Which South Carolina tax regulations became effective on February 24, 2006 after General Assembly approval?

Plain-English summary

Six South Carolina regulation actions became effective on February 24, 2006 after the General Assembly approved them on January 17, 2006. The Information Letter attaches the State Register text and identifies these changes:

1. Regulation 7-200.1 — Alcoholic beverage license and permit applications: amended the application rule, including the relationship between Title 61 permits and a retail sales-tax license and the treatment of an unused permit or license fee.
2. Regulation 117-1400 — Electric power tax: replaced the 1967 Standard Industrial Classification guide with NAICS Sections 31, 32, and 33 for classifying industrial customers.
3. Regulation 117-8 — Property tax: repealed a duplicate rule because the same Department-responsibilities provision had been codified as Regulation 117-1720.1.
4. Regulation 117-325 — Sales and use tax: repealed the bulk-sales regulation after the underlying Commercial Code bulk-sales statute had been repealed effective July 1, 2001.
5. Regulation 117-302.5 — Manufacturing-machine exemption: amended the rule to combine the remaining regulation with guidance based on two court decisions and SC Revenue Ruling #04-7.
6. Regulation 117-875 — Individual income tax: added a rule directing the Department to determine and credit voluntary return-designated contributions to the appropriate checkoff funds.

What this means for you

This letter is a historical effective-date notice and a convenient map to the attached regulatory text. Anyone analyzing a 2006 transaction or filing should use the listed regulation action, while checking later law before applying it today.

Common questions

Q: When did these regulation actions take effect?
A: February 24, 2006, when they were published in the State Register.

Q: Did the letter only add new rules?
A: No. It reports amendments, two repeals, and one newly added regulation.

Q: Which sales-tax regulation was substantively amended?
A: Regulation 117-302.5, covering the exemption for qualifying machines used in manufacturing and related activities.

Subject

Regulations Approved by the General Assembly

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/IL06-3.pdf

Original ruling text

State of South Carolina
Department of Revenue
301 Gervais Street, P.O. Box 125, Columbia, South Carolina 29214
Website Address: http://www.sctax.org

SC INFORMATION LETTER #06-3

SUBJECT:

Regulations Approved by the General Assembly

DATE:

February 24, 2006

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2000)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #05-2

SCOPE:

An Information Letter is a written statement issued to the public to
announce general information useful in complying with the laws
administered by the Department. An Information Letter has no
precedential value.

The following regulation proposals were approved by the General Assembly on January
17, 2006 and became effective upon publication in the State Register on February 24,
2006. Each regulation is attached as published in the State Register.
Regulation No.

Subject

Document

Page No.

7-200.1

License and Permit Applications
(ABL)

2937

2

117-1400

Industrial Customer Classification
(Electric Power Tax)

2914

5

117-8

DOR Responsibilities (Repealed)
(Property Tax)

2935

7

117-325

Bulk Sales (Repealed)
(Sales and Use Tax)

2915

8

117-302.5

Machine Exemption
(Sales and Use Tax)

2936

9

117-875

Voluntary Contributions
(Individual Income Tax)

2958

20

1

Document No. 2937
DEPARTMENT OF REVENUE
CHAPTER 7
Statutory Authority: 1976 Code Section 12-4-320

Regulations: SC Regulation 7-200.1 Applications
Synopsis:
The South Carolina Department of Revenue is considering amending SC Regulation 7200.1 to delete the cooking license provisions of subsection F and replace those
provisions with one stating that the holder of a retail permit or license issued pursuant to
Tile 61 must obtain and maintain a retail sales tax license issued pursuant to Chapter 36
of Title 12. In addition, the provisions will state that if the retail sales tax license is
revoked, then the Department must cancel, suspend or revoke all permits and licenses
issued under Title 61. The Department is also considering amending subsection J to
clarify that the request for refund only applies to the permit or license fee when a timely
refund request is received with respect to a permit or license that was not used.
Instructions: Amend SC Regulation 7-200.1 to delete the cooking license provisions of
Subsection F and replace those provisions with one stating that the holder of a retail
permit or license issued pursuant to Tile 61 must obtain and maintain a retail sales tax
license issued pursuant to Chapter 36 of Title 12.
Text:
7-200.1
A. Filing fees. All applications filed with the South Carolina Department of Revenue
must be accompanied by the appropriate filing fee before any application can be
processed.
B. Contents of application. All applications shall describe with particularity the specific
areas upon which the licensee shall store, sell and/or serve liquor, beer or wine. This
description shall include but not be limited to the building or buildings affected, floors,
rooms, patios, and recreation areas where authorization to conduct any of the above
mentioned functions is requested.
C. Permits and licenses must be in same name. When a person applies for a beer and
wine permit and/or a sale and consumption permit, a retail liquor store license, and/or a
food preparation license, all permits and licenses must be applied for in the same name.
D. Change in Designee - Publicly Traded Corporation. A new license or permit is not
necessary, provided no violations are pending, if the officer or employee designated to
hold the permit or license on behalf of the publicly traded corporation is replaced by a
different officer or employee. The replacement must be of good moral character, over the
age of twenty-one and a resident of this State and notice of the substitution must be filed
with the Department in writing.

