Who was responsible for South Carolina use tax on untaxed Internet, catalog, travel, and other out-of-state purchases under RR 06-2?

Plain-English summary

South Carolina Revenue Ruling 06-2 explained that an out-of-state purchase was not exempt merely because it was made through the Internet, a catalog, an auction site, by telephone, or during travel. Tangible personal property bought for use, storage, or consumption in South Carolina was subject to use tax when enough sales or use tax had not already been paid.

The applicable rate depended on where the property would be used, stored, or consumed. The ruling used the then-current 5% state rate plus applicable local use tax. If tax was legally due and paid to another state, the purchaser received a transaction-specific credit. South Carolina collected the difference when its tax was higher, but did not refund an excess or let the excess offset another purchase.

The ruling also described historical reporting methods for individuals, licensed retailers, other businesses, and nonprofits. Those forms, rates, contacts, and procedures have since changed, and RR 07-5 expressly superseded this document.

What this means for you

Individuals

If an out-of-state seller did not collect South Carolina tax, the purchaser remained responsible. The ruling described reporting on an individual income-tax return, Form UT-3, or specified title and registration procedures.

Businesses and nonprofits

Organizations buying property for their own use, rather than resale, also owed use tax. The historical filing route depended on whether the organization was a licensed retailer and whether it regularly made out-of-state purchases.

Cross-border shoppers

Paying another state's tax did not automatically eliminate the South Carolina amount. The ruling compared the taxes separately for each purchase.

Common questions

Q: Were online or catalog purchases exempt?
A: No. The ruling treated them like other taxable out-of-state retail purchases used in South Carolina.

Q: Could sales tax and use tax both apply to the same transaction?
A: No. The ruling said one or the other applied, not both.

Q: What if the seller collected the full South Carolina tax?
A: A receipt showing payment to a licensed out-of-state retailer meant the purchaser no longer owed use tax on that purchase.

Q: Did an in-state exemption also protect the same out-of-state purchase?
A: Yes. The ruling used qualifying prescription medicine as its example.

Citations and references

• Article 13, Chapter 36 of Title 12 — South Carolina use-tax provisions
• S.C. Code Ann. §§ 12-36-1710 through 12-36-1740 — casual excise tax discussed for specified non-retailer transfers
• S.C. Code Ann. § 12-36-2120(41) — nonprofit-sales example
• SC Revenue Ruling #07-5 — expressly superseded RR 06-2

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR06-2.pdf
• Superseding guidance: RR07-5.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P. O. Box 12265, Columbia, South Carolina 29211
Website Address: http://www.sctax.org

SC REVENUE RULING #06-2

SUBJECT:

Use Tax Information for Individuals, Businesses and Nonprofits
(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:

Article 13, Chapter 36 of Title 12 (2000; Supp 2005)

AUTHORITY:

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

Introduction:
Contrary to popular opinion, catalog, Internet and other out-of-state purchases from outof-state retailers are subject to the South Carolina sales and use tax. Making a purchase
from a retailer outside of South Carolina’s borders, whether done physically,
electronically or by telephone, does not exempt the purchaser from paying the tax.
Merchandise bought from a retailer outside of South Carolina for use, storage or
consumption in this state is subject to the "use" tax if an equal amount of sales tax was
not due and paid in the other state at the time of purchase. The statewide use tax is 5%,
but residents in counties with a local option or one of the special local taxes have to pay
an additional local use tax.

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The following questions and answers are part of the Department’s continuing efforts to
educate the public about the use tax and a person’s responsibilities in reporting and
paying this tax. These questions and answers are intended to provide general information.
For more specific information, including information about exemptions and maximum
tax items, visit the Department’s website at www.sctax.org.

