When one company hauls in and sets up scaffolding for another company's insulation crew, who owes South Carolina sales tax — and is any of it a taxable rental?

Plain-English summary

An insulation contractor ("XYZ") installed insulation in commercial and industrial buildings and used temporary scaffolding to do it. A related company ("ABC") delivered, assembled, disassembled, and removed its own scaffolding at XYZ's job sites, charging XYZ its actual labor-and-materials cost (never a "rental fee"), which XYZ passed to its customers at cost-plus. The Department was asked to sort out the sales-tax treatment of two separate transactions.

1. XYZ ↔ its customer (insulation job): not a taxable rental. Under the true-object test (Regulation 117-308; the classic Snite/Vanderbilt formulation), the customer hired XYZ to install insulation — the scaffolding was just tangible personal property XYZ used along the way, incidental to the service. The customer never got the right to move or control the scaffolding. And South Carolina treats a contractor as the user/consumer of the property it uses in a construction contract [§ 12-36-110(1)(e); Reg 117-314.2]. So XYZ's use of scaffolding is not a rental to the customer and isn't taxed as one. (The Department flagged that if a customer had instead just rented scaffolding from XYZ with no installation service, that would be taxable.)

2. ABC ↔ XYZ (supplying the scaffolding): a taxable rental. A "sale" includes any transfer of tangible personal property for a consideration [§ 12-36-100]. ABC temporarily handed scaffolding to XYZ for a fee — a rental. The delivery/assembly/disassembly labor exists only because of the scaffolding, so it's incidental to and inseparable from the transfer — the true object is the scaffolding itself. The Department analogized to portable-toilet rentals (Boggero; RR #09-5, #19-10), where the service is incidental to the unit. Critically, calling it something other than "rent" doesn't matter — nomenclature doesn't control; the true-object test does.

Tax base — the whole charge. Because it's a taxable rental, the entire gross proceeds are taxed with no deduction for the cost of materials, labor, service, or any other expense [§§ 12-36-90, 12-36-130; Meyers Arnold]. (Separately-stated, reasonable installation charges can be excluded under Reg 117-313.3, but scaffolding isn't "installed" because it isn't affixed to real property, and the Department scrutinizes charges that try to gut the tax base.)

No credit for the tax ABC already paid. ABC had wrongly treated itself as a contractor and paid sales tax on buying the scaffolding. But ABC was actually a retailer — someone "renting, leasing, or otherwise furnishing tangible personal property for a consideration" [§ 12-36-70(1)(c)] — so it should have bought the scaffolding tax-free with a resale certificate [§ 12-36-950]. South Carolina allows a credit for tax previously paid only for out-of-state use-tax situations [§ 12-36-1310(C)], so ABC gets no credit for the sales tax it paid by mistake. (It isn't barred from seeking a refund of that tax within the § 12-54-85(F) time limit.)

What this means for you

Equipment/scaffolding suppliers and rental companies

If you provide equipment to another business for a fee, that's very likely a taxable rental — even if you bill it as "cost of labor and materials," "delivery," or anything other than "rent," and even if setup labor is a big part of the charge. The entire charge is taxable, so you can't carve out delivery/assembly to shrink the base. Register as a retailer, buy your rental inventory tax-free on a resale certificate [§ 12-36-950], and collect tax on the rental. If you've been misclassifying yourself as a contractor and paying tax on purchases, note you won't get a credit for that later — your remedy is a timely refund claim.

Construction and installation contractors

When you use equipment to perform your own service (installing insulation, etc.), you're the user/consumer of that equipment — it's not a rental to your customer, and your service (true object) isn't taxed as a rental. But watch the flip side: if you separately rent equipment to a customer without bundling it into your service, that rental is taxable.