2

E. Violation of license. A licensee or permittee, who permits or knowingly allows the
storage, serving, sale or delivery of liquor, beer or wine in or upon those areas of this
licensed establishment which were not specifically designated in the application shall be
deemed to have violated said license or permit; provided, however, this regulation shall
not be construed to prohibit the delivery of such containers within licensed hotels and
motels to rooms which are leased and used primarily for lodging purposes.
F. In order to hold any retail alcoholic beverage permit or license under Title 61 of the
South Carolina Code of Laws, the applicant, or holder of a retail alcoholic beverage
permit or license, must obtain and maintain a retail sales tax license issued pursuant to
Chapter 36 of Title 12 of the South Carolina Code of Laws. If the retail sales tax license
of a location is revoked, canceled or otherwise terminated for any reason, the Department
must cancel, suspend or revoke all retail alcoholic beverage permits or licenses issued for
that location if such permits or licenses are not immediately surrendered to the
Department at the time the retail sales tax license for the location is revoked, canceled or
otherwise terminated.
G. Retail Liquor Dealers. Must procure permit. Every holder of a retail liquor license in
this State must make application for and procure from the Department a permit to sell
alcoholic beverages in sealed containers of two (2) ounces or less before any such sale is
made. This permit will be issued by the Department free of charge. Any holder of a
retail liquor license will be in violation of Title 61 of the 1976 Code, if such sales are
made prior to obtaining this permit from the Department.
H. Partnership--Change to Corporation Must Have New Permit. A permit or a license is
a personal privilege granted by the State and cannot be transferred from one person to
another. A corporation is a distinct entity, and is as a matter of law, a person. Therefore,
if a partnership holding a beer license incorporates, even though the stockholders are the
same persons as the partners were, a new permit or license must be secured for the
corporation.
I. Stipulations. Any written stipulation and/or agreement which is voluntarily entered
into by an applicant for a permit or license between the applicant and the Department, if
accepted by the Department, will be incorporated into the basic requirements for the
enjoyment and privilege of obtaining and retaining the permit or license and shall have
the same effect as any and all laws and any and all other regulations pertaining to the
permit or license.
Knowing violation of the terms of the stipulation or agreement shall constitute sufficient
grounds to revoke said license.
J. Refund on Permit Applications. When an application for a permit or license is
approved by the Department and is not used, a request for the refund of the permit or
license fee must be received by the Department within the fiscal year for which the
permit was issued, and in no event will a refund of an application fee be made unless a
request is received by the Department within sixty (60) days of the date the permit was
issued. An agent of the Department or the State Law Enforcement Division must verify
in writing that the permit was not used.

3

Fiscal Impact Statement:
There will be no impact on state or local political subdivisions expenditures in complying
with this proposed legislation.
Statement of Need and Reasonableness:
The proposal to amend SC Regulation 7-200.1 is needed to ensure that taxpayers
understand (1) that only a cooking license is needed if a location that offers meals to the
public purchases liquor for use solely in the cooking and preparing meals served by the
location and not for sale to the public; (2) that all holders of a retail permit or license
issued pursuant to the alcoholic beverage laws must also maintain a retail sales tax
license for the same location; and (3) that only the permit or license fee is refundable if a
timely refund request is received with respect to a permit or license that was not used.
The proposal to amend SC Regulation 7-200.1 is also reasonable in that it is the
department’s responsibility to maintain regulations that are up-to-date and consistent with
the law.
Statement of Rationale:
The proposal amend SC Regulation 7-200.1 is needed (1) since the statute requires only a
cooking license under Code Section 61-6-700 and does not require a minibottle license
when a location that offers meals to the public purchases liquor for use solely in the
cooking and preparing meals served by the location and does not sell liquor as a beverage
to the public, and (2) since only the permit or license fee is refundable if a timely refund
request is received with respect to a permit or license that was not used. In addition, it is
needed to advise taxpayers that all holders of a retail permit or license issued pursuant to
the alcoholic beverage laws must also maintain a retail sales tax license for the same
location.

