When does South Carolina allow a use-tax credit for sales or use tax paid on property purchased in another state?

Plain-English summary

South Carolina Revenue Ruling 06-4 explains when sales or use tax paid elsewhere reduces South Carolina use tax on tangible personal property.

The credit is available only when the taxpayer bought tangible personal property in another state or the District of Columbia, tax was legally due on that purchase there, the tax was actually paid there, and the taxpayer can prove both that it was due and that it was paid. The other jurisdiction does not need to offer South Carolina purchasers a reciprocal credit.

The comparison includes state and local tax. If the qualifying other-state tax is lower than the South Carolina state and local use tax, the purchaser pays the difference to South Carolina. If it is higher, South Carolina does not refund the excess.

Each purchase stands alone. Excess tax on one transaction cannot reduce South Carolina use tax due on another transaction. The ruling also excludes taxes paid to another country or a U.S. territorial possession from the credit.

What this means for you

Purchasers bringing property into South Carolina

Keep invoices and proof showing that the other state's tax was legally due and paid. Payment alone is not enough if the charge was not legally owed on that transaction.

Businesses with multistate purchases

Calculate the credit purchase by purchase using the qualifying state and local tax paid elsewhere. Do not pool overpayments from high-tax transactions against liabilities on other purchases.

International purchasers

The ruling says tax paid to a foreign country or U.S. territorial possession does not qualify for this statutory credit.

Common questions

Q: Does the other state have to give a similar credit?
A: No. The ruling says reciprocity is not required.

Q: What if the other state's tax was lower?
A: The taxpayer receives credit for the qualifying amount paid and owes South Carolina the difference.

Q: What if the other state's tax was higher?
A: No additional South Carolina use tax is due on that transaction, but South Carolina does not refund the excess.

Q: Does the District of Columbia count as a state?
A: Yes. The ruling says the Department's longstanding policy treated the District as a state for this credit.

Citations and references

• S.C. Code Ann. § 12-36-1310(C) — requirements and amount of the other-state sales-or-use-tax credit
• S.C. Code Ann. § 12-36-60 — tangible personal property definition referenced by the ruling
• SC Revenue Ruling #18-9 — later use-tax guidance that continued to cite RR 06-4

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR06-4.pdf
• Later use-tax guidance: RR18-9.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 #06-4

SUBJECT:

Credit for Taxes Paid in Other States
(Use Tax)

EFFECTIVE DATE:

Applies to all periods open under the statute.

SUPERSEDES:

SC Revenue Advisory Bulletin #02-2 and 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.

South Carolina Code of Laws (“Code”) Section 12-36-1310(C) provides for the credit and reads:
(C) When a taxpayer is liable for the use tax imposed by this section on tangible personal
property purchased in another state, upon which a sales or use tax was due and paid in the
other state, the amount of the sales or use tax due and paid in the other state is allowed as
a credit against the use tax due this State, upon proof that the sales or use tax was due and
paid in the other state. If the amount of the sales or use tax paid in the other state is less
than the amount of use tax imposed by this article, the user shall pay the difference to the
department.
Based on the above, South Carolina will allow a credit against the state and local use tax due in
South Carolina for the state and local sales or use tax due and paid in another state on the
purchase of tangible personal property. The statute does not require that the other state offer a
similar credit.

1

Therefore, in order for the taxpayer liable for the use tax in South Carolina to take the credit
authorized under Code Section 12-36-1310(C), the following requirements must be met:
1) The taxpayer must have purchased tangible personal property, as defined in Code Section
12-36-60, in one of the other 49 states or the District of Columbia¹.
Note: A credit is not allowed for any sales or use tax due and paid in another country or
in a territorial possession of the United States.
2) A sales or use tax must have been legally due on the purchase transaction in the other
state.
3) The sales or use tax that was legally due on the purchase transaction in the other state
must have been paid in that state.
4) The taxpayer must have proof that the sales or use tax was due and paid in the other state.
Finally, if the state and local sales or use tax due and paid in the other state is less than the
amount of state and local use tax due in South Carolina, the taxpayer liable for the use tax in
South Carolina must pay the difference to the South Carolina Department of Revenue. If the state
and local sales or use tax due and paid in the other state is greater than the state and local use tax
due in South Carolina, the taxpayer is not entitled to a refund².
SOUTH CAROLINA DEPARTMENT OF REVENUE

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

¹ Several states do not impose a state sales tax or use tax. In addition, it has been the
longstanding policy of the Department to consider the District of Columbia a state for purposes
of this credit. Therefore, any further reference to another state in this document is considered to
include the District of Columbia.
² Each purchase transaction must stand on its own. In other words, if the state and local sales or
use tax due and paid in another state on one purchase transaction is greater than the state and
local use tax due in South Carolina, the “excess” tax paid in the other state on the purchase
transaction cannot be used to offset any use tax that may be due in South Carolina on another
out-of-state purchase transaction.

2