What does South Carolina Regulation 117-337 do for the unprepared-food sales tax exemption (per SC IL #08-16)?

Plain-English summary

This Information Letter announces that the General Assembly approved SC Regulation 117-337 — the "Food Tax Regulation" — on June 20, 2008, which became official upon publication in the State Register on July 25, 2008. The regulation gives guidance on how to apply the statutory exemption in S.C. Code § 12-36-2120(75).

That statute exempts from the state sales and use tax the gross proceeds of sales, or sales price, of "unprepared food that lawfully may be purchased with United States Department of Agriculture food coupons." In plain terms, it is the exemption for groceries eligible for the federal food-stamp (SNAP) program.

A key limit: the exemption does not apply to the local sales and use taxes the Department collects on behalf of counties and other jurisdictions — unless the particular local tax law specifically exempts such unprepared food. So unprepared food can still be subject to local sales and use tax even though it is exempt from the state tax.

What this means for you

If you sell groceries in South Carolina, unprepared food eligible for USDA food coupons is exempt from the state sales and use tax, but you may still owe applicable local sales and use tax on those same items unless the local tax law exempts them. Regulation 117-337 is the Department's guidance on applying that exemption; read the attached regulation for the operative details, and confirm current law, since the rules can change.

Common questions

Q: What does Regulation 117-337 address?
A: How to apply the § 12-36-2120(75) exemption for unprepared food that may lawfully be purchased with USDA food coupons.

Q: Does the exemption cover local sales and use taxes too?
A: No. It applies to the state tax; local sales and use taxes still apply unless the specific local tax law exempts unprepared food.

Q: When did the regulation take effect?
A: It became official upon publication in the State Register on July 25, 2008.

Subject

Regulation 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/IL08-16.pdf

Original ruling text

State of South Carolina

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

SC INFORMATION LETTER #08-16

SUBJECT:

Regulation Approved by the General Assembly
(Sales and Use Tax)

DATE:

July 21, 2008

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2000; Supp. 2007)
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.

On June 20, 2008, the General Assembly approved SC Regulation 117-337 which will
become an official regulation upon publication in the State Register on July 25, 2008.
SC Regulation 117-337 was promulgated to provide guidance as to the application of
Code Section 12-36-2120(75) which exempts from the state sales and use tax the gross
proceeds of sales or sales price of “unprepared food that lawfully may be purchased with
United States Department of Agriculture food coupons.” This exemption does not apply
to local sales and use taxes that are administered and collected by the Department on
behalf of the counties and other jurisdictions, unless the local tax law specifically
exempts the sales of such unprepared food.
The regulation is attached as published on the General Assembly website at
http://www.scstatehouse.net/regs/3189.doc (excluding the initial page of legislative
history).

Document No. 3189
DEPARTMENT OF REVENUE
CHAPTER 117
Statutory Authority: 1976 Code Section 12-4-320
117-337. Food Tax Regulation
Synopsis:
The South Carolina Department of Revenue is considering adding SC Regulation 117337 to provide guidance as to the application of Code Section 12-36-2120(75) which
exempts from the state sales and use tax the gross proceeds of sales or sales price of
“unprepared food that lawfully may be purchased with United States Department of
Agriculture food coupons.” This exemption does not apply to local sales and use taxes
that are administered and collected by the Department on behalf of the counties and other
jurisdictions, unless the local tax law specifically exempts the sales of such unprepared
food.
Under the proposed regulation, the determination as to whether a sale of unprepared food
is exempt from the state sales and use tax is based on whether the food is of a type that is
eligible to be purchased with USDA food stamps, the type of location selling the food,
and whether the food is being sold for immediate consumption, business or institutional
consumption, or home consumption.
In other words, a food must be of a type eligible to be purchased with USDA food stamps
and must also be sold for home consumption (based on the type of food and the type of
location selling the food) to qualify for the exemption from the state sales and use tax
under Code Section 12-36-2120(75). For example, bottled soft drinks are eligible to be
purchased with USDA food stamps, but if bottled soft drinks are sold at a concession
stand at a festival, then the bottled soft drinks are sold for immediate consumption and
not home consumption and the sale at the festival would be subject to the full state sales
tax rate.
This regulation will explain which sales of food qualify or do not qualify for the
exemption from the state sales and use tax under Code Section 12-36-2120(75). This
exemption does not apply to local sales and use taxes that are administered and collected
by the Department on behalf of the counties and other jurisdictions, unless the local tax
law specifically exempts the sales of such unprepared food.
Instructions:
Add SC Regulation 117-337 to provide guidance as to the application of Code Section
12-36-2120(75) which exempts from the state sales and use tax the gross proceeds of
sales or sales price of “unprepared food that lawfully may be purchased with United
States Department of Agriculture food coupons.”

