Which foods qualified for South Carolina's reduced 3% state sales-tax rate beginning October 1, 2006?

Plain-English summary

South Carolina Revenue Ruling 06-5 explained a historical state sales-and-use-tax reduction that began October 1, 2006. Qualifying unprepared food was taxed at a 3% state rate instead of the then-general 5% rate.

Eligibility turned on whether the item could lawfully be purchased with USDA food benefits, not whether the customer actually used those benefits or whether the retailer was authorized to accept them. Qualifying examples included food intended for home consumption, snacks, beverages, seasonings, seeds and plants that grow food, and qualifying cold salads or sandwiches.

Prepared meals and food intended for immediate consumption did not qualify. The ruling also excluded alcohol, hot ready-to-drink beverages, tobacco, hot ready-to-eat foods, food intended to be heated in the store, vitamins, pet food, and nonfood household goods.

A single-price combination of a qualifying and nonqualifying item did not receive the lower rate. The ruling used a fruit-and-wine basket as its example. RR 07-4 later superseded this guidance when the state exemption for qualifying unprepared food took effect.

What this means for you

Grocery and convenience retailers

Classification depended on the product and how it was sold. Providing eating utensils or selling food for consumption at or near the store could make it prepared food outside the reduced rate.

Consumers

Customers did not need to pay with USDA benefits to receive the reduced rate. Food actually purchased with those benefits was separately exempt under the ruling.

Sellers of mixed baskets or packages

A nonitemized package combining eligible food with an ineligible item did not qualify for the lower rate.

Common questions

Q: Did the retailer have to accept USDA food benefits?
A: No. The item itself had to be eligible; retailer authorization was not required.

Q: Did cold prepared items always qualify?
A: No. Cold salads or sandwiches could qualify when intended for home consumption and not treated as prepared meals or food under the ruling.

Q: Did local tax rates also fall to 3%?
A: No. The ruling said applicable local rates did not change with this state-rate reduction.

Q: Is this 3% rule current?
A: No. RR 07-4 expressly superseded RR 06-5 when the later state exemption took effect.

Citations and references

• Act 388 of 2006, Part I, § 1 — enacted the historical state-rate reduction
• S.C. Code Ann. §§ 12-36-910(D) and 12-36-1110 — historical food and general-rate provisions quoted in the ruling
• S.C. Code Ann. § 12-36-2120(10) and (41) — specified food and nonprofit exemptions
• SC Revenue Ruling #07-4 — superseding unprepared-food guidance

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR06-5.pdf
• Superseding guidance: RR07-4.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 #06-5

SUBJECT:

Sale Tax Rate Reduction for Unprepared Foods
(Sales and Use Tax)

EFFECTIVE DATE:

October 1, 2006

REFERENCES:

Act 388 of 2006, Part I, Section 1 (Enacted June 22, 2006)

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 specific set of facts or
general category of taxpayers. It is the Department’s position and
is binding on agency personnel until superseded or modified by a
change in statute, regulations, court decision, or another
Departmental advisory opinion.

Introduction:
The General Assembly, in Act 388 of 2006, Part 1, Section 1, enacted legislation to reduce the
State sales and use tax rate on unprepared food items eligible for purchase with United States
Department of Agriculture food coupons.
Beginning on October 1, 2006, the State sales and use tax rate on unprepared food items eligible
for purchase with United States Department of Agriculture food coupons will be 3% instead of
5%. When the general State sales and use tax rate increases to 6% on June 1, 2007, the State
sales and use tax rate on unprepared food items eligible for purchase with United States
Department of Agriculture food coupons will remain 3%.

1

Act 388 of 2006, Part 1, Section 1, states:
A. Chapter 36, Title 12 of the 1976 Code is amended by adding:
"Article 11
Additional Sales, Use, and Casual Excise Tax
Section 12-36-1110. Beginning June 1, 2007, an additional sales, use, and casual
excise tax equal to one percent is imposed on amounts taxable pursuant to this
chapter, except that this additional one percent tax does not apply to amounts
taxed pursuant to Section 12-36-920(A), the tax on accommodations for
transients, nor does this additional tax apply to items subject to a maximum sales
and use tax pursuant to Section 12-36-2110 nor to the sale of unprepared food
which may be lawfully purchased with United States Department of Agriculture
food coupons.
Section 12-36-1120. The revenue of the taxes imposed by this article must be
credited to the Homestead Exemption Fund established pursuant to Section 11-11155.
Section 12-36-1130. The Department of Revenue may prescribe amounts that
may be added to the sales price to reflect the additional taxes imposed pursuant to
this article."
B. 1. Section 12-36-910 of the 1976 Code, as last amended by Act 161 of 2005, is
further amended by adding a new subsection at the end to read:
"(D)(1) Notwithstanding the rate of the tax imposed pursuant to subsection (A) of
this section or the rate of any other sales tax imposed pursuant to this chapter and
the rate of any use tax imposed pursuant to this chapter, the sales and use tax on
the gross proceeds of sales or sales price of unprepared food which lawfully may
be purchased with United States Department of Agriculture food coupons is three
percent.
(2) There is transferred from the general fund of the State to the EIA Fund in
fiscal year 2006-2007 the revenue estimated by the Board of Economic Advisors
to equal EIA revenue not received as a result of the two percent sales tax
differential provided pursuant to this subsection."

2. Notwithstanding the general effective date provided in this act, this subsection
   takes effect October 1, 2006.
   C. The provisions of Section 4-10-350(F) and (G) of the 1976 Code apply mutatis
   mutandis with respect to the tax imposed pursuant to Article 11, Chapter 36, Title
   12 of the 1976 Code as added by this section.

2

Questions and Answers:
1.