Accountants and tax professionals

This ruling is a clean, two-transaction application of the true-object test with three practical rules: (1) contractor-used TPP ≠ rental to the customer [§ 12-36-110(1)(e), Reg 117-314.2]; (2) transfer of TPP for consideration = a taxable rental regardless of label, with incidental services (delivery/assembly) folded into a gross-proceeds base that allows no deductions [§§ 12-36-90/130; Boggero, Meyers Arnold]; and (3) mistakenly paying tax as a "contractor" yields no credit — the fix is a resale certificate going forward and a § 12-54-85(F) refund claim for the past. The Reg 117-313.3 installation-charge exclusion won't help for unaffixed property.

Common questions

Q: My crew uses scaffolding to do an install. Am I renting it to the customer?
A: No. You're the user/consumer of the scaffolding; the true object of your deal with the customer is the installation service, so it's not a taxable rental to them.

Q: We deliver and set up our own scaffolding for another company for a fee but never call it "rent." Is it taxable?
A: Yes. Transferring the scaffolding for a consideration is a taxable rental. The label doesn't matter, and the delivery/assembly labor is part of the taxable charge.

Q: Can we deduct the delivery and labor from the taxable amount?
A: No. The entire gross proceeds are taxable with no deduction for materials, labor, service, or other expenses. (Unaffixed scaffolding isn't "installed," so the Reg 117-313.3 installation-charge exclusion doesn't apply.)

Q: We already paid sales tax when we bought the scaffolding. Do we get a credit?
A: No credit is allowed here — you should have purchased tax-free with a resale certificate as a retailer. You may, however, file a refund claim for the wrongly paid tax within the § 12-54-85(F) period.

Citations and references

Statutes:

• S.C. Code Ann. § 12-36-910(A) — 6% sales tax on gross proceeds of retail sales
• S.C. Code Ann. § 12-36-100 — "sale" = transfer of TPP for a consideration
• S.C. Code Ann. §§ 12-36-90, 12-36-130 — gross proceeds / sales price; no deduction for materials, labor, or service
• S.C. Code Ann. § 12-36-70(1)(c) — "retailer" includes one renting/leasing/furnishing TPP for consideration
• S.C. Code Ann. § 12-36-110(1)(e) — sales to contractors for use in construction contracts
• S.C. Code Ann. § 12-36-950 — resale certificate shifts the tax to the buyer
• S.C. Code Ann. § 12-36-1310(C) — credit limited to out-of-state use-tax situations
• S.C. Code Ann. § 12-54-85(F) — refund time period

Regulations: S.C. Regulation 117-308 (true-object test); 117-313.3 (separately-stated installation charges); 117-314.2 (contractor as user/consumer of building materials).

Cases/rulings discussed in prose (not linked): Boggero v. S.C. Dep't of Revenue, 414 S.C. 277, 777 S.E.2d 842 (Ct. App. 2015) and RR #09-5 / #19-10 (portable-toilet rentals; service incidental to the unit); Meyers Arnold, Inc. v. S.C. Tax Comm'n, 285 S.C. 303, 328 S.E.2d 920 (Ct. App. 1985) (lay-away fees in the tax base); the "true object" test per 9 Vanderbilt Law Review 231 (1956) and Snite v. Department of Revenue, 398 Ill. 41, 74 N.E.2d 877 (1947). The Department's companion Revenue Ruling #26-3 addresses the related question of when furnishing an operator with rented equipment makes it a nontaxable service.

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: PLR25-1.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 #25-1 (Sanitized)
SUBJECT:

Providing Scaffolding for the Installation of Insulation
(Sales and Use Tax)

REFERENCES:

S.C. Code Ann. Section 12-36-90 (2014 & Supp. 2024)
S.C. Code Ann. Section 12-36-100 (2014)
S.C. Code Ann. Section 12-36-130 (2014 & Supp. 2024)
S.C. Code Ann. Section 12-36-910(A) (2014)
S.C. Code Regs. Ann. 117-308 (2012)
S.C. Code Regs. Ann. 117-313.3 (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.

