Can a South Carolina internet or communications provider recover sales tax paid on equipment and electricity?

Plain-English summary

South Carolina's 2026 Act 242 allows qualifying internet access and communications service providers to recover state and local sales and use tax paid on certain purchases. Information Letter 26-22 says the eligible items are supplies, technical equipment, machinery, and electricity used in producing, broadcasting, or distributing internet access or communications services. The letter says this operates through a refund of tax paid, so keep the purchase records and submit a claim rather than assuming every vendor will make a tax-free sale.

The act treats qualifying service providers as manufacturers for this exemption. It expressly excludes data centers as defined in S.C. Code Ann. § 58-9-3100(C). The letter says Act 242 applies to tax years after 2025; for 2026 tax paid, the example filing deadline is January 31, 2027.

Who qualifies and what can be refunded

An internet access service provider or communications service provider must produce or distribute internet access service, communications services, or both. The purchase must be one of the listed kinds of property or electricity, and its use must be tied to producing, broadcasting, or distributing those services. The letter does not say that every purchase by an eligible company qualifies.

Data centers are excluded. Section 58-9-3100(C), reproduced in the letter's footnote, defines the excluded data center using the facility's primary data function, an electric supply agreement, contractual peak demand of at least 50 megawatts, and becoming an electric-service customer after December 31, 2026, with stated exceptions for telecommunications facilities. Do not classify a site from its name alone; check the statutory definition and the contract terms.

How to claim the refund

Submit Form ST-609, Service Provider Sales Tax Exemption Refund Application, and supporting documentation to [email protected] by January 31 for tax paid in the prior year. The letter's example is a January 31, 2027 deadline for 2026.

The Department requires an Excel invoice list with each purchase date, item, a short explanation of use, price, state and local tax paid, tax rate charged, and purchase county. Include copies of every invoice and proof of payment. The Department may request more information and may deny a claim missing required documentation.

The Department will calculate total requests by May 1 and issue refunds by June 1. If eligible requests exceed $10 million statewide, it will prorate them so the total refunded stays within the $10 million annual limit. A qualifying claim can therefore receive less than the tax paid.

What this means for you

Internet and communications providers

Review 2026 and later purchases by use, not just by vendor or item label. Preserve invoices and payment proof as you go, and build the spreadsheet with the fields the Department lists. The January 31 deadline leaves little time after year-end to assemble a claim.

Accountants and tax teams

Check the provider definition, qualifying use, data-center exception, and both state and local tax amounts before calculating the refund. Treat the $10 million cap as a possible reduction of the eventual payment, not as a per-applicant allowance.

Common questions

Can an eligible provider simply stop paying sales tax when it buys equipment?

The letter describes a refund for taxes paid in the prior year and instructs applicants to document the tax on invoices. It does not give a general instruction to purchase these items without tax.

Does electricity qualify?

Yes, if sold to an eligible provider and used in producing, broadcasting, or distributing the covered services. Electricity is one of the four item categories the letter names.

Are data centers eligible?

No, if they meet the data-center definition in § 58-9-3100(C). That definition has specific facility and electric-demand conditions, so check the statute rather than the label.

When is the application due?

By January 31 after the tax year for which tax was paid. For tax year 2026, the letter gives January 31, 2027 as its example.

Will the Department refund every eligible dollar?

Not necessarily. It will prorate refunds if all requests together exceed $10 million for the year.

Is this Information Letter binding precedent?

No. Its scope paragraph says it announces general compliance information and "has no precedential value."

Citations and verbatim support

• 2026 S.C. Acts 242; S.C. Code Ann. §§ 12-36-2120 and 58-9-3100(A)–(C).
• "This new exemption ... exempts from state and local sales and use tax all supplies, technical equipment, machinery, and electricity sold to internet access service providers and communications service providers ... so long as the items are used in producing, broadcasting, or distributing" the covered services.
• "The Service Provider Tax Exemption does not apply to data centers."
• "Service Providers must submit the completed application and required supporting documentation ... by January 31st for the prior year."
• "If the total amount of refund requests exceeds $10 million, SCDOR will pro-rate refunds" to stay within that total.

