Did a West Virginia resident owe South Carolina sales tax on a car bought from a South Carolina dealer, and could the buyer claim a refund of tax paid?

Plain-English summary

South Carolina Private Letter Ruling 88-16 concluded that a West Virginia resident's automobile purchase from a South Carolina dealer was not subject to South Carolina sales tax.

Section 12-35-555 based tax on a nonresident vehicle sale on the sales tax that the purchaser's home state would impose. West Virginia exempted titled motor vehicles from sales tax, even though it separately charged a 5% privilege tax when issuing the title.

The South Carolina dealer had collected $280 based on an incorrect state chart. The buyer could not obtain the refund directly from the Tax Commission because the dealer—not the customer—was the taxpayer legally liable for South Carolina sales tax. The buyer could claim only if the dealer assigned its refund right to him in writing.

The vehicle purchase

Mr. X bought an automobile from a South Carolina dealer for $5,600 on March 8 of the ruling year. The dealer added $280 of sales tax, calculated at 5%.

The dealer relied on a chart supplied by the Tax Commission. The chart, based on questionnaires completed by other states' taxing authorities, said West Virginia imposed 5% sales tax on motor vehicles.

When Mr. X titled the car in West Virginia, he learned that West Virginia did not impose sales tax on titled motor-vehicle sales. Instead, it imposed a 5% privilege tax on issuing the certificate of title.

Why South Carolina sales tax was not due

Section 12-35-555 taxed a new or used motor vehicle sold in South Carolina to a nonresident in an amount equal to the sales tax imposed by the purchaser's state of residence, capped at the South Carolina amount.

West Virginia Code section 11-15-9(d), as quoted in the ruling, exempted motor vehicles titled by its motor-vehicle department from sales tax because they were subject to the separate title tax under section 17A-3-4.

The Commission distinguished the title privilege tax from a sales tax. Because West Virginia imposed no sales tax on the vehicle sale, the South Carolina sale was not subject to South Carolina sales tax under section 12-35-555.

Why the buyer could not claim the refund directly

South Carolina's sales tax was imposed on the in-state retailer. The retailer could collect the tax from its customer, but the retailer remained legally liable whether or not it collected the tax.

Section 12-47-440 allowed a taxpayer to seek refund of tax paid erroneously, improperly, or illegally. Section 12-35-150 defined taxpayer as the person liable for the tax.

Because the dealer was the liable taxpayer, only the dealer could claim the refund from the Commission. Mr. X could pursue the refund himself only if the dealer assigned its refund right to him in writing.

What this means for you

South Carolina motor-vehicle dealers

PLR 88-16 required identifying the purchaser state's sales tax, not a differently classified title or registration tax. A state chart did not save the tax when its underlying classification was wrong.

Nonresident vehicle buyers

Paying tax to the dealer did not make the customer the South Carolina taxpayer for refund purposes. The dealer held the direct refund right unless it assigned that right in writing.

Dealership accounting and title teams

The ruling separated three issues: the home state's sales-tax treatment, any separate title tax, and who was legally entitled to request a South Carolina refund.

Refund claimants

The person who bore the economic cost was not necessarily the statutory taxpayer. Refund standing followed legal liability for the tax.

Readers applying the ruling today

PLR 88-16 applied 1988 vehicle-tax and refund rules and West Virginia law then in effect. Current purchaser-state taxes, South Carolina maximum taxes, reciprocal rules, exemption certificates, dealer charts, assignments, and refund procedures must be checked independently.

Common questions

Q: Was the West Virginia buyer's South Carolina car purchase taxable?

A: No. West Virginia did not impose sales tax on titled motor-vehicle sales, so South Carolina tax was not due under the cited nonresident-sale rule.

Q: Did West Virginia impose any vehicle tax?

A: Yes. It imposed a separate 5% privilege tax when issuing the certificate of title.

Q: How much did the dealer collect?

A: The dealer collected $280 on a $5,600 automobile purchase.

Q: Why was the dealer's chart wrong?

A: It treated West Virginia's 5% vehicle charge as sales tax, while West Virginia law classified the charge as a title privilege tax and exempted the sale itself.

Q: Could Mr. X file the refund claim himself?

A: Not without a written assignment. The dealer was the taxpayer entitled to the refund because South Carolina imposed sales-tax liability on the retailer.

Q: Can another dealer or buyer rely on PLR 88-16?

A: No. The ruling states that it applied only to Mr. X's specific facts, had no precedential value, and was not intended for general distribution.