What unprepared food items are eligible for the lower sales tax rate beginning October 1,
2006?
Effective October 1, 2006, unprepared foods which lawfully may be purchased with United
States Department of Agriculture (“USDA”) food coupons 1 are subject to the state sales and
use tax at a rate of three percent.
The term “unprepared” food does not include (1) meals and food sold by a restaurant,
cafeteria, lunch wagon, or other similar places or businesses engaged in the business of
selling prepared meals or food for immediate consumption; (2) meals prepared and
delivered by a meal delivery service; (3) meals sold to or at congregate meal sites; or (4)
meals and food sold at a grocery store, convenience store or any other similar store for the
purpose of eating at or near the store, such as meals and food sold with eating utensils (e.g.,
plates, knives, forks, spoons, cups, napkins) provided by the seller. These meals and foods
are considered “prepared meals or food” and are not eligible for the lower sales tax rate and
are subject to the state sales and use tax at the state rate of 5% (6% effective June 1, 2007).
The following are examples of foods eligible and not eligible for the lower state sales tax
rate.
Foods eligible for the lower state sales tax rate beginning October 1, 2006 include:
*

Any food intended to be eaten at home by people, including snacks, beverages and
seasonings

*

Seeds and plants intended to grow food (not birdseed or seeds to grow flowers)

*

Cold items, which may include salads or sandwiches, intended to be eaten at home
by people and that are not considered “prepared meals or food” as discussed above

Items which are not eligible for the lower sales tax rate and are, therefore, subject to the
state sales and use tax at the state rate of 5% (6% effective June 1, 2007) are:
*

Alcoholic beverages, such as beer, wine, or liquor

*

Hot beverages ready-to-drink such as coffee

*

Tobacco

*

Hot foods ready to eat

1

For purposes of the lower sales tax rate discussed this advisory opinion, food coupons also
means food stamps, electronic benefits transfer cards and any other method approved by the
United States Department of Agriculture.

3

*

Foods designed to be heated in the store

*

Hot and cold food to be eaten at a lunch counter, in a dining area or anywhere else
in the store or in a nearby area such as a mall food court or that are considered
“prepared meals or food” as discussed above

*

Vitamins and medicines (Note: Medicines sold by prescription are exempt from the
5% (6% effective June 1, 2007) state sales and use tax.)

*

Pet food

*

Any non-food items such as tissue, soap or other household goods

Note: Some sales of meals and food may be exempt from the sales and use tax. For example,
Code Section 12-36-2120(10) provides exemptions from the sales and use tax for (1) meals
or foodstuff used in furnishing meals to school children within school buildings on a
nonprofit basis; (2) meals or foodstuff provided to elderly or disabled persons at home by
certain nonprofit organizations; (3) prepared or packaged foodstuff sold to nonprofit
organizations for the homeless and needy; or (4) meals and prepared or packaged foodstuff
sold to public and nonprofit organizations for congregate or in-home service to the
homeless, needy, disabled adults over eighteen years of age or persons over sixty years of
age (provided the meals or packaged foodstuffs in this item (4) are eligible for purchase with
USDA food coupons). Code Section 12-36-2120(41) exempts from the sales and use tax
tangible personal property, including meals or food, sold by certain nonprofit organizations.
2.

Must the above unprepared food items be purchased with USDA food coupons to be
eligible for the lower sales tax rate beginning October 1, 2006?
No.
Note: Food items which are actually purchased with USDA food coupons are exempt from
the state sales and use tax.

3.

Must the unprepared food items eligible for the lower sales tax rate beginning October 1,
2006 be purchased from a retailer authorized by the United States Department of
Agriculture to accept food coupons?
No.

4.

When the State sales and use tax rate on unprepared food items eligible for purchase with
United States Department of Agriculture food coupons is reduced to 3% beginning October
1, 2006, what will be the State sales and use tax rate on sales of such food items to persons
85 years of age or older?

4

When the State sales and use tax rate on unprepared food items eligible for purchase with
United States Department of Agriculture food coupons is reduced to 3% beginning October
1, 2006, the State sales and use tax rate on sales of such food items to persons 85 years of
age or older will also be 3%.
5.

When the State sales and use tax rate on unprepared food items eligible for purchase with
United States Department of Agriculture food coupons is reduced to 3% beginning October
1, 2006, what will be the local sales and use tax rate on sales of such food items in counties
that impose a local sales and use tax on food items eligible for purchase with United States
Department of Agriculture food coupons?
When the State sales and use tax rate on unprepared food items eligible for purchase with
United States Department of Agriculture food coupons is reduced to 3% beginning October
1, 2006, the local sales and use tax rate on sales of such food items in counties that impose a
local sales and use tax on food items eligible for purchase with United States Department of
Agriculture food coupons will not change.
Note: For information concerning the various types of local sales and use taxes being
imposed by counties and other jurisdictions, and which of these local taxes exempt or do not
exempt food items eligible for purchase with United States Department of Agriculture food
coupons, see SC Information Letter #06-16. Please note that this information letter is
updated periodically and updated versions of it can be found on the Department’s website at
www.sctax.org under “Dept. Advisory Opinions.”

6.

When an unprepared food item eligible for purchase with United States Department of
Agriculture food coupons is prepackaged with a non-eligible item, or a single price is
established for a combination of an unprepared food item eligible for purchase with United
States Department of Agriculture food coupons and a non-eligible item, is the lower sales
tax rate applicable?
No. For example, if a grocery store advertises and sells a basket containing fruit and a
bottle of wine, the lower sales tax rate is not applicable.
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Ray N. Stevens
Ray N. Stevens, Director

, 2006
September 25
Columbia, South Carolina

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