QUESTIONS:

1. In the context of insulation installation services by XYZ to a customer, whereby XYZ
   installs insulation into a building owned by the customer, is XYZ’s use of scaffolding in
   furtherance of these services subject to sales tax as a rental of tangible personal property?
2. Is the delivery and subsequent removal of scaffolding owned by ABC to a job site for
   XYZ’s use in installing insulation subject to sales tax as a rental of tangible personal
   property, and if so, to what extent?
3. If the delivery and subsequent removal of scaffolding by ABC to XYZ’s job site is the
   rental of tangible personal property subject to sales tax, does South Carolina law allow a
   credit for sales or use taxes paid upon the original purchase of the scaffolding materials?
   1

CONCLUSIONS:

1. Based on the facts provided, the true object of the transactions between XYZ and the
   customer is for the installation of insulation and not for the rental of scaffolding; therefore,
   XYZ’s use of scaffolding in furtherance of installing insulation is not a rental of tangible
   personal property subject to sales tax.
2. Based on the facts provided, the delivery and subsequent removal of scaffolding owned by
   ABC to a job site for XYZ’s use in installing insulation is a rental of tangible personal
   property subject to sales tax.
3. South Carolina law does not allow a credit for any sales taxes paid on the original purchase
   of the scaffolding materials.
   FACTS:
   XYZ 1 was a construction contractor and installed insulation for commercial and industrial property
   owners (the “customer”). XYZ frequently utilized temporary scaffolding in performing these
   installation services.
   ABC 2 contracted with XYZ, ABC’s only client, to deliver, install, and remove ABC owned
   scaffolding to XYZ’s project sites. ABC never held a South Carolina retail sales tax license based
   on ABC’s own determination that it was a contractor. On this basis, ABC paid sales tax on all of
   its purchases of taxable tangible personal property, including the scaffolding it delivered to XYZ’s
   job sites.
   ABC did not use the scaffolding at XYZ’s job site; rather, XYZ operated, used, and otherwise
   exercised control over the scaffolding while it remained at XYZ’s job sites in furtherance of
   providing insulation installation services to the customer. Neither ABC nor XYZ granted XYZ’s
   customers, who contracted for the installation of insulation, the right to move, use, or otherwise
   direct the usage of the scaffolding.
   ABC did not charge XYZ a rental fee or a daily/monthly charge for the use of the scaffolding.
   Rather, ABC charged XYZ the actual costs of labor and materials to deliver, install, and remove
   the scaffolding. XYZ then passed along any charges from ABC to the customers of the insulation
   installation services at cost plus a small mark up.

1

XYZ merged out of existence, effective October 17, 2024, as part of a transaction that left the
business under new ownership. The transactions discussed herein relate to the business conduct of
XYZ on or before October 17, 2024.
2

ABC was related to XYZ through similar ownership. ABC also merged out of existence,
effective October 17, 2024, as part of the same transaction as described in footnote 1.
2

LAW AND ANALYSIS:
South Carolina law imposes “[a] sales tax, equal to [six] 3 percent of the gross proceeds of sales . .
. upon every person engaged or continuing within this State in the business of selling tangible
personal property 4 at retail.” S.C. Code Ann. § 12-36-910(A). The “gross proceeds of sales”
means “the value proceeding or accruing from the sale, lease, or rental of tangible personal
property.” S.C. Code Ann. § 12-36-90. South Carolina law does not impose the sales and use tax
on the receipts from services, 5 “when the services are the true object of the transaction.” S.C.
Regulation 117-308.
Both the Department and South Carolina courts use the “true object” test to determine whether a
transaction is a taxable sale or rental of tangible personal property or a nontaxable service.
The "true object" test is best described in 9 Vanderbilt Law Review 231 (1956), wherein it is stated:
The true test then is one of basic purpose of the buyer. When the product of the
service is not of value to anyone other than the purchaser, either because of the
confidential character of the product, or because it is prepared to fit the purchaser's
special need - a contract or will prepared by a lawyer, or the accident investigation
report prepared for an insurance company - this fact is evidence tending to show
that the service is the real purpose of the contract. When the purpose of a contract
is to produce an article which is the true object of the agreement, the final transfer
of the product should be a sale, regardless of the fact that special skills and
knowledge go into its production. Under this analysis, printing work, done on
special order, and of significant value only to the particular customer, is still a sale.
The purchaser is interested in the product of the services of the printer, not in the
services per se. Similarly, it would seem that contracts for custom-produced
articles, be they intrinsically valuable or not, should be classified as sales when the
product of the contract is transferred.
The Vanderbilt Law Review article, in quoting Snite v Department of Revenue, 398 Ill. 41, 74
N.E.2d. 877 (1947), also establishes the following general rule:
If the article sold has no value to the purchaser except as a result of services
rendered by the vendor, and the transfer of the article to the purchaser is an actual
and necessary part of the services rendered, then the vendor is engaged in the
business of rendering service, and not in the business of selling at retail. If the
article sold is the substance of the transaction and the service rendered is merely
incidental to and an inseparable part of the transfer to the purchaser of the article
3