2

Text:
117-337. Sales of Unprepared Food
Effective November 1, 2007, Code Section 12-36-2120(75) exempts from the state sales
and use tax the gross proceeds of sales or sales price of “unprepared food that lawfully
may be purchased with United States Department of Agriculture food coupons.” This
exemption does not apply to local sales and use taxes that are administered and collected
by the Department on behalf of the counties and other jurisdictions, unless the local tax
law specifically exempts the sales of such unprepared food.
The determination as to whether a sale of unprepared food is exempt from the state sales
and use tax is based on whether the food is of a type that is eligible to be purchased with
USDA food stamps, the type of location selling the food, and whether the food is being
sold for immediate consumption, business or institutional consumption, or home
consumption.
In other words, a food must be of a type eligible to be purchased with USDA food stamps
and must also be sold for home consumption (based on the type of food and the type of
location selling the food) to qualify for the exemption from the state sales and use tax
under Code Section 12-36-2120(75). For example, bottled soft drinks are eligible to be
purchased with USDA food stamps, but if bottled soft drinks are sold at a concession
stand at a festival, then the bottled soft drinks are sold for immediate consumption and
not home consumption and the sale at the festival would be subject to the full state sales
tax rate.
This regulation will explain which sales of food qualify or do not qualify for the
exemption under Code Section 12-36-2120(75).
117-337.1. “Eligible Food” Defined
For purposes of this regulation, the term “eligible food” is food eligible for the exemption
under Code Section 12-36-2120(75) that will be defined to include and exclude the
following:
(A) Foods eligible for the exemption under Code Section 12-36-2120(75) include:
(1) Any food intended to be eaten at home by people, including snacks, beverages
and seasonings;
(2) Seeds and plants intended to grow food (not birdseed or seeds to grow flowers);
and
(3) Cold items, which may include salads or sandwiches, intended to be eaten at
home by people and that are not considered “prepared meals or food” as discussed below.

3

(B) Food and other items which are not eligible for the exemption under Code Section
12-36-2120(75) and are, therefore, subject to the full state sales and use tax rate (unless
otherwise exempt) include:
(1) Alcoholic beverages, such as beer, wine, or liquor;
(2) Hot beverages ready-to-drink such as coffee;
(3) Tobacco;
(4) Hot foods ready to eat;
(5) Foods designed to be heated in the store;
(6) Hot and cold food to be eaten at a lunch counter, in a dining area or anywhere
else in the store or in a nearby area such as a mall food court;
(7) Vitamins and medicines;
(8) Pet food;
(9) Any non-food items such as tissue, soap or other household goods;
(10) Meals or food shipped or delivered to businesses or institutions (hospitals,
prisons, jails, nursing homes, etc.); and
(11) Prepared meals or food as defined in Regulation 117-337.2.
117-337.2. “Prepared Meals or Food” Defined
(A) “Prepared meals or food” is food for immediate consumption (based on the type of
food and the type of location selling the food) and is not eligible for the exemption under
Code Section 12-36-2120(75), but is subject to the full state sales and use tax rate.
“Prepared meals or food” are meals or food sold by a business, or from an identifiable
location within a business, which advertises, holds itself out to the public (e.g., offers hot
food or the ability to heat food, provides seating, or provides utensils with the meal or
food), or is perceived by the public as being engaged in the sale of ready-to-eat food or
beverages to customers for their immediate consumption on or off the premises. Such a
business, or identifiable location within a business, may be mobile or immobile and may
or may not provide seating accommodations for its customers. For example, “prepared
meals or food” includes, but is not limited to (a) meals or food sold by a restaurant,
cafeteria, lunch wagon or cart, lunch counter, cafeteria, ice cream stand, tavern, night
club, or other similar places or businesses engaged in the business of selling prepared
meals or food for immediate consumption, (b) meals prepared and delivered by a meal
delivery service; (c) meals sold to or at congregate meal sites; (d) meals or food sold at a