4

Document No. 2914
DEPARTMENT OF REVENUE
CHAPTER 117
Statutory Authority: 1976 Code Section 12-4-320
Regulations: SC Regulation 117-1400
Synopsis:
The South Carolina Department of Revenue is considering amending SC Regulation 1171400 concerning the electric power tax to state that the Department will no longer use the
Standard Industrial Classification (“SIC”) Manual from 1967 as its guide in classifying
“industrial customers” as that term is used in the electric power tax law. The Department,
if this amendment is approved, will use the North American Industry Classification
System (“NAICS”) Manual as its guide in classifying industrial customers under the
electric power tax law. The NAICS Manual has replaced the U.S. Standard Industrial
Classification (SIC) system as the classification system used by the Census Bureau.
Instructions: Amend SC Regulation 117-1400 concerning the electric power tax to state
that the Department will no longer use the Standard Industrial Classification Manual from
1967 as its guide in classifying “industrial customers”.
Text:
117-1400. Hereafter, the South Carolina Department of Revenue will use Sections 31,
32, and 33 of the North American Industry Classification System (“NAICS”) Manual, as
a guide to classify “industrial customers,” as such term is used in Section 12-23-10.
Persons engaged in the business of manufacturing, generating and selling electric power
must furnish to the Department a list, on or before January 31 and July 31 of each year, of
industrial customers for which an exemption is claimed for the preceding periods, June
through December and January through June, respectively. Such lists must show the
name, address, KWH consumption and the classification code as provided in the NAICS
Manual.
Fiscal Impact Statement:
There will be no impact on state or local political subdivisions expenditures in complying
with this proposed legislation.
Statement of Rationale:
The purpose of this proposal is to amend SC Regulation 117-1400 concerning the electric
power tax to state that the Department will use the North American Industry
Classification System (“NAICS”) Manual as its guide in classifying industrial customers

5

under the electric power tax law. The NAICS Manual has replaced the U.S. Standard
Industrial Classification (SIC) system as the classification system used by the Census
Bureau. The proposal to amend the regulation is needed to reduce any taxpayer confusion
that may result from having a published regulation that is using a classification system
that is no longer used by the Census Bureau. The proposal to amend this regulation is
also reasonable in that it is the department’s responsibility to maintain regulations that are
up-to date and consistent with the law.

6

Document No. 2935
DEPARTMENT OF REVENUE
CHAPTER 117
Statutory Authority: 1976 Code Section 12-4-320
Regulations: SC Regulation 117-8
Synopsis:
The South Carolina Department of Revenue is considering repealing SC Regulation 1178 concerning responsibilities of the Department of Revenue with respect to property
taxation and fees in lieu of property taxes. Since this same regulation was codified on
June 25, 2004 as SC Regulation 117-1720.1, SC Regulation 117-8 is no longer needed.
Instructions: Repeal SC Regulation 117-8
Text:
No text is necessary since the proposal is only repealing a regulation that is no longer
needed since the same regulation was codified on June 25, 2004 as SC Regulation 1171720.1
Fiscal Impact Statement:
There will be no impact on state or local political subdivisions expenditures in complying
with this proposed legislation.
Statement of Rationale:
The purpose of this proposal is to repeal SC Regulation 117-8 concerning responsibilities
of the Department of Revenue with respect to property taxation and fees in lieu of
property taxes. Since this same regulation was codified on June 25, 2004 as SC
Regulation 117-1720.1, SC Regulation 117-8 is no longer needed. The proposal to repeal
this regulation is needed to reduce any taxpayer confusion that may result from having
two identical published regulations on the same subject. The proposal to repeal this
regulation is also reasonable in that it is the department’s responsibility to maintain
regulations that are up-to date.

7

Document No. 2915
DEPARTMENT OF REVENUE
CHAPTER 117
Statutory Authority: 1976 Code Section 12-4-320
Regulations: SC Regulation 117-325
Synopsis:
The South Carolina Department of Revenue is considering repealing SC Regulation 117325 concerning the sales and use tax and the bulk sales statute. Since the bulk sales
statute in Title 36, Chapter 6 of the Commercial Code was repealed effective July 1, 2001
by Act 67 of 2001, SC Regulation 117-325 is no longer needed.
Instructions: Repeal SC Regulation 117-325 concerning the sales and use tax and the
bulk sales statute.
Text:
No text is necessary since the proposal is only repealing a regulation that is no longer
needed since the bulk sales statute in Title 36, Chapter 6 of the Commercial Code was
repealed effective July 1, 2001 by Act 67 of 2001.
Fiscal Impact Statement:
There will be no impact on state or local political subdivisions expenditures in complying
with this proposed legislation.
Statement of Rationale:
The purpose of this proposal is to repeal SC Regulation 117-325 concerning the sales and
use tax and the bulk sales statute. Since the bulk sales statute in Title 36, Chapter 6 of the
Commercial Code was repealed effective July 1, 2001 by Act 67 of 2001, SC Regulation
117-325 is no longer needed. The proposal to repeal this chapter in the code of
regulations is needed to reduce any taxpayer confusion that may result from having a
published regulation that is no longer needed. The proposal to repeal this regulation is
also reasonable in that it is the department’s responsibility to maintain regulations that are
up-to date and consistent with the law.