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/IL26-22.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE

300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 125, Columbia, South Carolina 29214-0575

SC INFORMATION LETTER #26-22
SUBJECT:

Service Provider Tax Exemptions
(Sales and Use Tax)

DATE:

October 1, 2026

REFERENCES:

S.C. Code Ann. § 12-36-2120
S.C. Code Ann. § 58-9-3100
2026 S.C. Acts 242

AUTHORITY:

S.C. Code Ann. § 12-4-320 (2014)
SC Revenue Procedure #09-3

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.

Purpose
On May 19, 2026, Governor Henry McMaster signed Act 242, effective for tax years after 2025, which added Section 58-9-3100 of the South Carolina Code (2026), permitting certain items sold to or used by internet access service providers and communications service providers to be exempt from state and local sales and use tax by allowing a refund for taxes paid in the prior year. The purpose of this Information Letter is to provide eligible taxpayers with details about the exemption and refund. General Guidance on Exemption This new exemption, (the “Service Provider Tax Exemption”) exempts from state and local sales and use tax all supplies, technical equipment, machinery, and electricity sold to internet access service providers and communications service providers (“Service Providers”) so long as the items are used in producing, broadcasting, or distributing internet access service, communications

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services, or any combination of such services pursuant to the provisions of Section 12-36-2120 of the South Carolina Code. 1 Section 58-9-3100 deems Service Providers to be manufacturers for purposes of this exemption. 2 The Service Provider Tax Exemption does not apply to data centers. 3 Service Providers meeting these qualifications may apply to the South Carolina Department of Revenue (“SCDOR”) for a refund of state and local sales and use taxes paid on eligible items no later than January 31st of the following year. 4 SCDOR shall calculate the total amount of refund requests no later than May 1. 5 If the total amount of refund requests exceeds $10 million, SCDOR will pro-rate refunds to ensure the total amount refunded does not exceed $10 million.6 SCDOR will issue refunds no later than June 1. 7 Eligible Applicants Internet access service providers and communications service providers producing, or distributing internet access service, communications services, or any combination of such services are eligible for the Service Provider Tax Exemption. 8 Application for Refund Application for refund may be made using Form ST-609 Service Provider Sales Tax Exemption Refund Application at dor.sc.gov. Service Providers must submit the completed application and required supporting documentation to [email protected] by January 31st for the prior year (e.g., for tax year 2026, submit ST-609 by January 31, 2027, etc.). SCDOR will review the Service Provider Sales Tax Exemption Refund applications and supporting documentation including:

S.C. Code Ann. § 58-9-3100(A).
Id.
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S.C. Code Ann. § 58-9-3100(C). Section 58-9-3100(C)(1) provides that for this exemption, “data center” means “a facility, campus of facilities, or array of electronically interconnected facilities under a single electric supply agreement in this State used by an entity or other business enterprise to operate, manage, or maintain a computer, group of computers, or other organized assembly of hardware and software for the primary purpose of storing, retrieving, or transmitting data, other than facilities owned or operated by a telecommunications company as defined in Section 589-2200 or facilities that primarily support telecommunications service or network operations, that has a peak demand of fifty megawatts or greater, and that becomes a customer of an electric service provider after December 31, 2026.” Section 58-9-3100(C)(2) further reads that “[f]or purposes of calculating peak demand under this definition, peak demand shall be determined according to the contract between the energy user and the electric service provider, and the possibility of occurrence of energy usage which temporarily exceeds fifty megawatts shall not cause a commercial data center to fall under this definition where contractual peak demand is less than fifty megawatts.” 4 S.C. Code Ann. § 58-9-3100(B). 5 Id. 6 Id. 7 Id. 8 Data centers, as defined pursuant to Section 58-9-3100(C)(1) are not eligible for the Service Provider Sales Tax Exemption. 1 2

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• An Excel spreadsheet listing all invoices included with the requested refund amount. The

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list must include:
o the date of purchase;
o item purchased;
o brief description of how item is used;
o purchase price;
o total state and local sales and use tax paid;
o total sales tax rate charged;
o county in which item was purchased; and,
Copies of all invoices and proof of payment supporting the tax summary.

SCDOR may request additional information to process refund requests. Refund requests may be denied if all required documentation is not included. Refunds received may be less than the amount requested as the total for all requested refunds may not exceed $10 million per year for all Service Providers. SCDOR will issue refund payments no later than June 1st.

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