Citations and references

• S.C. Code section 12-35-555 (Supp. 1987) — motor-vehicle sales to nonresidents
• W. Va. Code section 11-15-9(d) — sales-tax exemption for titled motor vehicles
• W. Va. Code section 17A-3-4 — certificate-of-title privilege tax cited in the ruling
• S.C. Code sections 12-35-510, 12-35-610, and 12-35-620 — sales tax, customer collection, and retailer liability
• S.C. Code sections 12-47-440 and 12-35-150 — refund claims and taxpayer definition
• Furman University v. Livingston, 244 S.C. 200, 136 S.E.2d (1964) — refund right limited to the person legally liable, as cited in the ruling
• Slater Corporation v. South Carolina Tax Commission, 280 S.C. 584, 314 S.E.2d 31 (S.C. App. 1984) — assignment authority cited in the ruling
• S.C. Code section 12-3-170 (1976) and SC Revenue Procedure 87-3 — private-letter-ruling authority

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/PLR88-16.pdf

Original ruling text

SC PRIVATE LETTER RULING #88-16

TO:

Mr. X

SUBJECT:

Motor Vehicle Sale to Nonresident
(Sales Tax)

REFERENCE:

S.C. Code Ann. Section 12-35-555 (Supp. 1987)

AUTHORITY:

S.C. Code Ann. Section 12-3-170 (1976)
SC Revenue Procedure #87-3

SCOPE:

A Private Letter Ruling is a temporary document issued to a taxpayer,
upon request, and it applies only to the specific facts or circumstances
related in the request. Private Letter Rulings have no precedential value
and are not intended for general distribution.

Question:

1. Was the sale of an automobile by a South Carolina dealer to a resident of West Virginia
   subject to the State's sales tax (Code Section 12-35-555)?
2. If the tax was erroneously paid, then is Mr. X entitled to a refund from the Tax
   Commission?
   Facts:
   S.C. Code Section 12-35-555 reads, in part:
   The sale in this State of new or used motor vehicles as defined in Section 56-1-10 is
   taxable for purposes of this article in an amount equal to the sales tax which would be
   imposed on the sale in the purchaser's state of residence. The tax on the sale may not
   exceed the tax that would other-wise be imposed under this article.
   On March 8, of this year, Mr. X purchased an automobile from a South Carolina dealer for
   $5,600, plus $280 sales tax. The dealer collected the tax based upon a chart supplied by the Tax
   Commission. The chart was prepared based upon the results of a questionnaire completed by the
   taxing authorities of the various states. The chart provided to the dealers indicates that the State
   of West Virginia does impose a sales tax of 5% on sales of motor vehicles. Therefore, based

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upon the language in Section 12-35-555 and the aforementioned chart, the dealer charged Mr. X
$280 sales tax. This appeared to be "an amount equal to the sales tax which would be imposed
on the sale in the purchaser's state of residence."
Upon titling his automobile in West Virginia, Mr. X was advised that the State of West Virginia
does not impose a sales tax on sales of motor vehicles. However, that state does impose a 5%
tax for the privilege of titling a motor vehicle.
Based upon the above facts, Mr. X is now requesting a refund of the $280 paid to the South
Carolina dealer.
Discussion:

1. An examination of the Code of Laws of West Virginia reveals that Section 11-15-9(d)
   does provide an exemption from sales tax for:
   Sales of motor vehicles which are titled by the department of motor vehicles and
   which are subject to the tax imposed by section four, article three, chapter seventeena [Section 17A-3-4] of the code;
   The West Virginia State Reporter of Commerce Clearing House, paragraph 50-151, reads, in
   part:
   CERTIFICATE OF TITLE FEE-PRIVILEGE TAX.-A tax is imposed on the issuance
   of a certificate of title equal to 5% of the actual value of a motor vehicle at the time of
   certification.
2. South Carolina's sales tax is imposed at Code Section 12-35-510, and reads, in part:
   ....there is levied.....upon every person engaged or continuing within this State in the
   business of selling at retail........, an amount equal to four percent...... (emphasis
   added)
   In other words, this state's sales tax is imposed on in-state re-tailers. Code Section 12-35610 allows the retailer to collect the tax from his customer; however, the retailer is liable
   for the tax, whether collected from the customer or not (Code Section 12-35-620).
   Code Section 12-47-440 allows for refunds of taxes erroneously paid. That section reads,
   in part:
   ..., whenever it shall appear to any taxpayer that any.....tax.....has been erroneously,
   improperly or illegally....paid..., the taxpayer, may make application to the
   Commission to abate or refund.....such.... tax (emphasis added).
   The word "taxpayer" is defined at Code Section 12-35-150 as, "any person liable for
   taxes under this chapter (emphasis added)."

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In Furman University v. Livingston, 244 S.C. 200, 136 S.E. 2d (1964), the Supreme
Court of South Carolina ruled, "[t]he right....to sue for a refund of taxes erroneously,
improperly or illegally assessed is restricted to those on whom the tax liability is
imposed." That case concerned the state's admissions tax, which is imposed on the
purchaser.
Conclusion(s):

1. As the State of West Virginia does not impose a sales tax on sales of motor vehicles, the
   sale in question was not subject to the South Carolina sales tax.
2. Because Mr. X is not the taxpayer, he is not entitled to a refund from the Commission.
   Only the S.C. dealer is entitled to the refund, unless the dealer assigns his right to the
   refund, in writing, to Mr. X. (See Slater Corporation v. South Carolina Tax Commission,
   280 S.C. 584, 314 S.E. 2d 31, (S.C. App. 1984) concerning assignments)

SOUTH CAROLINA TAX COMMISSION
s/S. Hunter Howard Jr.
S. Hunter Howard, Jr., Chairman
s/John M. Rucker
John M. Rucker, Commissioner
s/A. Crawford Clarkson Jr.
A. Crawford Clarkson, Jr., Commissioner

Columbia, South Carolina
, 1988
June 29

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