8

Document No. 2936
DEPARTMENT OF REVENUE
CHAPTER 117
Statutory Authority: 1976 Code Section 12-4-320

Regulations: SC Regulation 117-302.5
Synopsis:
The South Carolina Department of Revenue is considering amending SC Regulation 117302.5 which concerns the sales and use tax exemption for machines used in
manufacturing, processing, compounding, mining, or quarrying tangible personal
property for sale. As a result of two recent court decisions, the Department issued an
advisory opinion, SC Revenue Ruling #04-7. This proposal to amend SC Regulation 117302.5 will combine the guidance provided in the advisory opinion, which is based on the
two court cases, with provisions of the present regulation that are still applicable under
these two court decisions.
Instructions:
Amend SC Regulation 117-302.5 to combine guidance provided in the advisory opinion,
which is based on the two court cases, with provisions of the present regulation that are
still applicable under these two court decisions.
Text:
117-302.5 Machines
(A) Introduction:
Machines used in manufacturing, processing, compounding, mining, or quarrying
tangible personal property for sale, and the replacement parts and attachments to such
machines, are exempt from the sales and use tax under Code Section 12-36-2120(17).
Materials or equipment which might constitute a machine or machinery when not used
for manufacturing, processing, compounding, mining, or quarrying tangible personal
property for sale are not exempted.
(B) General Guidance:
(1) A “machine used in manufacturing … tangible personal property for sale” is exempt
from the sales and use tax. For purposes of this regulation subsection (117-302.5),
manufacturing includes processing, compounding, mining and quarrying.

9

A machine qualifies for the exemption under Code Section 12-36-2120(17) if the
machine is integral and necessary to the manufacturing process and the product being
manufactured is being manufactured “for sale.” A machine, which includes every
mechanical device or combination of mechanical powers, parts, attachments and devices
to perform some function and produce a certain effect or result, is integral and necessary
to the manufacturing process if it meets all of the following:
(a) The machine is used at a manufacturing facility. This exemption only applies to
machines used at a facility whose purpose is that of manufacturing a product “for
sale.” It does not apply to machines used at a facility whose purpose is retailing,
wholesaling, distributing, or some other non-manufacturing purposes. For example,
machines used by a large industrial baker in manufacturing breads, cakes, and pies for
sale may be purchased tax free; however, similar machines used by a “Ma & Pa”
bakery on Main Street may not be purchased tax free since they are used at a facility
whose purpose is retailing.
(b) The machine is used in, and serves as an essential and indispensable component
part of the manufacturing process, and is used on an ongoing and continuous basis
during the manufacturing process. A machine is not a part of the manufacturing
process merely because it is integral and necessary to the manufacturer. For example,
machines used for warehouse, distribution, or administrative purposes are integral and
necessary to the manufacturer, but not part of the manufacturing process.
(c) The machine must be substantially “used in manufacturing … tangible personal
property for sale.” The statute does not require that the machine be used exclusively
in manufacturing; however, incidental manufacturing use will not qualify for the
exemption. For purposes of the exemption, more than one-third of a machine’s use in
manufacturing is substantial.
Machines that meet the above requirements do not lose the exemption because they do
not have moving parts or because they are fixtures upon the real estate where they stand.
However, buildings and parts of buildings, as well as other improvements which benefit
the land generally and may serve other users of the land, do not come within the
exemption.
(2) Machine Parts:
Parts of machines, attachments, and replacements used, or manufactured for use, on or in
the operation of machines are also exempt, provided the parts, attachments or
replacements are used on or in the operation of such machines, manufactured for use on
or in the operation of such machines, integral and necessary to the operation of such
machines, and must be customarily so used. These restrictions are interpreted to mean
that the part or attachment must be purchased in the form in which it will be used by the
manufacturer without any fabrication or alteration by him, except the usual and
customary minor adjustment, (except as stated in “Building of Machines”) and that it is a
standard part or attachment customarily used and, further, that the machine or machinery

