When does a deed conveying South Carolina mineral rights trigger the deed recording fee?

Plain-English summary

South Carolina Revenue Ruling 06-11 draws the deed-recording-fee line based on who will sever the minerals from the land.

If the buyer or grantee will sever oil, gas, sand, or other minerals, the deed transfers realty. Recording it is subject to the deed recording fee unless an exemption applies, and the fee is based on the value of the mineral rights under § 12-24-30.

If the seller or grantor will sever the minerals, § 36-2-107(1) treats the transaction as a sale of goods rather than a transfer of realty. The ruling therefore says the deed recording fee does not apply.

The Department later repeated this distinction in RR 17-5, its comprehensive deed-recording-fee guide.

What this means for you

Mineral-rights buyers

If the transaction gives the buyer the right and responsibility to remove the minerals, treat the recorded instrument as a potential transfer of real property for fee purposes.

Mineral sellers

When the seller must extract and deliver the minerals, the ruling characterizes the transaction as a sale of goods instead.

Closing and recording professionals

Review the severance obligation, the value of the rights conveyed, and any statutory exemption rather than relying only on the document's title.

Common questions

Q: Does the rule cover only oil and gas?
A: No. The ruling expressly includes oil, gas, sand, and similar mineral rights.

Q: What controls the realty-versus-goods distinction?
A: Who is to sever the minerals: buyer severance means realty; seller severance means goods.

Q: Is the fee based on the whole parcel?
A: The ruling says it is based on the value of the mineral rights transferred under § 12-24-30.

Citations and references

• S.C. Code Ann. § 12-24-10 — imposition of the deed recording fee
• S.C. Code Ann. § 12-24-30 — value of the transferred realty
• S.C. Code Ann. § 12-24-40 — exemptions
• S.C. Code Ann. § 36-2-107(1) — seller-severed minerals treated as goods
• SC Revenue Ruling #17-5 — later comprehensive deed-recording-fee guidance

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR06-11.pdf
• Later comprehensive guidance: RR17-5.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 #06-11

SUBJECT:

Conveyance of Mineral Rights
(Deed Recording Fee)

EFFECTIVE DATE:

Applies to all periods open under the statute.

SUPERSEDES:

All previous documents and any oral directives in conflict
herewith.

REFERENCES:

S. C. Code Ann. Section 12-24-10 (2000)
Act No. 323 of 2006 (Effective June 2, 2006)
S. C. Code Ann. Section 12-24-30 (2000)
S. C. Code Ann. Section 12-24-40 (2000; Supp. 2005)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2000)
S. C. Code Ann. Section 1-23-10(4) (Supp. 2005)
SC Revenue Procedure #05-2

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to
the public and to Department personnel. It is an advisory
opinion issued to apply principles of tax law to a set of
facts or general category of taxpayers. It is the
Department’s position until superseded or modified by a
change in statute, regulation, court decision, or another
Departmental advisory opinion.

Question:
Is the recording of a deed that conveys mineral rights (oil, gas, sand, etc.) to another
person subject to the deed recording fee?
Conclusion:
A deed that conveys mineral rights (oil, gas, sand, etc.) to another person where the
minerals are to be severed by the grantee (buyer) is a deed that conveys realty. The
recording of this deed is subject to the deed recording fee, unless otherwise exempt under
the law, based on the value of the mineral rights as determined by Code Section 12-2430.