4

grocery store, convenience store or any other similar store for the purpose of eating at or
near the store, such as meals or food sold with eating utensils (e.g., plates, knives, forks,
spoons, cups, napkins) provided by the seller, (e) meals or food sold at hotels, motels, or
other places furnishing accommodations; (f) meals or food sold at newsstands, gift shops,
and snacks bars located in offices or other public or commercial buildings; (g) meals or
food sold at movies theaters, opera houses, fairs, carnivals, stadiums, auditoriums,
amphitheaters, or similar entertainment or sports facilities; and (h) food sold through
vending machines.
(B) Exception: If a store, or an identifiable location within a store, advertises, holds itself
out to the public (e.g., offers hot food or the ability to heat food, provides seating, or
provides utensils with the meal or food), or is perceived by the public as being engaged in
the sale of ready-to-eat food or beverages to customers for their immediate consumption
on or off the premises and also sells food that is prepared for home consumption, sold for
home consumption, and is not the type of food intended for immediate consumption, then
such “home consumption” food is not considered “prepared meals or food” and would be
“eligible food” exempt from the state sales and use tax under Code Section 12-362120(75), provided it is not one of the foods listed above in Regulation 117-337.1(B) –
Items (1) through (10).
The following are examples of this exception:
(A) A grocery store has a deli/bakery that provides tables, chairs, benches, booths,
counters or an area where customers may consume food in or near the store. In addition
to other items, this deli/bakery area sells loaves of baked bread (the bread it is not hot at
the time of sale).
The sales at retail of the loaves of bread are exempt from the state sales and use tax under
Code Section 12-36-2120(75), provided the sale is not for a party or gathering held at the
store or delivered to a location other than a private residence.
(B) A coffee shop sells individual slices of cake to be eaten with the coffee and other
drinks sold at the shop. The shop also sells entire sheet cakes.
The sale at retail of the sheet cake is exempt from the state sales and use tax under Code
Section 12-36-2120(75), provided the sale is not for a party or gathering held at the shop
or delivered to a location other than a private residence.
(C) Some sales of meals or food may be exempt from the sales and use tax under other
exemption provisions. For example, Code Section 12-36-2120(10) provides exemptions
from the sales and use tax for (1) meals or foodstuff used in furnishing meals to school
children within school buildings on a nonprofit basis; (2) meals or foodstuff provided to
elderly or disabled persons at home by certain nonprofit organizations; (3) prepared or
packaged foodstuff sold to nonprofit organizations for the homeless and needy; or (4)
meals or prepared or packaged foodstuff sold to public and nonprofit organizations for
congregate or in-home service to the homeless, needy, disabled adults over eighteen years