10

on which it is used would not do the work for which it was designed if it were not used.
This, of course, exempts all parts and attachments without which the machine would do
no work, and, in addition, it exempts parts and attachments designed to increase the
efficiency of the machine.
(3) Building of Machines:
Manufacturers, and contractors building machines for manufacturers are entitled to
purchase at wholesale, free of the sales or use tax, materials used by them in the building
of machines for the purpose of manufacturing tangible personal property for sale. It
should be noted that only those materials are exempt to manufacturers or their
contractors, which are used by them in building machines for the purpose of
manufacturing tangible personal property for sale. This ruling would not be applicable to
tangible personal property for use as building materials from which there is erected a
"building." (See section on “Buildings” below.)
(4) Conveyances:
(a) The general rule with reference to material handling machinery and/or mechanical
conveyors is that such machinery is subject to the tax up to the point where the materials
go into process. The machine feeding the first processing machine(s) is exempt. The last
machine to come within the exemption is that machine which discharges the finished
product from the last machine used in the process. Material handling machinery used for
transporting (in process) material from one process stage to another comes within the
exemption. Warehouse machinery used only for warehouse purposes, loading and
unloading, storing, transporting raw materials and finished products, etc., is subject to the
tax, unless exempt under the provisions of Code Section 12-36-2120(51). If material
handling machinery is customarily used for a dual purpose, that is partly for an exempt
purpose and partly for a taxable purpose, and is not otherwise exempt under the
provisions of Code Section 12-36-2120(51), the machinery may be purchased free of the
tax under the machine exemption (Code Section 12-36-2120(17)) provided the exempt
use represents a substantial portion of its use.
For example, the following conveyances are exempt:
(i) Wheeled conveyances known as “print screen truck” used by a textile
manufacturer in the movement of print screens from a holding area to the exempt
print machines, to the print screen washing machine, and back to the holding area
racks after the style or pattern is changed and the print screen is washed.
(ii) Warehouse machines (e.g., forklifts) that are used substantially to feed raw
material into or onto the first processing machine in the manufacturing process area in
addition to being used in loading, unloading, storing, and transporting raw materials
from the warehouse to the manufacturing area, or transporting finished products from
the manufacturing area to the warehouse.

11

(b) Conveyances are subject to the tax up to the point where the materials go into the
process. The last machine to come within the exemption is that machine which
discharges the finished product from the last machine used in the process. Under this
rule, the following conveyors are subject to the tax:
(i) Conveyors used solely by the taxpayer in the warehousing of raw materials and
finished goods.
(ii) Conveyors which are not integral and necessary to the manufacturing process.
(iii) Piping leading to and from storage tanks.
(iv) Piping, pumps, and well connections installed for use by a manufacturer to
supply the manufacturing plant with water necessary for the manufacture of tangible
personal property.
(v) Warehouse machines that are used for warehouse purposes, such as loading,
unloading, storing, transporting raw materials from the warehouse to the
manufacturing area, or transporting finished products from the manufacturing area to
the warehouse.
(5) Chemicals:
(a) Chemicals, including greases, oils, lubricants, and coolants, used in an exempt
manufacturing machine that are essential to the functioning of the exempt machine during
the manufacturing process are integral, necessary, and indispensable to the manufacturing
process and are exempt as part of the machine. For example, the following are situations
in which chemicals, greases, oils, lubricants, and coolants are exempt as part of an
exempt machine:
(i) Chemicals, greases, oils (motor oils, gear oils, chain oils), lubricants, and coolants
used in an exempt manufacturing machine when such items are integral and necessary
to the manufacturing process, such as those that are essential in ensuring the
functioning of the machine during the manufacturing process, and the use of such
items is an ongoing, continuous activity.
(ii) Chemicals used in an exempt pollution control machine to abate or prevent
pollution when such chemicals are integral and necessary to the manufacturing
process, such as the treating of wastewater or otherwise preventing or abating
pollution, and the use of such chemicals is an ongoing, continuous activity.
(iii) Chemicals used to clean the exterior or interior of an exempt manufacturing
machine when the cleaning is integral and necessary to the manufacturing process,
such as those that are essential in ensuring the quality of the product is maintained,
and the use of such chemicals is an ongoing, continuous activity.