S.C. Code Ann. § 12-36-910(A) imposes a 5% sales tax. S.C. Code Ann. § 12-36-1110
imposes an additional 1% sales and use tax.

4

South Carolina law defines “tangible personal property” as “personal property which may be
seen, weighed, measured, felt, touched, or which is in any other manner perceptible to the senses.”
S.C. Code Ann. § 12-36-60.
5

With the exception of those services on which South Carolina law specifically imposes the sales
and use tax (i.e. accommodation services, communication services). S.C. Regulation 117-308.
3

sold, then the vendor is engaged in the business of selling at retail, and the tax which
he pays ... [is measured by the total cost of article and services]. If the service
rendered in connection with an article does not enhance its value and there is a fixed
or ascertainable relation between the value of the article and the value of the service
rendered in connection therewith, then the vendor is engaged in the business of
selling at retail, and also engaged in the business of furnishing service, and is
subject to tax as to the one business and tax exempt as to the other.
In this case, there are two separate transactions. First, the transaction between XYZ and the
customer involving the installation of insulation by XYZ into the customer’s building, where XYZ
uses temporary scaffolding in furtherance of its installation services. Second, the transaction
between ABC and XYZ, where ABC delivers, assembles, disassembles, and removes scaffolding
from XYZ’s job sites in exchange for a consideration. The Department must determine if these
transactions were the rental of tangible personal property subject to sales tax or nontaxable
services.
I.

Transactions between XYZ and the customer

In this first transaction, the customer hired XYZ to install insulation in, on, or around the
customer’s property. While XYZ contracted with ABC for the delivery, assembly, disassembly,
and removal of scaffolding at the customer’s property, the customer did not rent the scaffolding
equipment and would not be subject to sales tax for the use of the scaffolding. 6 XYZ’s use of the
scaffolding, like other tangible personal property used in the installation of the insulation, was
incidental to the purpose of the transaction between XYZ and the customer.
Furthermore, South Carolina law defines a “sale at retail” or a “retail sale” to include “sales to
contractors for use in the performance of construction contracts.” S.C. Code Ann. § 12-36110(1)(e). South Carolina law also states that “building materials when purchased by . . .
contractors . . . for use in adding to, repairing or altering real property are subject to either the sales
or use tax at the time of purchase by such . . . contractor.” S.C. Regulation 117-314.2. In such
instances, the contractor is considered to be the user and consumer of the item purchased, making
that transaction subject to the sales tax. This further supports the conclusion that XYZ’s use of
scaffolding in the performance of its installation services is not a rental of tangible personal
property to the customer, as it is XYZ who is the user and consumer of the scaffolding and not the
customer.
II.

Transactions between ABC and XYZ

South Carolina law defines a “sale” as “any transfer, exchange, or barter, conditional or otherwise,
of tangible personal property for a consideration.” S.C. Code Ann. § 12-36-100. The Department
previously determined businesses that temporarily provide portable toilets to others for a fee are
renting tangible personal property because such transactions constitute the transfer of tangible
personal property for a consideration. See S.C. Revenue Rulings #09-5 and #19-10.