5

of age or persons over sixty years of age (provided the meals or packaged foodstuffs in
this item (4) are eligible for purchase with USDA food coupons). Code Section 12-362120(41) exempts from the sales and use tax tangible personal property, including meals
or food, sold by certain nonprofit organizations.
117-337.3. General Rules
(A) Sales of “Eligible Food” by Grocery, Convenience and Similar Stores Authorized to
Accept Food Stamps:
Sales of “eligible food” by a grocery, convenience or similar store authorized to accept
food stamps shall be deemed to be for home consumption and exempt from the state sales
and use tax under Code Section 12-36-2120(75).
However, if the store has an identifiable location which advertises, holds itself out to the
public (e.g., offers hot food or the ability to heat food, provides seating, or provides
utensils with the meal or food), or is perceived by the public as being engaged in the sale
of ready-to-eat food or beverages to customers for their immediate consumption on or off
the premises, then all sales of food from that identifiable location shall be deemed to be
for immediate consumption and subject to the sales tax at the full state rate, unless the
sale falls within the exception noted above in Regulation 117-337.2. For example, if a
neighborhood grocery store also has a lunch counter, then sales from that lunch counter
are for immediate consumption and subject to the tax at the full sales tax rate. If the lunch
counter also sold entire sheet cakes, then the sale at retail of a sheet cake would be
exempt from the state sales and use tax under Code Section 12-36-2120(75) provided the
sale is not for a party or gathering held at the store or delivered by the store to a business
or institution.
(B) Sales of “Eligible Food” by Grocery and Other Stores Not Authorized to Accept
Food Stamps:
Sales of “eligible food” by a grocery, convenience or similar store not authorized to
accept food stamps but which is engaged in the retail sale of all sorts of canned foods and
dry goods (e.g., tea, coffee, spices, sugar, and flour), and may also be engaged in the
retail sale of fresh fruits and vegetables and fresh and prepared meats, fish, and poultry,
shall be deemed to be for home consumption and exempt from the state sales and use tax
under Code Section 12-36-2120(75).
However, if the store has an identifiable location which advertises, holds itself out to the
public (e.g., offers hot food or the ability to heat food, provides seating, or provides
utensils with the meal or food), or is perceived by the public as being engaged in the sale
of ready-to-eat food or beverages to customers for their immediate consumption on or off
the premises, then all sales of food from that identifiable location shall be deemed to be
for immediate consumption and subject to the sales tax at the full state rate unless the sale
falls within the exception noted above in Regulation 117-337.2. For example, if a
convenience store has an area where a customer can get a hot dog or sandwiches that are

6

intended for immediate consumption (including ones intended to be heated in a
microwave), then the sale of the hot dogs and sandwiches are for immediate consumption
and subject to the full state rate. Any chips or drinks (whether fountain drinks or bottled
drinks) sold with that hot dog or sandwich at the lunch counter are also for immediate
consumption and subject to the full state rate.
(C) Sales of “Eligible Foods” to or by Vending Machine Operators for Sale through
Vending Machines:
Sales of “eligible food” to or by vending machine operators for sale through vending
machines are for immediate consumption and subject to the sales tax at the full state rate.
(D) Sales of “Eligible Food” to Institutions:
Sales of “eligible food” to the SC Department of Corrections, city or county jails,
hospitals, nursing homes, and colleges for use in providing meals to the prisoners,
patients, or students are sales to institutions who, under the sales and use tax law, are the
users or consumers of such food in carrying out their primary functions of incarcerating
convicts, providing medical care or providing an education. As such, sales of such food
are not for home consumption and are subject to the sales tax at the full state rate.
(E) Sales of “Eligible Food” Prepackaged with a Non-Eligible Item
Sales of “eligible food” that is prepackaged with a non-eligible item, or sales in which a
single price is established for a combination of an “eligible food” and a non-eligible item,
are subject to the tax at the full state rate.
For example, if a grocery store advertises and sells a basket containing fruit and a bottle
of wine, the exemption under Code Section 12-36-2120(75) is not applicable. The full
state rate applies.
(F) “Eligible Food” Purchased with Food Stamps:
“Eligible food” purchased with food stamps from a retailer authorized by the United
States Department of Agriculture to accept food stamps are exempt from the sales and
use tax.
117-337.4. Examples
The following examples are provided to assist in understanding the above provisions of
this regulation:
(a) Sales at retail of food delivered to offices and businesses are subject to tax at the full
state rate.

