Was a mobile concrete batch plant's per-yard mixing fee taxable for the requesting road contractor?

Plain-English summary

South Carolina Private Letter Ruling #20-3 holds that a mobile concrete batch plant operator's fee was not subject to sales tax because the true object of the transaction was a mixing service.

The requesting road contractor bought all cement and aggregates from South Carolina suppliers, paid sales tax on those purchases, arranged delivery to the project site, and retained ownership at all times. The operator placed and ran the mobile batch plant, supplied the water, mixed the contractor's materials into concrete, and charged by the cubic yard.

South Carolina treats a contractor's purchase of cement and other materials that become part of real property as a taxable retail purchase. But services are not taxable when the service itself is the true object and the statute does not specifically tax that service. Because the operator did not sell the cement, aggregates, or completed concrete to the contractor, its mixing charge was nontaxable on these facts.

What this means for you

Road and construction contractors

Pay sales or use tax when buying cement, aggregates, and other building materials. If a separate operator only processes materials that you already own, the processing charge may be a nontaxable service under this PLR's facts.

Concrete batch operators

Document who buys and owns each input. If the operator supplies and sells the concrete rather than merely mixing the customer's materials, the true object could be tangible personal property and the tax result could change.

Contract drafters

State that ownership of contractor-supplied cement and aggregates never transfers to the operator, identify the operator-supplied water, and separately describe the per-yard mixing service. The actual transaction must match the agreement.

Common questions

Q: Was the finished concrete itself treated as the operator's sale?
A: No. The contractor owned the principal materials throughout, and the operator provided mixing.

Q: Were the contractor's materials exempt?
A: No. The ruling says the contractor's purchases of aggregates and cement were taxable retail purchases.

Q: Would the same answer apply if the operator supplied the concrete materials?
A: The ruling does not decide that scenario. It explains that if concrete were the true object, the mixing service would be incidental and the entire charge taxable.

Citations and references

• S.C. Code Ann. § 12-36-60 — tangible personal property
• S.C. Code Ann. § 12-36-110 — retail sales, including building materials to contractors
• S.C. Code Ann. § 12-36-910 — sales tax
• S.C. Regulation 117-308 — true-object treatment of services
• S.C. Regulation 117-314.2 — building materials, including cement

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: PLR20-3.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 PRIVATE LETTER RULING #20-3

SUBJECT:

Concrete Mixing Charges for Use in Road Construction Project
(Sales and Use Tax)

REFERENCES: S.C. Code Ann. Section 12-36-60 (2014)
S.C. Code Ann. Section 12-36-110 (2014)
S.C. Code Ann. Section 12-36-910 (2014)
SC Regulation 117-308 (2012)
SC Regulation 117-314 (2012)
AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2014)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

A Private Letter Ruling is an advisory opinion issued to a specific taxpayer by
the Department to apply principles of law to a specific set of facts or a
particular tax situation. It is the Department’s opinion limited to the specific
facts set forth, and is binding on agency personnel only with respect to the
person to whom it was issued and only until superseded or modified by a
change in statute, regulation, court decision, or another Departmental advisory
opinion, providing the representations made in the request reflect an accurate
statement of the material facts and the transaction was carried out as proposed.

QUESTION
Are fees charged to MNO Corporation by the operator of a mobile concrete batch plant for
mixing concrete for use in a road construction project, as described in the facts, subject to sales
tax?
CONCLUSION
Fees charged to MNO Corporation by the operator of a mobile concrete batch plant for mixing
concrete for use in a road construction project, as described in the facts, are not subject to sales
tax. The true object of the transaction is providing a mixing service. However, MNO
Corporation’s purchases of aggregates and cement for use in mixing concrete are subject to sales
tax.