6

If, however, there were any transactions where the customer did not hire XYZ for insulation
installation services and strictly engaged in a transaction with XYZ for the rental of scaffolding,
such transaction would be subject to sales tax.
4

In Boggero v. South Carolina Department of Revenue, the South Carolina Court of Appeals
affirmed the Administrative Law Court’s (“ALC”) decision, holding that the “true object” of a
transaction involving a portable toilet is the rental of tangible personal property as opposed to the
furnishing of a nontaxable service. See Boggero v. S.C. Dep’t of Revenue, 414 S.C. 277, 777
S.E.2d 842 (Ct. App. 2015). In the ALC decision, the Administrative Law Judge used the “true
object” test to determine that, without the portable toilet units, there would be no need for any
services, thus the services provided along with the unit were merely incidental to the transaction—
the lease or use of the unit. Eugenia Boggero, d/b/a Boggero’s Portable Toilets v. South Carolina
Dep’t of Revenue, 2014 WL 104827, at 6 (S.C. Admin Law Ct., January 6, 2014).
In this case, ABC temporarily provided scaffolding to XYZ for a fee. Therefore, ABC rented
tangible personal property to XYZ, as it transferred tangible personal property to XYZ for a
consideration. ABC also provided services in the form of delivery, assembly, and disassembly of
the scaffolding at XYZ’s job sites. The need for such services does not exist without the
scaffolding itself. Accordingly, the services for constructing and deconstructing the scaffolding
were merely incidental to, and an inseparable part of, the transfer of the scaffolding from ABC to
XYZ. The “true object” of the transactions between ABC and XYZ was the rental of tangible
personal property, i.e. scaffolding, and is subject to sales tax.
The fact that neither ABC nor XYZ characterized the consideration as a rental fee is irrelevant in
determining the “true object” of the sale. As noted by the lower court in Boggero, “the
characterization of the transaction through mere nomenclature cannot be controlling as to whether
there is a retail sale of tangible personal property,” but rather the application of the “true object”
test is determinative. Boggero’s Portable Toilets, at 7. The “true object” of the transactions at
issue is the rental of tangible personal property, regardless of whether ABC ever charged a rental
fee.
a. Tax Base
Because these transactions are subject to sales tax, the Department must next determine what is
included in calculating the sales tax for these transactions.
Gross proceeds of sales, as defined above, include “the proceeds from the sale of tangible personal
property without any deduction for . . . the cost of materials, labor, or service” or “any other
expenses.” S.C. Code Ann. §§ 12-36-90(1)(b)(ii) and (vii). South Carolina law defines “sales
price” as “the total amount for which tangible personal property is sold, without any deduction for
the cost of the property sold, the cost of the materials used, labor or service cost, interest paid,
losses, or any other expenses.” S.C. Code Ann. § 12-36-130. Accordingly, the tax base upon
which South Carolina law imposes the sales tax includes the value proceeding or accruing from
the rental of tangible personal property, without any deduction for the cost of materials, labor,
services, or any other expenses.
In the case of Meyers Arnold, Inc. v. South Carolina Tax Commission, the Court of Appeals
determined that lay away fees Meyers Arnold charged to its customers when making lay away
sales were a part of the gross proceeds of sales and subject to sales tax. Meyers Arnold, Inc. v. S.C.
Tax Com’n, 285 S.C. 303, 328 S.E.2d 920 (Ct. App. 1985). In making the connection between the
lay away sales and the lay away fees, the Court stated that, “but for the lay away sales, Meyers
Arnold would not receive the lay away fees.” Id. at 307.
5

