Did PLR 98-4 exempt propane and a filled tank sold for a barbecue grill at a South Carolina residence?

Plain-English summary

South Carolina Private Letter Ruling 98-4 concluded that propane sold for an outdoor barbecue grill at a person's residence was exempt from sales and use tax under the residential-fuel exemption.

The exemption applied whether the customer brought a tank for refilling, exchanged a tank for a filled one, or bought a filled tank without bringing one. When XYZ provided a tank filled with the propane being sold, the tank was incidental to the sale and delivery of the exempt propane. Separately stating the tank charge did not change the result.

The location and what was sold mattered. Propane for a grill anywhere other than a residence was taxable, along with the filled tank. An empty tank sold by itself was also taxable because it was not being used as a container incident to the sale and delivery of propane.

Transactions described

• Customer's tank refilled for a residential grill: exempt.
• Tank exchanged for a filled tank for residential use: exempt as a propane sale with an incidental container.
• Filled tank purchased for a residential grill: the full transaction was exempt even if the tank charge was separately stated.
• Propane and tank for a nonresidential grill: taxable.
• Empty tank sold without propane: taxable.

Common questions

Q: Why did outdoor grilling count as residential use? The ruling treated residential purposes as the space or area connected with the residence, not only the inside of the house.

Q: Did the customer need documentation? The ruling identified Department Form ST-8 as an exemption certificate purchasers could use to certify residential use.

Q: Did separately stating the tank charge make it taxable? No, when the filled tank was incidental to delivering exempt residential propane.

Q: Can another propane seller rely on PLR 98-4? No. The ruling limits reliance to XYZ and the transactions described and says it has no precedential value.

Citations and references

• S.C. Code Ann. § 12-36-2120(33) (combustible material used for residential purposes)
• S.C. Code Ann. § 12-36-2120(14) and § 12-36-120 (containers used incident to sale and delivery)
• S.C. Regulation 117-177 (residential purposes)
• Attorney General Opinion #67 (August 23, 1979) and SC Technical Advice Memorandum #87-5 (residential area discussed)

Subject

Propane Gas - Residential Use

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/PLR98-4.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P.O. Box 125, Columbia, South Carolina 29214

SC PRIVATE LETTER RULING #98-4

TO:

XYZ

SUBJECT:

Propane Gas - Residential Use
(Sales and Use Tax)

DATE:

December 15, 1998

REFERENCE:

S. C. Code Ann. Section 12-36-2120(33) (Supp. 1997)
S. C. Code Ann. Section 12-36-2120(14) (Supp. 1997)
S. C. Code Ann. Section 12-36-120 (Supp. 1997)
SC Regulation 117-177

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (Supp. 1997)
SC Revenue Procedure #97-8

SCOPE:

A Private Letter Ruling is an official advisory opinion issued by the
Department of Revenue to a specific person.

NOTE:

A Private Letter Ruling may only be relied upon by the person to whom it is
issued and only for the transaction or transactions to which it relates. A
Private Letter Ruling has no precedential value.

Questions:
Is the sale of propane gas by XYZ for use in an outdoor barbecue grill exempt from the sales and
use tax under Code Section 12-36-2120(33)?
Conclusions:
The sale of propane gas by XYZ for use in an outdoor barbecue grill at a person’s residence is
exempt from the sales and use tax under Code Section 12-36-2120(33).
If a tank is provided by XYZ as part of the sale, then the tank (when filled with the propane that
is being sold) is incidental to the sale of the propane. As such, the entire sale by XYZ of the
propane gas and tank for use in an outdoor barbecue grill at a person’s residence is exempt,
regardless of whether or not the charge for the tank is separately stated on the bill to the
customer.
The Department of Revenue provides an “Exemption Certificate,” Form ST-8, that can be used
by purchasers to certify to the seller, XYZ, that the propane gas will be used for “residential
purposes.”
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Note: The sale of propane gas by XYZ for use in an outdoor barbecue grill at any location other
than a residence is subject to the sales and use tax. As such, the entire sale by XYZ of the
propane gas and tank for use in an outdoor barbecue grill at any location other than a residence is
subject to the sales and use tax. In addition, the sale of an empty tank is subject to the tax since
the tank is not being used incident to the sale and delivery of propane.
Facts:
XYZ (“XYZ”) is a leading distributor of propane and related accessories, parts, and service.
XYZ will sell propane in one of three ways:

1. The customer brings his own tank to be refilled. At the present time, the sale price to
   the customer is approximately $7.
2. The customer brings his own tank and exchanges the tank for another one filled with
   propane under a new sales program named “PPX.” The PPX program is a tank exchange
   program, exclusively using the 20 lb. tanks commonly used in outdoor barbecue grill. At
   the present time, the sale price to the customer is approximately $16.
3. The customer does not bring a tank and purchases a tank filled with propane. At the
   present time, the sale price to the customer is approximately $30.
   Discussion:
   Code Section 12-36-2120(33) exempts from the sales and use tax the gross proceeds of sales and
   sales price of:
   electricity, natural gas, fuel oil, kerosene, LP gas, coal, or any other combustible heating
   material or substance used for residential purposes. Individual sales of kerosene of
   twenty gallons or less by retailers are considered used for residential heating purposes;
   SC Regulation 117-177 defines the term “residential purposes” to mean:
   any space or area occupied by one or more individuals with the intent that such space or
   area serves as a residence, house, dwelling or abode.
   Attorney General's Opinion #67, dated August 23, 1979, defines the term "residential purposes"
   as meaning "any space or area occupied by one or more individuals with the intent that such
   space or area serve as a residence, house, dwelling or abode (emphasis added)."
   The Attorney General's Office relied upon the definition's found in Webster's New World
   Dictionary, 2d Ed. (1978) for "residential" and "purpose". "Residential" is defined as "of or
   connected with residence." "Purpose" is defined as "something one intends to get or do;
   intention, aim....with a specific end in view."

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Furthermore, it was held that the term "residence" should be viewed as a place not used for
business purposes.
SC Technical Advice Memorandum #87-5 concluded that the term "residential" pertains to not
only the house in which one resides, but encompasses the entire "space or area" which is
"connected with" the house.
Therefore, it is concluded that the gross proceeds of sales of propane gas for use in an outdoor
barbecue grill at a person=s residence is exempt from sales tax pursuant to Code Section
12-36-2120(33). The Department of Revenue provides an “Exemption Certificate,” Form ST-8,
that can be used by purchasers to certify to the seller that the propane gas will be used for
“residential purposes.”
The next issue concerns the taxability of the tanks.
With respect to containers, the law provides an exclusion and an exemption. Code Section 1236-120 defines the terms “wholesale sale” and “sale at wholesale” to mean, in part, the sale of:
materials, containers, cores, labels, sacks, or bags used incident to the sale and delivery
of tangible personal property ....
Code Section 12-36-2120 exempts from the tax:
(14) wrapping paper, wrapping twine, paper bags, and containers, used incident to the
sale and delivery of tangible personal property.
As such, South Carolina considers the vendor to be the user or consumer of the container when
such is used incident to the sale and delivery of the item being sold. Purchases of such containers
by XYZ are therefore not subject to the tax.
Based on the above, XYZ is selling propane and using the tank incident to the sale and delivery
of the propane. Therefore, the entire sale by XYZ of propane gas for use in an outdoor barbecue
grill at a person’s residence is exempt, regardless of whether or not the charge for the tank is
separately stated on the bill to the customer. However, it should be noted that the sale of an
empty tank by XYZ is subject to the tax since the tank is not being used incident to the sale and
delivery of propane.

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