12

(iv) Chemicals used to prevent corrosion in an exempt manufacturing machine, such
as an exempt boiler, when such chemicals are integral and necessary to the
manufacturing process, such as those that are essential in ensuring the functioning of
the machine during the manufacturing process, and the use of such chemicals is an
ongoing, continuous activity.
(b) Situations in which the chemicals would not qualify as a part under the machine
exemption and would therefore be subject to the sales and use tax, include:
(i) Chemicals used to clean non-exempt machines, such as storage tanks.
(ii) Chemicals used to clean floors, walls, and other parts of the manufacturing
facility.
(iii) Paint used on exempt manufacturing machines to prevent corrosion of the
machines is not exempt from the tax as a machine used in manufacturing tangible
personal property for sale. (Note: This is different from the chemicals used to prevent
corrosion in exempt machines, such as exempt boilers, since the painting of the
machine is not an ongoing, continuous activity. It is a maintenance activity. The
chemicals, unlike the paint, are integral and necessary to the operation of the
machines since they are essential in ensuring the functioning of the machine during
the manufacturing process and are used on an ongoing, continuous basis.)
(iv) Chemicals, greases, oils (motor oils, gear oils, chain oils), lubricants, and
coolants used in an exempt manufacturing machine when such items are not integral
and necessary to the manufacturing process, such as those that are not essential in
ensuring the functioning of the machine during the manufacturing process. For
example, grease used on a part that has been removed from an exempt manufacturing
machine when such grease has been placed on the part to protect it while it is in
storage and not being used is subject to the tax since the grease is not integral and
necessary to the functioning of the part or the machine during the manufacturing
process.
(6) Maintenance:
Maintenance machines used at a manufacturing facility are not exempt from the tax as a
machine used in manufacturing tangible personal property for sale.
Machines that are used to maintain non-exempt machines (machines that are not integral
and necessary to the manufacturing process), or are not used on an ongoing, continuous
basis to maintain exempt manufacturing machines (machines that are integral and
necessary to the manufacturing process) are maintenance machines and are not exempt
from the tax as machines used in manufacturing tangible personal property for sale.
The following machines are maintenance machines and therefore subject to the sales and
use tax:

13

(a) Pressure washing machines and ultrasonic cleaning machines used to clean nonexempt machines or parts, such as storage tanks.
(b) Machines used to clean floors and other parts of realty (e.g., machines used in
removing sawdust from the floor of a sawmill).
(c) Machines, such as maintenance machines, which are not integral and necessary to
the manufacturing process.
(d) Machines, such as pressure washing machines and ultrasonic cleaning machines,
used to clean exempt manufacturing machines or parts when the cleaning of the
exempt manufacturing machine or part is not integral and necessary to the
manufacturing process, such as those that are not essential in ensuring the functioning
of the exempt machine or part during the manufacturing process or those that are not
essential in ensuring the quality of the product is maintained. In addition, if the
cleaning is not an ongoing, continuous activity, then the machines are not integral and
necessary to the manufacturing process.
(7) Storage:
Machines used at a manufacturing facility for storage are not exempt from the tax as a
machine used in manufacturing tangible personal property for sale. For example, the
following machines are for storage and therefore taxable:
(a) Racks used to store raw materials or finished goods.
(b) Storage tanks used to store raw materials, gasses, or water.
(c) Racks and tanks used to store a finished product while it cures.
Note: See example of exempt warehouse machines in Section (B)(4)(a)(ii).
(8) Buildings:
A building which houses a manufacturing process, and the various parts of such a
building, are not exempt from the tax as a machine, or a part or attachment to a machine,
used in manufacturing tangible personal property for sale. For example, the following
parts of a building are not exempt:
(a) Paint or sealant used to seal the floor or walls of the manufacturing area of a
building to provide chemical resistance in the event of a spill.
(b) Paint used on the floor of the textile manufacturing area of a building to facilitate
the threading of machines so that employees can more easily see the thread.

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(c) Paint used on exempt manufacturing machines to prevent corrosion of the
machines.
Note: Paint is not integral and necessary to the operation of the manufacturing
machines. This is different from the chemicals used to prevent corrosion in exempt
machines, such as exempt boilers. Such chemicals, unlike the paint, are exempt when
such chemicals are integral and necessary to the functioning of the exempt machine
during the manufacturing process and the use of these chemicals to prevent corrosion
is an ongoing, continuous activity. Paint is not integral and necessary to the
functioning of the machine “during the manufacturing process” and painting the
machine is not an ongoing continuous activity.
(d) Foundations (consisting of pilings, pile caps, elevated slab, and slab on grade) of a
building in which exempt manufacturing machines are the plant manufacturing
process or system as a whole.
(e) Structural steel, steel decking, and checker plate of a building in which exempt
manufacturing machines are housed.
(f) Hangers and supports used in a manufacturing building to route exempt process
piping from one area of the manufacturing process to another area of the
manufacturing process via pipe racks and cable trays.
(g) Architectural roofing and siding enclosing a manufacturing building housing
exempt manufacturing machines.
(h) Pipe, valves, fittings, etc., regardless of size, which are purchased by paper
manufacturers specifically for use in drinking water lines, fire protection lines, or for
transmission of water from source to water treatment plant, or from water treatment
plant itself.
(i) Piping furnished and installed along with pump houses and well connections by a
contractor when intended for use by a paper manufacturer to supply his plant with the
water necessary to the manufacturer of paper.
(j) Power lines bringing electricity into the plant.
(k) All wires, fixtures, etc., used in lighting.
(9) Administrative Machines, Furniture, Equipment and Supplies:
Administrative machines, furniture, equipment, and supplies, such as office computers
used for word processing, recordkeeping, employee payroll, customer billing, purchasing,
accounting, and similar purposes, office furniture, office supplies, such as pens, pencils,
paper, and similar items, educational material, or items used for the personal comfort,