7

(b) Sales at retail of food delivered to day care centers and similar facilities are subject to
tax at the full state rate.
(c) Sales at retail of bottled water delivered to an individual's home are exempt from the
state sales and use tax under Code Section 12-36-2120(75). However, the lease of a
water cooler unit to a residential customer is subject to the full state rate.
Sales at retail of bottled water delivered to a commercial enterprise are subject to the tax
at the full state rate. The lease of a water cooler unit to a commercial enterprise is also
subject to the full state rate.
(d) Sales at retail of ground coffee, creamer, sugar, tea bags and other "coffee service"
products delivered to a commercial enterprise are subject to the tax at the full state rate.
(e) Sales at retail of drinks, coffee supplies, and snacks by an office supply store are
exempt from the state sales and use tax under Code Section 12-36-2120(75), unless
shipped or delivered to a location other than a private residence. Shipments or deliveries
to a location other than a private residence are subject to the full state rate.
(f) Sales at retail by a coffee shop of packaged cold sandwiches, salads, and containers of
cut fruit, cookies, muffins, donuts, slices of nut bread, cupcakes, brownies, whole fruit, or
similar food products sold individually are subject to the tax at the full state rate.
However, sales at retail of these same food products by the loaf or tray are subject
exempt from the state sales and use tax under Code Section 12-36-2120(75) unless such
loaf or tray is sold for a party or gathering held at or near the coffee shop or is delivered
to a location other than a private residence. Sales at retail of these products by the loaf or
tray for a party or gathering held at or near the coffee shop or that are delivered a location
other than a private residence are subject to the tax at the full state rate.
(g) Sales at retail at a location that contains both a restaurant and a convenience or similar
store under one roof are taxed at the full state rate for sales from the restaurant portion of
the business and are exempt from the state sales and use tax under Code Section 12-362120(75) for sales from the convenience or similar store portion of the business, unless
an exception discussed previously in this regulation applies. For more detailed
information, see the above sections of this regulation concerning restaurants and
convenience or similar stores.
(h) Sales at retail of loaves of bread baked in and sold at a bakery in a grocery store are
exempt from the state sales and use tax under Code Section 12-36-2120(75), provided
the loaf of bread sold is not “hot food.”
117-337.5. Local Taxes
The exemption in Code Section 12-36-2120(75) for “unprepared food that lawfully may
be purchased with United States Department of Agriculture food coupons” does not apply

8

to local sales and use taxes that are administered and collected by the Department on
behalf of the counties and other jurisdictions, unless the local tax law specifically
exempts the sales of such unprepared food.
This regulation is not applicable to any local tax administered and collected by a local
jurisdiction.
117-337.6. Records
The seller of “eligible food” exempt from the state sales and use tax under Code Section
12-36-2120(75) shall maintain sufficient documentation to substantiate that a sale
qualifies for the exemption from the state sales and use tax, using any method of
recording that properly reflects all purchases and sales of such items.
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 add SC Regulation 117-337 to provide guidance as to
the application of Code Section 12-36-2120(75) which exempts from the state sales and
use tax the gross proceeds of sales or sales price of “unprepared food that lawfully may
be purchased with United States Department of Agriculture food coupons.” The proposal
to add SC Regulation 117-337 is needed to ensure taxpayers understand the application
of the tax to the sale of food, whether prepared food taxed at the 6% rate or unprepared
food exempt from the state sales and use tax under Code Section 12-36-2120(75). The
proposal to add SC Regulation 117-337 is also reasonable in that it is consistent with the
department’s prior position on the issue as sales of the same unprepared food were
subject to a reduced sales and use tax rate of 3% from October 1, 2006 through October
31, 2007.

9