Questions and Answers:

1. What is the use tax?
   The use tax is a tax that applies to purchases of tangible personal property from out-ofstate retailers for use, storage or consumption in South Carolina, and includes purchases
   from retailers made via the Internet (retailers’ websites and retailers’ sales on auction
   sites), through out-of-state catalog companies, or when visiting another state.
2. What is the rate for the use tax?
   The tax rate for the use tax is the same as the sales tax. This rate is determined by where
   the tangible personal property will be used, stored or consumed, regardless of where the
   sale actually takes place. Therefore, the tax rate for the use tax will be the 5% state rate
   plus the applicable local use tax rate for the location where the tangible personal property
   will be used, stored or consumed.
   Note: Information concerning local sales and use tax rates can be found on the
   Department’s website (www.sctax.org).
3. What is the difference between the sales tax and the use tax?
   The sales tax is imposed on all retailers within South Carolina and applies to all retail
   sales of tangible personal property within the state. Retailers making sales of tangible
   personal property in South Carolina are required to remit the sales tax to the Department
   of Revenue.
   The use tax is imposed upon the consumer of tangible personal property that is purchased
   at retail for use, storage, or consumption in South Carolina. The use tax applies to
   purchases from out-of-state retailers. The use tax has been around since 1951 – the same
   year the sales tax law was adopted in South Carolina.
   Both the sales tax and the use tax also apply to leases or rentals at retail of tangible
   personal property (e.g., tuxedos, office equipment, etc.).
   It is important to note that either the South Carolina sales tax or the South Carolina use
   tax applies to a single transaction, but not both.
4. Why would an out-of-state retailer charge a purchaser the South Carolina sales tax or
   use tax?

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An out-of-state retailer must obtain a retail license and remit either the South Carolina
sales tax or use tax on retail sales shipped into South Carolina if the out-of-state retailer
has a physical presence in South Carolina.
Examples of physical presence include, but are not limited to, maintaining (temporarily
or permanently) an office, warehouse, store, other place of business, or property of any
kind in the state or having (temporarily or permanently) an agent, representative
(including delivery personnel and independent contractors acting on behalf of the
retailer), salesman, or employee operating within the state.
An out-of-state retailer that is not required to obtain a retail license and remit the South
Carolina sales or use tax may, however, voluntarily obtain the retail license and collect
and remit the tax to South Carolina.

5. If an out-of-state retailer who has obtained a retail license charges the purchaser for the
   South Carolina sales or use tax on tangible personal property delivered into South
   Carolina, is the purchaser still liable for the use tax?
   If the purchaser has a receipt showing the South Carolina (state and local) sales tax or use
   tax has been paid to a licensed out-of-state retailer, then the purchaser is no longer liable
   for the South Carolina use tax.
6. If a South Carolina purchaser buys merchandise via an Internet or mail-order catalog
   retailer that has not obtained a South Carolina retail license and therefore does not charge
   the purchaser for the South Carolina sales or use tax on tangible personal property
   delivered into South Carolina, is the purchaser liable for the use tax?
   Yes.
7. If a South Carolina purchaser travels to another state and purchases tangible personal
   property from a retailer in the other state for use, storage or consumption in South
   Carolina, does the South Carolina purchaser still owe the South Carolina use tax on the
   purchase if the other state’s sales tax was paid to the retailer at the time of purchase?
   The South Carolina purchaser would only owe the use tax on the difference between the
   sales tax paid in the other state and the use tax due in South Carolina. In other words, if
   the state and local sales or use tax due and paid in another state is equal to or greater than
   the state and local use tax due in South Carolina, then no use tax is due in South Carolina.
   Example #1: If a South Carolina purchaser paid $15.00 sales tax in the other state
   and the total state and local use tax due in South Carolina was $18.00, then the
   South Carolina purchaser would be allowed a credit for the $15.00 and would
   only owe a South Carolina use tax of $3.00.

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Example #2: If a South Carolina purchaser paid $21.00 sales tax in the other state
and the total state and local use tax due in South Carolina was $18.00, then the
South Carolina purchaser would be allowed a credit for the $21.00 and no use tax
would be due in South Carolina since the $21.00 paid exceeds the $18.00 due in
South Carolina. However, the purchaser is not entitled to a refund of the
difference between the $21.00 paid in the other state and the $18.00 due in South
Carolina.
Note: Each transaction must stand on its own. In other words, an “excess” paid to
another state on one purchase transaction, as shown in Example #2, cannot be
used to offset any South Carolina use tax that may be due on another purchase
transaction.