1

If the minerals are to be severed by the grantor (seller), the transaction is for the sale of
goods and is not subject to the deed recording fee.
Note: In addition to the discussion portion of this document, see Questions #1 through #4
of SC Revenue Ruling #04-6 for a discussion of “value” as determined by Code Section
12-24-30.
Discussion:
Code Section 12-24-10 imposes the deed recording fee and reads:
(A) In addition to all other recording fees, a recording fee will be imposed
for the privilege of recording a deed in which any lands and all
improvements on the land, tenements, or other realty is transferred to
another person. The fee is one dollar and eighty-five cents for each five
hundred dollars, or fractional part of five hundred dollars, of the realty's
value as determined by Section 12-24-30.
(B) An instrument or deed of distribution assigning, transferring, or
releasing real property to the distributee of a decedent's estate pursuant to
Section 62-3-907 as evidence of the distributee's title to the property is not
a deed subject to this chapter 1 .
Code Section 12-24-30 defines the term “value” as used in the imposition and reads:
(A) For purposes of this chapter, the term “value” means the consideration
paid or to be paid in money or money’s worth for the realty including
other realty, personal property, stocks, bonds, partnership interest, and
other intangible property, the forgiveness or cancellation of a debt, the
assumption of a debt, and the surrendering of a right. The fair market
value of the consideration must be used in calculating the consideration
paid in money’s worth. Taxpayers may elect to use the fair market value
of the realty being transferred in determining fair market value of the
consideration under the provisions of this section. However, in the case of
realty transferred between a corporation, a partnership, or other entity and
its stockholder, partner, or owner, and in the case of realty transferred to a
trust or as a distribution to a trust beneficiary, “value” means the realty’s
fair market value.
(B) A deduction from value is allowed for the amount of any lien or
encumbrance existing on the land, tenement, or realty before the transfer
and remaining on the land, tenement, or realty after the transfer.

1

The provisions of subsection (B) became effective June 2, 2006. See Act No. 323 of 2006

2

(C) Taxpayers may elect to use the fair market value as determined for
property tax purposes in determining fair market value under the
provisions of this section.
Code Section 12-24-40 provides several exemptions from the fee 2 .
Based on the above, the deed recording fee is imposed for the privilege of recording a
deed based on the transaction of transferring realty from one person to another person,
unless the deed is exempt under the provisions of Code Section 12-24-40. For a more
detailed discussion of the deed recording fee, see SC Revenue Ruling #04-6.
It must now be determined if a deed that conveys mineral rights is a deed that conveys
realty. In other words, are mineral rights real property?
While the provisions of the deed recording fee do not refer to the Uniform Commercial
Code 3 , it is proper to do so under the following rule of statutory construction from 73
Am. Jur. 2d Statutes, Section 103:
Under the rule of statutory construction of statutes in pari materia, statutes
are not to be considered as isolated fragments of law, but as a whole, or as
parts of a great, connected, homogenous system. Such statutes are
considered as if they constituted but one act, so that sections of one act
may be considered as though they were parts of the other act, as far as this
can reasonably be done. Indeed, as a general rule, where legislation
dealing with a particular subject consists of a system of related general
provisions indicative of a settled policy, new enactments of a fragmentary
nature on that subject are to be taken as intended to fit into the existing
system and to be carried into effect conformably to it, unless a different
purpose is shown plainly.
Code Section 36-2-107(1) of the Uniform Commercial Code provides that the sale of
minerals and the like (including oil and gas) when severed by the seller from the realty is
a contract for the sale of goods.

2

Code Section 12-24-40(7) exempts from the deed recording fee deeds “that constitute a contract for the
sale of timber to be cut.” See also footnote #3.

3

In 1994 Opinions of the Attorney General, 94-52 (September 13, 1994), the provisions of Code Section
36-2-107(2) in the Uniform Commercial Code were cited as instructive in determining if a document which
conveys timber to be cut was a contract for the sale of goods or the sale of realty. Since Code Section 36-2107(2) states that a contract for the sale of timber to be cut, whether to be cut by the seller or the buyer, is a
contract for the sale of goods and not realty, the opinion held that a contract for the sale of timber to be cut
was not subject to the former State documentary tax under Code Section 12-21-380.

3

With respect to the same code section, the Official Comment reads, in part:
Subsection (1). Notice that the subsection applies only if the minerals or
structures “are to be severed by the seller.” If the buyer is to sever, such
transactions are considered contracts affecting land and all problems of the
Statute of Frauds and of the recording of land rights apply to them.
The South Carolina Reporter's Comments states, in part, with respect to Code Section 362-107(1), that “[i]f the severance is to be made by the buyer, the contract is for the sale of
land ...”
Based on the above, a deed that conveys mineral rights (oil, gas, sand, etc.) to another
person where the minerals are to be severed by the grantee (buyer) is a deed that conveys
realty. The recording of this deed is subject to the deed recording fee, unless otherwise
exempt under the law, based on the value of the mineral rights as determined by Code
Section 12-24-30. If the minerals are to be severed by the grantor (seller), the transaction
is a sale of goods and is not subject to the deed recording fee.
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Ray N. Stevens
Ray N. Stevens, Director
December 6
, 2006
Columbia, South Carolina

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