When were South Carolina hotel stays for government, diplomatic, credit-union, nonprofit, or Red Cross travelers exempt?

Plain-English summary

South Carolina Revenue Ruling #04-1 gave hotels a historical guide to lodging for government employees, foreign diplomats, federal-credit-union employees, nonprofit employees, and American Red Cross employees. The recurring question was who actually purchased and paid for the room.

A federal-government, federally chartered credit union, or Red Cross stay was exempt when the organization was billed directly, a centrally billed organizational card was used, or payment came by its check. The stay was taxable when the employee paid and was reimbursed later.

State-government employee accommodations were taxable regardless of whether the employee or state paid. Foreign-diplomat treatment depended on the Office of Foreign Missions card and its restrictions. Most nonprofit employee stays were taxable; the ruling described a narrow direct-payment exemption for an employee of a qualifying charitable hospital predominantly serving children without charge.

The ruling covered South Carolina accommodations tax and local-option sales taxes collected by the Department. It did not address local accommodations taxes collected directly by a county.

RR 09-2 expressly superseded RR 04-1, and later rulings updated the card programs and exemption reference again.

What this means for you

Hotels and lodging operators

Official travel or an exempt employer did not automatically exempt the room. The billing account, direct purchaser, payment method, exemption card, and documentation controlled.

Government and nonprofit travelers

Paying personally and seeking reimbursement later generally left the stay taxable under this ruling. Direct organizational payment was central to the federal, credit-union, and Red Cross exemptions.

Tax professionals

Separate Department-administered state and local-option taxes from county-collected local accommodations taxes, which this ruling did not decide.

Common questions

Q: Was a federal employee's official hotel stay automatically exempt?
A: No. It was exempt when the federal government was the direct purchaser; employee payment followed by reimbursement was taxable.

Q: Were state-government employee stays exempt?
A: No. The ruling treated them as taxable regardless of who paid.

Q: Were all nonprofit employee stays exempt?
A: No. The ruling described only a narrow qualifying children's-hospital category; other nonprofit employee lodging was taxable.

Q: Is RR 04-1 current?
A: No. RR 09-2 expressly superseded it, and later rulings updated the guidance again.

Citations and references

• S.C. Code Ann. § 12-36-920 — accommodations and additional guest charges
• S.C. Code Ann. § 12-36-2120(1) — diplomatic and other constitutionally protected sales
• S.C. Code Ann. § 12-36-2120(2) — federal-government purchases
• S.C. Code Ann. § 12-36-2120(41) and (47) — nonprofit-related exemptions discussed by the ruling
• SC Revenue Ruling 09-2 — expressly superseded RR 04-1
• SC Revenue Ruling 19-7 — later government, diplomat, and similar-employee guidance

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR04-1.pdf
• Official superseding RR 09-2 PDF: RR09-2.pdf
• Official later RR 19-7 PDF: RR19-7.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P. O. Box 125, Columbia, South Carolina 29214
Website Address: http://www.sctax.org

SC REVENUE RULING #04-1

SUBJECT:

Accommodations Furnished to Government Employees, Foreign
Diplomats, and Nonprofit Organization Employees
(Sales Tax)

EFFECTIVE DATE: Applies to all periods open under statute.
REFERENCES:

S. C. Code Ann. Section 12-36-920 (Supp. 2000)
S. C. Code Ann. Section 12-36-2120 (Supp. 2000)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (Supp. 2000)
S. C. Code Ann. Section 1-23-10(4) (Supp. 2000)
SC Revenue Procedure #03-1

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the public and
to Department personnel. It is a written statement issued to apply
principles of tax law to a specific set of facts or a general category of
taxpayers. A Revenue Ruling is an advisory opinion; it does not have
the force or effect of law and is not binding on the public. It is,
however, the Department’s position and is binding on agency personnel
until superseded or modified by a change in statute, regulation, court
decision, or advisory opinion.