8. If a sale by a South Carolina retailer is exempt from the South Carolina sales tax, is the
   purchase of the same product from an out-of-state retailer exempt from the South
   Carolina use tax?
   Yes. For example, prescription medicine purchased from a South Carolina pharmacy
   upon presentation of the prescription written by the physician is exempt from the South
   Carolina sales tax. The same purchase from an out-of-state mail-order pharmacy is
   exempt from the South Carolina use tax.
9. How can a person report and pay the use tax to the SC Department of Revenue?
   The South Carolina use tax is reported and remitted as follows:
   If the purchaser is an individual, then this purchaser may:
   a) report and remit the use tax on the South Carolina Individual Income Tax
   Return (Form SC 1040 or Form SC 1040A).
   b) report and remit the use tax on a Form UT-3 use tax return. This return can be
   filed after the purchase or may be filed for a specific period (month, calendar
   quarter, etc.)
   c) report and remit the use tax on a vehicle, airplane or boat purchased from an
   out-of-state retailer (1) by filing a Form ST-236 with the Department of Revenue
   or (2) at the time a vehicle, airplane or boat is registered, titled or licensed with
   the Department of Motor Vehicles, the Department of Aeronautics or the
   Department of Natural Resources. (Note: Motor vehicles, motorcycles, boats,
   motors and airplanes purchased from a non-retailer are subject to a separate tax
   called the “casual excise tax” at the time registered, titled or licensed with one of
   these agencies. A taxpayer may also report and remit this tax by filing a Form ST236 with the Department of Revenue.) For information on the “casual excise tax,”
   see Code Sections 12-36-1710 through 12-36-1740.

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If the purchaser is a business or nonprofit organization that is purchasing the tangible
personal property for its own use (and not for resale), then this purchaser may:
a) report and remit the use tax on its sales and use tax return if the purchaser is a
licensed South Carolina retailer. The use tax is reported on Line #2 (“Out-of-State
Purchases Subject to Use Tax”) of the Worksheet on the SC sales and use tax
return (Forms ST-3, ST-3EZ, ST-388, and ST-403, plus local tax addendum ST389).
Note: Certain nonprofit organizations that sell tangible personal property are not
required to be licensed as retailers since their sales are exempt from the sales tax
under Code Section 12-36-2120(41). These nonprofit organizations should report
the use tax as discussed below in item “b” through item “d.”
b) obtain a purchaser’s certificate of registration and report and remit the use tax
on its use tax return if the purchaser is not a licensed South Carolina retailer but is
a business or nonprofit organization that regularly purchases tangible personal
property for its use from an out-of-state retailer. The use tax is reported on Line

2 (“Out-of-State Purchases Subject to Use Tax”) of the Worksheet on the SC

sales and use tax return (Forms ST-3, ST-3EZ, ST-388, and ST-403, plus local tax
addendum ST-389).
Note: Persons needing to obtain a purchaser’s certificate of registration in order to
file tax returns and remit the use tax on a periodic basis may do so by completing
Form SCTC -111 or by contacting the Department’s License and Registration
Section at (803) 898-5872.
c) report and remit the use tax on a Form UT-3 use tax return if the purchaser is a
business or nonprofit organization that is not a licensed South Carolina retailer
and does not regularly purchases tangible personal property for its own use from
an out-of-state retailer.
d) report and remit the use tax on a vehicle, airplane or boat purchased from an
out-of-state retailer (1) by filing a Form ST-236 with the Department of Revenue
or (2) at the time a vehicle, airplane or boat is registered, titled or licensed with
the Department of Motor Vehicles, the Department of Aeronautics or the
Department of Natural Resources. (Note: Motor vehicles, motorcycles, boats,
motors and airplanes purchased from a non-retailer are subject to a separate tax
called the “casual excise tax” at the time registered, titled or licensed with one of
these agencies. A taxpayer may also report and remit this tax by filing a Form ST236 with the Department of Revenue.) For information on the “casual excise tax,”
see Code Sections 12-36-1710 through 12-36-1740.

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10. Who can a person contact for additional questions about the use tax?
Persons having questions about the use tax should call the Department at (803) 898-5788
or send an e-mail to [email protected].

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Ray N. Stevens
Ray N. Stevens, Director
May 19
, 2006
Columbia, South Carolina

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