1

FACTS
MNO Corporation (“MNO”) is a road construction contractor. MNO entered into an agreement
with a third party (“operator”) to place and operate a mobile concrete batch plant on a project site
in South Carolina and to mix concrete for MNO’s road construction project. MNO, and not the
operator, purchases all of the aggregates and cement needed for the operator to mix the concrete.
The operator does provide the water needed to mix the concrete. MNO purchases the aggregates
and cement from in-state suppliers, pays sales tax on these transactions, and arranges for delivery
of these items to the mobile concrete batch plant. The aggregates and cement remain MNO’s
property at all times, and ownership does not transfer to the operator. The operator mixes the
aggregates, cement, and water into concrete and charges MNO a fee for mixing each cubic yard
of concrete.
LAW AND DISCUSSION
Code Section 12-36-910(A) imposes the sales tax and provides:
A sales tax, equal to [six] 1 percent of the gross proceeds of sales, is imposed upon
every person engaged or continuing within this State in the business of selling
tangible personal property at retail.
Thus, for the sales tax to be imposed, there must be a retail sale or a retail purchase of tangible
personal property.
The terms “sale at retail” and “retail sale” are defined at Code Section 12-36-110 as:
. . . all sales of tangible personal property except those defined as wholesale sales.
The quantity or sales price of goods sold is immaterial in determining if a sale is
at retail.
(1) The terms include:
(a) sales of building materials to construction contractors, builders, or
landowners for resale or use in the form of real estate[.] (Emphasis added)

The term “building materials” is defined in SC Regulation 117-314.2, and includes cement, and
any and all other tangible personal property, which becomes a part of real property.
In summary, purchases of building materials by a contractor are retail transactions and the tax is
due on the material’s purchase price. However, we must determine whether the operator is
selling tangible personal property or providing a service.
Tangible personal property is defined in Code Section 12-36-60 as:
[P]ersonal property which may be seen, weighed, measured, felt, touched, or
which is in any other manner perceptible to the senses. It also includes services
1

Code Section 12-36-1110 increased the state sales tax rate to 6% from 5% beginning June 2007.

2

and intangibles, including communications, laundry and related services,
furnishing of accommodations and sales of electricity, the sale or use of which is
subject to tax under this chapter and does not include stocks, notes, bonds,
mortgages, or other evidences of debt. . . . (Emphasis added)
SC Regulation 117-308 provides that:
The receipts from services, when the services are the true object of the
transaction, are not subject to the sales and use tax, unless the sales and use tax is
specifically imposed by statute on such services (i.e. accommodation services,
communication services). . . . (Emphasis added)
The so-called “true object” test is generally used to delineate sales of tangible personal property
from sales of services. This test is one of determining the basic purpose of the buyer. 2
If the tangible personal property (concrete) is the true object of the transaction, the mixing
service would be incidental to the sale of the tangible personal property, and the entire fee
charged would be subject to the sales tax. If the true object is a mixing service, then such
charges would not be considered a sale of tangible personal property.
Based on the facts provided, the true object of the transaction is providing a mixing service.
Accordingly, fees charged to MNO by the operator of a mobile concrete batch plant for mixing
concrete for use in a road construction project, as described in the facts, are not subject to sales
tax under Code Section 12-36-910(A). However, MNO’s purchases of aggregates and cement
for use in mixing concrete are subject to sales tax.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/W. Hartley Powell
W. Hartley Powell, Director
March 31
, 2020
Columbia, South Carolina
CAVEAT: This advisory opinion is issued to the taxpayer requesting it on the assumption
that the taxpayer’s facts and circumstances, as stated, are correct. If the facts and
circumstances given are not correct, or if they change, then the taxpayer requesting the
advisory opinion may not rely on it. If the taxpayer relies on this advisory opinion, and the
Department discovers, upon examination, that the facts and circumstances are different in
any material respect from the facts and circumstances given in this advisory opinion, then
the advisory opinion will not afford the taxpayer any protection. It should be noted that
subsequent to the publication of this advisory opinion, changes in a statute, a regulation, or
case law could void the advisory opinion.
2

9 Vanderbilt Law Review 231 (1956).

3