Background:
Special rules exist for sales tax imposed on accommodations furnished to certain government
employees, foreign diplomats, and nonprofit organization employees. Questions often arise about
the taxability of specific transactions involving these types of employees.
The purpose of this advisory opinion is to provide a reference tool to assist the hospitality
industry in determining the proper taxation of accommodations to the following persons:
1.
2.
3.
4.
5.

Government employees
Federal credit union employees
Foreign diplomats
Nonprofit Organization employees
American Red Cross employees

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South Carolina’s sales tax on accommodations is 7% (composed of a 5% State tax and a 2%
accommodations tax.) The transactions discussed in this document pertain to the 7%
accommodations tax and to any local option sales taxes collected by the Department. This
document, however, does not address any local taxes on accommodations that may be due and
collected directly by a county.
The Department has issued more detailed advisory opinions concerning its position on these
issues that should be referred to for additional information. As of the date of this advisory
opinion, the most recently published advisory opinions pertaining to this issue are:

1. SC Revenue Advisory Bulletin #02-3 – Federal Employee Credit Cards
2. SC Revenue Procedure #03-03 – Exemption Certificates – Sales by Certain Nonprofit
   Organizations
3. SC Information Letter #03-25 – Foreign Diplomats
   Law:
   Code Section 12-36-920 provides for a tax on accommodations and additional guest charges. It
   provides:
   (A) A sales tax equal to seven percent is imposed on the gross proceeds derived from the
   rental or charges for any rooms, campground spaces, lodgings, or sleeping
   accommodations furnished to transients by any hotel, inn, tourist court, tourist camp,
   motel, campground, residence, or any place in which rooms, lodgings, or sleeping
   accommodations are furnished to transients for a consideration. This tax does not apply
   where the facilities consist of less than six sleeping rooms, contained on the same
   premises, which is used as the individuals place of abode. The gross proceeds derived
   from the lease or rental of sleeping accommodations supplied to the same person for a
   period of ninety continuous days are not considered proceeds from transients. The tax
   imposed by this subsection (A) does not apply to additional guest charges as defined in
   subsection (B).
   (B) A sales tax of five percent is imposed on additional guest charges at any place where
   rooms, lodgings, or accommodations are furnished to transients for a consideration,
   unless otherwise taxed under this chapter. The term additional guest charges includes,
   but is not limited to:
   (1) room service;
   (2) amenities;
   (3) entertainment;
   (4) special items in promotional tourist packages;
   (5) laundering and dry cleaning services;
   (6) in-room movies;
   (7) telephone charges;
   (8) rentals of meeting rooms; and
   (9) other guest services.

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(C) Real estate agents, brokers, corporations, or listing services required to remit taxes
under this section shall notify the department if rental property, previously listed by them,
is dropped from their listings.
(D) When any business is subject to the sales tax on accommodations and the business
has more than one place of business in the State, the licensee shall report separately in his
sales tax return the total gross proceeds derived from business done within and without
the corporate limits of municipalities. A taxpayer who owns or manages rental units in
more than one county or municipality shall report separately in his sales tax return the
total gross proceeds from business done in each county or municipality.
(E) The taxes imposed by this section are imposed on every person engaged or continuing
within this State in the business of furnishing accommodations to transients for
consideration.
Code Section 12-36-2120 provides certain exemptions from sales tax. These exemptions include:

1. Exemption for foreign diplomats. Code Section 12-36-2120(1) exempts sales of tangible
   personal property which the State is prohibited from taxing by the Constitution or laws of the
   United States of America or this State;
2. Exemption for federal government, including federally chartered credit unions and the
   American Red Cross. Code Section 12-36-2120(2) exempts tangible personal property sold
   to the federal government.
3. Exemption for nonprofit organizations. Code Section 12-36-2120(41) exempts items sold by
   organizations under Section 12-37-220A(3) and (4) and B(5), (6), (7), (8), (12), (16), (19),
   (22), and (24), if the net proceeds are used exclusively for exempt purposes and no benefit
   inures to any individual. Code Section 12-36-2120(47) exempts tangible personal property
   sold to charitable hospitals predominately serving children exempt under Section 12-37-220,
   where care is provided without charge to the patient.
   Taxable versus Exempt Accommodations for Certain Persons:
   I. Federal Government Employees
   General Rule. The taxability of accommodations furnished to a federal government employee
   depends upon whether the sale is between the retailer and the employee or between the retailer
   and the federal government.
   The general rule is a follows:
4. Exempt Sale. The sale to the federal government is exempt from sales tax if: (1) the federal
   government is billed directly for the transaction, (2) the federal employee uses a credit card

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that is billed directly to the federal government, or (3) the federal employee pays with a
federal government check.

2. Taxable Sale. The sale to the federal government employee is subject to sales tax when the
   employee pays for the charge and is reimbursed by the federal government.
   Credit Cards Used by Federal Government Employees. The following briefly explains the
   credit cards that may be used by a federal employee for accommodations and the applicability of
   sales tax on these accommodations.
3. Travel Cards. This card is used at hotels, restaurants, and similar travel-related venues. The
   taxability of the purchase depends on whether the employee or the federal government is
   billed as described below:
   a. Taxable Sale. Travel cards that are billed to the employee are subject to sales tax. These
   cards begin with the following numbers:

4486 and the sixth digit is 1, 2, 3 or 4;

4716 and the sixth digit is 1, 2, 3 or 4; or

5568 and the sixth digit is 1, 2, 3 or 4.

b. Exempt Sale. Travel cards that do not contain the above number sequences are billed
directly to the federal government. Purchases with such cards are exempt from sales tax.
2. Integrated or combined cards. This card begins with account number 5568-16 and is used
for both taxable and exempt purposes. The merchant’s code tells the bank whether to bill
federal government or the employee. Currently, this card is used only by the Department of
the Interior.
a. Taxable Sale of lodging and restaurant food. These sales are billed to the employee
and are subject to sales tax, with one exception for employees of the Bureau of
Reclamation. Sales to an employee from the Bureau of Reclamation using an integrated
card with account number 5568-16 are exempt from sales tax.
b. Exempt Sale of office supplies and related tangible goods. These sales are billed
directly to the federal government and are exempt from the tax.
II. Sales to State Government Employees
Sales of accommodations to state government employees are subject to sales tax regardless of
whether the state government or the employee pays directly for the charges.
III. Sales to Federal Credit Union Employee
South Carolina Attorney General Opinion #S-OAG-59 concluded that federally chartered credit
unions are instrumentalities of the federal government. Accordingly, sales of accommodations
and tangible personal property to a federal credit union are exempt from sales tax.

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General Rule. The general rule in determining the taxability of accommodations furnished to a
federal credit union employee depends upon: (1) whether the charges are paid directly by the
employee of the federal credit union or paid directly by the federal credit union and (2) whether
the employee is an employee of a federal credit union or an association.
The general rule is a follows:

