Was a retailer's fuel surcharge for delivering taxable merchandise in its own vehicle subject to South Carolina sales and use tax?

Plain-English summary

South Carolina Revenue Ruling 05-1 held that a fuel surcharge a retailer charged for delivering taxable merchandise in its own vehicle was part of the taxable gross proceeds or sales price.

The statutory tax base included the total value received from the sale without deduction for the seller's materials, labor, services, losses, or other expenses. Regulation 117-310(d) likewise said no invoicing method allowed a retailer using its own transportation to deduct delivery costs.

The ruling gave two examples. A $1,000 taxable sale with a $50 delivery charge and $25 fuel surcharge had a $1,075 tax base. A $1,000 sale with no ordinary delivery charge but a $25 fuel surcharge had a $1,025 tax base.

RR 22-12 later expressly superseded this ruling. It retained the core result for taxable sales and added that the surcharge follows an exempt underlying sale, along with more guidance on separate and later invoices.

What this means for you

Retailers using their own vehicles

For a taxable sale, a separately stated fuel surcharge did not remove the retailer's delivery expense from the tax base.

Customers

The taxable amount could exceed the merchandise price because the retailer's own-delivery and fuel charges were part of the total consideration.

Common questions

Q: What if there was no separate delivery charge?
A: The fuel surcharge was still taxable on the ruling's facts.

Q: Did separately stating the surcharge make it exempt?
A: No. The ruling said invoicing practices did not permit deduction of own-delivery costs.

Q: Is RR 05-1 the latest guidance?
A: No. RR 22-12 expressly superseded it and added current examples and qualifications.

Citations and references

• S.C. Code Ann. §§ 12-36-90 and 12-36-130 — gross proceeds and sales price
• S.C. Code Ann. §§ 12-36-910 and 12-36-1310 — sales and use tax
• S.C. Regulation 117-310(d) — own-vehicle delivery costs cannot be deducted through invoicing
• SC Revenue Ruling #22-12 — superseding fuel-surcharge guidance

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR05-1.pdf
• Superseding guidance: RR22-12.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 #05-1

SUBJECT:

Fuel Surcharges by Retailers Delivering Tangible Personal Property
(Sales & Use Tax)

EFFECTIVE DATE:

Applies to all periods open under the statute.

SUPERSEDES:

All previous advisory opinions and any oral directives in conflict
herewith.

REFERENCES:

S. C. Code Ann. Section 12-36-90 (2000; Supp. 2003)
S. C. Code Ann. Section 12-36-130 (2000; Supp. 2003)
SC Regulation 117-310(d) (Supp. 2003)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2000)
S. C. Code Ann. Section 1-23-10(4) (Supp. 2003)
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 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.

Question:
Are fuel surcharges, as described in the facts, charged by a retailer to the customer when delivering
merchandise via its own vehicles includable in "gross proceeds of sales" and therefore subject to the
sales and use tax?
Conclusion:
Fuel surcharges, as described in the facts, charged by a retailer to the customer when delivering
merchandise via its own vehicles are includable in "gross proceeds of sales" and therefore subject to
the sales and use tax.

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For example:
(1) If Retailer “A” sells $1,000 in merchandise and charges the customer a $50 delivery
charge for delivery via its own vehicle and a $25 fuel surcharge due to the rising cost of
motor fuel, the basis for calculating the tax is $1,075.
(2) If Retailer “B” sells $1,000 in merchandise, and does not charge the customer for
delivery via its own vehicle but does charge a $25 fuel surcharge due to the rising cost of
motor fuel, the basis for calculating the tax is $1,025.
Facts:
Retailers selling tangible personal property at retail may or may not charge their customers for
delivery. Recently, due to the rising costs of gasoline and diesel fuel, some retailers are charging a
“fuel surcharge” when they make a delivery via their own vehicle. For example:
Example #1
Retailer “A” sold various office equipment and supplies to XYZ and delivered that
merchandise via its own vehicle. The retailer billed XYZ as follows:
Total Sales Price of All Purchases:
Delivery Charge:
Fuel Surcharge
Total:

$1,000.00
$ 50.00
$ 25.00
$1,075.00

Example #2
Retailer “B” sold various office equipment and supplies to XYZ and delivered that
merchandise via its own vehicle. The retailer billed XYZ as follows:
Total Sales Price of All Purchases:
Delivery Charge:
Fuel Surcharge
Total:

$1,000.00
$ 00.00
$ 25.00
$1,025.00

Discussion:
The sales tax is imposed upon a retailer's "gross proceeds of sales" which is defined at Code
Section 12-36-90, in part, as:
...the value proceeding or accruing from the sale, lease, or rental of tangible
personal property... without any deduction for... the cost of materials, labor, or
service... [or] any other expenses....

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The use tax is based upon the "sales price" of tangible personal property. The term "sales price"
is defined at Code Section 12-36-130, in part, 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.
(1)

The term includes:
(a)

any services or transportation costs that are a part of the sale, whether paid in
money or otherwise; ...

In Meyers Arnold, Inc. v. South Carolina Tax Commission, 285 S.C. 303, 328 S.E.2d 920, 923
(1985), the Court of Appeals of South Carolina held the element of service involved in a lay
away sale was subject to tax as being part of the sale of tangible personal property. The test used
by the court was as follows:
...But for the lay away sales, Meyers Arnold would not receive the lay away fees. The fees
are obviously charged for the service rendered in making lay away sales. For these reasons,
this court holds the lay away fees are part of the gross proceeds and subject to the sales tax.
Accordingly, the total amount charged in conjunction with the sale or purchase of tangible
personal property is subject to the tax.
A similar conclusion was reached in Regency Towers Association, Inc. v. South Carolina Tax
Commission, 88-CP-26-1109 (1989), where the Horry County Court of Common Pleas held
charges for maid service were not deductible from gross proceeds derived from charges for
accommodations. In Commission Decision #92-37, the Commission held that charges for maid
services, which were optional, were a part of the accommodations furnished to transients and
therefore subject to the accommodations tax.
Finally, SC Regulation 117-310, concerning “Freight and Delivery Charges,” states in part:
(d) No practice of invoicing or billing will entitle the seller to deduct from gross proceeds
of sale any cost or expense, actual or estimated, in cases where the seller, by use of his
own means of transportation, effects such delivery.
Based on the above, it is the opinion of the Department that fuel surcharges, as described in the
facts, charged by a retailer to the customer when delivering merchandise via its own vehicles are
includable in "gross proceeds of sales" and therefore subject to the sales and use tax.
For example:
(1) If Retailer “A” sells $1,000 in merchandise and charges the customer a $50 delivery
charge for delivery via its own vehicle and a $25 fuel surcharge due to the rising cost of
motor fuel, the basis for calculating the tax is $1,075.

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(2) If Retailer “B” sells $1,000 in merchandise, and does not charge the customer for
delivery via its own vehicle but does charge a $25 fuel surcharge due to the rising cost of
motor fuel, the basis for calculating the tax is $1,025.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Burnet R. Maybank
Burnet R. Maybank, Director
January 11
, 2005
Columbia, South Carolina

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