15

convenience, or use of employees, are not machines used in the process of manufacturing
tangible personal property for sale and are not exempt from the tax.
(10) Protective Clothing
Protective clothing worn by an employee working in the area in which the manufacturing
process occurs does not qualify as a machine and is not exempt from the tax as a machine
used in manufacturing tangible personal property for sale under Section 12-36-2120(17).
However, “clothing and other attire required for working in a Class 100 or better as
defined in Federal Standard 209E clean room environment” is exempt under the
provisions of Section 12-36-2120(54).
(C) Other Examples of Exempt Manufacturing Machines and Machine Parts:
The following are additional examples of machines or machines parts exempt from the
tax, provided they are (1) used at a manufacturing facility, (2) used in, and serve an
essential and indispensable component part of the manufacturing process, and are used on
an ongoing and continuous basis during the manufacturing process, and (3) used
substantially in manufacturing tangible personal property for sale:
(1) Buffing machines used to buff the cot of an exempt textile spinning machine to
maintain the yarn quality at a consistent level.
(2) Traveling water screens used to filter water from a river, lake, or other water
source at a water treatment plant processing water for sale.
(3) Quality control machines used in a lab at a manufacturing facility to test sample
products being manufactured for sale.
(4) Pressure washing machines and ultrasonic cleaning machines, used to clean
exempt manufacturing machines or parts, when the cleaning of the exempt
manufacturing machine or part is to ensure the functioning of the exempt machine or
part during the manufacturing process or to ensure the quality of the product is
maintained.
(5) Machines or machine parts used in removing sawdust from saws in a sawmill that
are either attached to the sawing mechanism or are essential in ensuring the quality of
the product is maintained.
(6) Trucks too large to be lawfully used upon the highways of this state, when used in
quarry pits for transporting rock or granite from the blasting site to the crushing
machine.
(7) Sand handling and sand condition machines used by manufacturers for
conditioning and transporting, while in process, and for use in mold making.

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(8) Tanks which are a part of the chain of processing operations.
(9) Patterns which become parts or attachments for molding machines when
purchased by a manufacturer for his use.
(10) Machines used in making molds from sand for use in manufacturing tangible
personal property for sale.
(11) Machines used in measuring, or weighing, and packaging by manufacturers to
put the product in condition for sale on the open market for the purpose for which it
was produced.
(12) Transformers, capacitors and voltage regulators used in manufacturing and
processing tangible personal property for sale, used by producers or distributors of
electricity which process the electricity, and all transformers used by other
manufacturers as a part of their manufacturing machinery.
(13) Machines used by cotton ginners in their processing operations.
(14) Pasteurizing machines, cooling machines, mechanical separators, homogenizing
machines and bottling machines used by dairies in processing milk for sale. The
machine exemption does not extend to cover milking machines.
(15) Boiler tubes used in repairing boilers used to furnish heat or power used in
manufacturing tangible personal property for sale.
(16) Machines used by persons in the business of producing scrap iron and other
metals from junk for resale to steel mills and/or foundries, such as hydraulic baling
presses (to compress sheet steel into bales), cranes (to feed scrap metals to baling
press), and alligator shears (to cut scrap steel to predetermined sizes).
(17) Machines used by dental laboratories in manufacturing for sale plates,
bridgework, artificial teeth and other prosthetic devices.
(18) Machines used in processing and manufacturing by electric power companies
including all producing stationary machines in an electric power generating house,
stationary, processing machines located in substation houses and transformers, pole or
otherwise.
(19) Starters, switches, circuit breakers and other electrical equipment which are parts
of, or attachments of machines, come within the machine exemption. In order to be
exempt this equipment must be either attached directly to the machine or be
immediately adjacent thereto. Switchboards and control boards and cabinets
controlling the general electrical supply system are not considered to be parts or
attachments of machines used in manufacturing. (Note, however, that, switchboards,
automatic or manually operated, which serve to operate exempt machinery may be