1. Exempt Sale. The sale to the federal credit union is exempt from sales tax if: (1) the federal
   credit union is billed directly for the transaction, (2) the federal credit union employee uses a
   credit card that is billed directly to the federal credit union, or (3) the federal credit union
   employee pays with a federal credit union check.
   Note: The person being furnished accommodations must be an employee of the federal credit
   union to come within this exemption. For example, if the federal credit union employee
   works for an association that represents various federal credit unions and the association pays
   the charges, then the accommodations are taxable since the association is not a federal credit
   union.
2. Taxable Sale. The sale to the federal credit union employee is subject to sales tax when the
   employee pays for the charge and is reimbursed by the federal credit union.
   Recordkeeping. If a person from a federal credit union presents a credit card, the retailer may
   consider asking for proof from the guest that the federal credit union will be billed by the credit
   card company and the federal credit union will pay the bill directly.
   IV. Foreign Diplomats
   General Rule. Sales to foreign officials are exempt from the sales tax in accordance with the
   type of card issued by, and the level of exemption authorized by, the Office of Foreign Mission.
   The exemption is only valid for the person whose photo appears on the card. Vendors may ask
   to see additional forms of identification, such as diplomatic I.D., or driver’s license.
   Exemption Cards. The Office of Foreign Missions issues two different types of tax exemption
   cards to eligible foreign officials:
3. Cards for personal purchases. This card is used for exemption from state and local sales,
   restaurant, lodging, and similar taxes normally charged to a customer, and may be used only
   for the personal use of the bearer whose picture appears on the front of the card.
4. Cards for mission or official business. This card is issued to embassies, consulates, and
   international organizations for official purchases only and for the sole benefit of the mission
   identified on the face of the card. All purchases must be made in the name of the mission and
   paid for by mission check or credit card (not cash or personal check). Personal purchases are
   prohibited.

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The tax exemption card contains the individual’s name, photograph, mission employed by, an
expiration date, and a protocol identification number for identification purposes. Each card will
have one of two different levels of sales and use tax exemption and is indicated by the color of
the card and the written explanation in the colored box. A card with a blue stripe exempts the
bearer from all state and local taxes nationwide on all personal and official purchases. A card
with a yellow stripe allows a full tax exemption on all personal and official purchases except
restricted categories or amounts identified on the face of the card. The tax exemption card,
however, is not valid for exemption from taxes on telephones, other utilities, or gasoline
purchases.
Recordkeeping. Retailers making sales to foreign officials are required to record the protocol
identification number from the tax exemption card on the invoice, bill of sale, cash register tape,
or other written evidence of the transaction.
V. Nonprofit Organizations
Taxable Sale. The sale of accommodations to employees of a nonprofit organization is subject
to sales tax regardless of how the transaction is billed, except as noted below under the “exempt
sale” section.
Note: A qualifying nonprofit organization exempt under Section 12-37-220A(3) and (4) and
B(5), (6), (7), (8), (12), (16), (19), (22), and (24) is exempt from sales tax only on purchases that
are to be resold by the nonprofit organization. Since the nonprofit organization is considered to
be purchasing the accommodations for its own use, and not for resale, the sales of
accommodations to a nonprofit organization and employees of the nonprofit organization listed
in Code Section 12-36-2120(41) are subject to sales tax.
Exempt Sale. The sale of accommodations to an employee of a charitable hospital
predominately serving children exempt under Section 12-37-220, where care is provided without
charge to the patient as provided in Code Section 12-36-2120(47) is exempt from sales tax if: (1)
the qualifying charitable hospital is billed directly for the transaction, (2) the qualifying
charitable hospital employee uses a credit card that is billed directly to the hospital, or (3) the
nonprofit employee pays for the charge with the hospitals check.
VI. Sales to American Red Cross Employee
The American Red Cross is an instrumentality of the United States government. See Department
of Employment et.al. v. United States, 385 U.S. 355 (1966). Accordingly, sales of
accommodations and tangible personal property to the American Red Cross are exempt from
sales tax.
General Rule. The general rule in determining the taxability of accommodations furnished to an
American Red Cross employee depends upon whether the charges are paid directly by the
employee of the American Red Cross or paid directly by the American Red Cross.

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The general rule is a follows:

1. Exempt Sale. The sale to the American Red Cross is exempt from sales tax if: (1) the
   American Red Cross is billed directly for the transaction, (2) the American Red Cross
   employee uses a credit card that is billed directly to the American Red Cross, or (3) the
   American Red Cross employee pays with an American Red Cross check.
2. Taxable Sale. The sale to the American Red Cross employee is subject to sales tax when the
   employee pays for the charge and is reimbursed by the American Red Cross.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Burnet R. Maybank III
Burnet R. Maybank III, Director
February 9
, 2004
Columbia, South Carolina

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