A.G. June 30, 2010)
(indicating this Office defers to the SCDMV on the interpretation of its statutes). In our discussions
with a representative from the SCDMV, we understand that they do not object to your
interpretation of the phrase. As such, we are further convinced that your interpretation of the
phrase “for hire” is likely one that a court would adopt.

Next, you ask whether a trailer that is determined to be “not for hire” is exempt from the
registration requirements under section 56-3-110 such that they would be subject to sales tax rather
than the IMF. Sales tax is imposed on “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 (2014).
Thus, generally trailer dealers are subject to sales tax on the trailers they sell at retail. However,
section 12-36-2120 (Supp. 2023) provides exemptions from the imposition of sales tax, including
an exemption for “any item subject to the fee set forth in Section 56-3-627.” Accordingly, any
item subject to the IMF is exempt from the imposition of sales tax. As such, the converse must be
true — a retailer who sells an item that is otherwise subject to sales tax and not specifically exempt,
must remit the sales tax associated with that item. Therefore, if the IMF does not apply to a
particular trailer, the sales tax exemption for items subject to the IMF would not apply. As long as
the trailer is subject to sales tax and does not qualify for some other exemption, sales tax must be
assessed at the time of sale.

Lastly, you inquire as to whether a trailer owner is exempt from paying the IMF if the owner pays
sales tax at the time of purchase and later registers the tailer with the DMV. As we mentioned,
section 12-36-2120(83) clearly exempts items subject to the IMF from sales tax. Moreover, in our
review of section 56-3-627, we note subsection (C), pertaining to purchases from non-dealers,
specifically excludes the imposition of the IMF for “items where a sales or use tax has been paid
on the transaction necessitating the transfer.” S.C. Code Ann. § 56-3-627(C)(2)(d). While we did
not find a specific exemption for purchases from a dealer, we believe the Legislature did not intend
to collect both sales tax and the IMF on the same item under the same ownership. As such, we are
of the opinion that the Legislature likely did not intend for one owner to pay both sales tax to a
dealer and the IMF upon registration. Additionally, it is our understanding that if an owner can
show proof of payment of the sales tax, the SCDMV does not assess the IMF upon registration.

Conclusion
Based on our analysis as explained above, we find your narrowed interpretation of the phrase “for

hire” reasonable and believe a court would find that a trailer that is not used for the transport of
goods for hire is exempt from registration pursuant to section 56-3-130 of the South Carolina Code

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October 7, 2024

and therefore not subject to the IMF under section 56-3-627 of the South Carolina Code. While
items subject to the IMF are specifically exempt from sales tax pursuant to section 12-36-2120(83),
items not subject to the IMF which are sold by a dealer in a retail sale are likely subject to sales
tax unless some other sales tax exemption applies. However, if an owner pays sales tax ona trailer
and then later, for whatever reason, registers it with the SCDMV, we do not believe the Legislature
intended for that owner to also pay the IMF.

an
Cydney Milling

Assistant Attorney General

REVIEWED AND APPROVED BY:

AG. Be2.

Robert D. Cook
Solicitor General