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classified a part or attachment thereto, provided, same are attached thereto or located
within the same structure or compound.) The general rule is that power distribution
machinery for operating machines used in manufacturing tangible personal property
which starts at the main switch within the factory building or compound is exempt.
(20) Machines used in the wood preserving process by persons engaged in the
business of treating lumber or lumber products (wood preserving) which they own
and treat for sale.
(21) Gas pressure regulators located in the lead off from the gas main.
(22) Machines used in the meatpacking process by meatpackers whose activities
include the curing of meats and the production of animal by-products such as lard,
sausages, or tankage.
(23) Machines used by ice manufacturers in manufacturing ice for sale.
(24) Machines used to condition air (including humidification systems) for quality
control during the manufacturing process of tangible personal property made from
natural fibers and synthetic materials. This exemption applies to the pipes and duct
used to distribute the processed air to the production areas within the plant.
(25) Recording instruments attached to manufacturing machines.
(26) Machines used by a manufacturer in the tire recapping process.
(27) Machines used by municipalities in processing or compounding water for sale.
(28) Belting purchased for use on a particular machine used in manufacturing tangible
personal property for sale even though such belting may not be purchased to the exact
length required.
(29) Machines purchased by persons in the business of collecting old and used paper
(waste paper) for the purpose of grading, sorting and packaging the same for sale or
resale to paper mills.
(30) Insulation for pipe coverings, tank coverings, and boiler insulation purchased by
a paper manufacturer from the vendor in its final prefabricated form for a specific
insulation job, provided it does not have to be cut and fitted at the paper mill. Certain
fabrication is permissible around valve openings, pipe openings at pipe joints, etc.
Note, where insulation is purchased in blocks, such blocks are to be considered as
taxable, except as noted above with respect to the purchase of material in building a
machine used in manufacturing tangible personal property for sale.
(31) Electrical equipment used as direct controls of machinery used in manufacturing
is considered as part of manufacturing machinery.

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(32) Machines used for the generation of electricity, such as boilers, engines,
condensers, generators, and transformers and their attachments.
Fiscal Impact Statement:
There will be no impact on state or local political subdivisions expenditures in complying
with this proposed legislation.
Statement of Rationale:
The purpose of this proposal is to repeal SC Regulation 117-302.5 concerning the sales
and use tax machine exemption. The proposed regulation is needed to ensure that
taxpayers understand the application of the sales tax machine exemption statute as a
result of Springs Industries, Inc. v. SCDOR (99-ALJ-17-0153-CC) and Anonymous
Taxpayer v. SCDOR (02-ALJ-17-0350-CC). The proposal is reasonable since it is
consistent with the decisions in these two court cases.

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Document No. 2958
DEPARTMENT OF REVENUE
CHAPTER 117
Statutory Authority: 1976 Code Section 12-4-320
Regulations
SC Regulation 117-875
Synopsis:
The South Carolina Department of Revenue is considering adding SC Regulation 117875 concerning voluntary income tax check off funds. Act No. 248, Part IB, Section 64,
Proviso 64.16, “Voluntary Tax Contribution K-12,” and Proviso 64.17, “Voluntary Tax
Contribution for PRT,” stated that these check off provisos would be implemented by the
Department by regulation. This regulation, if approved, would also be used for other
check offs currently provided in Chapter 6 of Title 12 and any future check offs.
Instruction:
Add SC Regulation 117-875 concerning voluntary income tax check off funds.
Text:
All voluntary contributions designated on the individual income tax return, as provided
by law, are determined at least annually by the Department. The total amount shall be
credited to the appropriate check off fund at the earliest possible time.
Fiscal Impact Statement:
There will be no impact on state or local political subdivisions expenditures in complying
with this proposed legislation.
Statement of Need and Reasonableness:
This proposal to add this regulation is needed since Act No. 248, Part ID, Section 64,
Proviso 64.16, “Voluntary Tax Contribution K-12,” and Proviso 64.17, “Voluntary Tax
Contribution for PRT,” stated that these check off provisos would be implemented by the
Department by regulation. This regulation, if approved, is reasonable since it would also
be used to consistently distribute monies to other check offs currently provided in
Chapter 6 of Title 12 and any future check offs.
Statement of Rationale:
The purpose of this proposal is to add SC Regulation 117-875 concerning voluntary
income tax check off funds to state that all voluntary contributions designated on the

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individual income tax return, as provided by law, are determined at least annually by the
Department and that the total amount shall be credited to the appropriate check off fund
at the earliest possible time. This proposal to add this regulation is needed since Act No.
248, Part ID, Section 64, Proviso 64.16, “Voluntary Tax Contribution K-12,” and Proviso
64.17, “Voluntary Tax Contribution for PRT,” stated that these check off provisos would
be implemented by the Department by regulation. This regulation, if approved, is
reasonable since it would also be used to consistently distribute monies to other check
offs currently provided in Chapter 6 of Title 12 and any future check offs.

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