In this case, but for the rental of the scaffolding materials themselves, there would be no charges
for labor wages, services, charges, overtime pay, other hourly services, or any other expenses that
proceed or accrue from the scaffolding rentals. The entire gross proceeds of sales for the rental of
scaffolding is subject to sales tax, without any deduction for cost of materials, labor, service, or
any other expenses. 7
b. Credit for Sales Taxes Previously Paid
The last item to address is whether South Carolina law allows a credit for the sales taxes ABC
previously paid on the original purchase of the scaffolding materials.
South Carolina law allows taxpayers to receive a credit for sales tax previously paid only in the
case of out-of-state sales. In such a case, the credit applies to use taxes and not to sales taxes. See
S.C. Code Ann. § 12-36-1310(C). However, South Carolina law does not provide a credit for sales
taxes previously paid under the facts and circumstances presented in this case.
ABC claims to have been a contractor, not a retailer, for the transactions at issue. As a purported
contractor, ABC paid sales tax on its original purchase of the scaffolding materials. (See S.C.
Regulation 117-314.2) (stating that a contractor must pay sales tax at the time of purchasing any
building materials for use in adding to, repairing, or altering real property)).
A “contractor” is “any person, firm, association, or corporation making repairs, or additions to real
property” and is deemed to be the user and consumer of the materials purchased in furtherance of
repairing or altering real property. Id. Based on the information provided, ABC did not make
any repairs, additions, or alterations to real property, nor did it use or consume the scaffolding
materials in furtherance of repairing or altering real property. Rather, ABC rented tangible
personal property, scaffolding materials, to XYZ for a consideration. ABC was a retailer, not a
contractor. See S.C. Code Ann. § 12-36-70(1)(c) (stating that the term “retailer” includes, among
other things, every person “renting, leasing, or otherwise furnishing tangible personal property for
a consideration”).

7

S.C. Regulation 117-313.3 provides that “charges for installation incident to the sale of tangible
personal property” are not subject to tax. However, the seller must separately state such charges
from the sales or rental price of the property on the billing to customers. Id. Further, the seller’s
records must show the reasonableness of these charges in relation to the sales or rental price of the
property. Id. In determining the reasonableness of the installation charges, the Department will
consider, on a case-by-case basis, whether the charges are issued in a way that would reduce the
tax base beyond what is intended by the Regulation. Factors the Department will take into account
to make this determination include, but are not limited to: (1) whether the charges seek to reduce
the tax base by eliminating the majority or the entirety of the sales or rental price of the tangible
personal property; and (2) whether the charges seek to remove from the tax base charges which
are specifically included in the gross proceeds of sales, i.e., cost of materials, labor, services, and
any other expenses. Lastly, the Department does not consider tangible personal property which is
not affixed to real property “installed” for purposes of Regulation 117-313.3. See Tronco’s
Catering, Inc., v. S.C. Dep’t of Revenue, 2010 WL 5781622 (S.C. Admin Law Ct., April 12, 2010);
see also S.C. Technical Advice Memorandum #89-9.
6

Based on the facts provided, ABC operated as a retailer renting tangible personal property. ABC,
as a retailer, had the option to present a resale certificate to the seller at the time of purchase,
relieving the seller of its liability to remit the sales tax on the scaffolding materials; thereby shifting
the liability to ABC. See S.C. Code Ann. § 12-36-950. Failing to utilize a resale certificate on its
original purchases, however, does not grant ABC or any other taxpayer a credit for sales tax
liability determined after the fact. 8
CONCLUSION:
Based on the above and the facts represented to the Department, it is the Department’s position
that the true object of the transaction between XYZ and the customer was for the installation of
insulation and not for the rental of scaffolding; therefore, XYZ’s use of scaffolding in furtherance
of installing insulation is not a rental of tangible personal property subject to sales tax. It is also
the Department’s position that the transfer of scaffolding materials from ABC to XYZ for a
consideration, the charges for which were subsequently passed on to XYZ’s customers, was a
rental of tangible personal property and subject to sales tax. Furthermore, the entire gross proceeds
of these rental sales are subject to sales tax, without any deduction for cost of materials, labor,
service, or any other expenses.
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/W. Hartley Powell
W. Hartley Powell, Director
September 15
, 2025
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.

8

While the Department does not guarantee a refund claim will be accepted, nothing herein
prohibits ABC from seeking a refund of sales taxes paid on its original purchases, so long as the
refund claim falls within the statutory time period set forth in S.C. Code Ann. § 12-54-85(F).
7