When did withdrawing wholesale inventory for business use, employee use, samples, or giveaways trigger South Carolina sales or use tax?

Plain-English summary

South Carolina treated the withdrawal, use, or consumption of property bought wholesale as a retail sale. If any one of those events occurred in South Carolina, sales tax applied to the property's fair market value, even if the item was later used or given away outside the state.

If inventory was withdrawn outside South Carolina and then used or consumed in South Carolina, the ruling imposed use tax on fair market value. A credit was allowed for sales or use tax legally due and paid to the other state on that withdrawal.

Merely moving property between inventories for resale was different. A transfer from South Carolina inventory to an out-of-state resale inventory did not trigger tax when the later withdrawal, use, and consumption all occurred outside South Carolina. Likewise, property moved into South Carolina inventory for sale was not taxed until it was sold at retail or withdrawn, used, or consumed here.

What this means for you

Retailers and wholesalers

Items bought tax-free for resale could become taxable when diverted to business use. The ruling included property used by the business, given to employees, used as unavailable-for-sale samples, or given away to customers for promotion or goodwill.

Multi-state inventory operators

The place of withdrawal mattered, but it was not the only taxable event. A South Carolina use or consumption could create use-tax liability even when the item left inventory in another state.

Promotional programs

Free distribution did not avoid tax. The business's withdrawal or use was the retail sale, and tax was measured by fair market value rather than the customer's zero price.

Common questions

Q: Was a South Carolina inventory withdrawal taxable if the item was used outside the state?
A: Yes. The in-state withdrawal was itself a retail sale under the ruling.

Q: What if the item was withdrawn in another state and used in South Carolina?
A: South Carolina use tax applied, with a credit for qualifying tax legally paid to the other state.

Q: Was moving goods to another resale inventory taxable?
A: Not by itself. Tax arose when a retail sale, withdrawal, use, or consumption occurred under the described rules.

Q: Did employee gifts and customer giveaways count?
A: Yes. The ruling included employee personal use and promotional or goodwill giveaways among taxable withdrawals or uses.

Q: Did the out-of-state delivery exemption protect an internal withdrawal?
A: No. The ruling said that exemption required a contract of sale, which did not exist when a business withdrew its own inventory.

Citations and references

• S.C. Code §§ 12-36-110 and 12-36-120 (retail sale, withdrawal, and wholesale sale definitions)
• S.C. Code §§ 12-36-90 and 12-36-130 (gross proceeds, fair market value, and sales price)
• S.C. Code §§ 12-36-910 and 12-36-1310 (sales and use tax, including other-state credit)
• S.C. Code § 12-36-2120(36) (out-of-state delivery exemption analyzed by the ruling)
• S.C. Regulation 117-309.17 (withdrawals from stock valuation, quoted in the ruling)
• SC Revenue Ruling #25-3 (later withdrawals-for-use guidance that cites this ruling)

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR08-11.pdf
• Later guidance: SC Revenue Ruling #25-3

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 #08-11

SUBJECT:

Withdrawals from Inventory for Use in South Carolina or
Outside of South Carolina
(Sales and 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 12-36-910(A) (2000)
S. C. Code Ann. Section 12-36-1310 (2000; Supp. 2007)
S. C. Code Ann. Section 12-36-1110 (Supp. 2007)
S. C. Code Ann. Section 12-36-60 (2000)
S. C. Code Ann. Section 12-36-110 (2000)
S. C. Code Ann. Section 12-36-120 (2000)
S. C. Code Ann. Section 12-36-90 (2000, Supp. 2007)
S. C. Code Ann. Section 12-36-130 (2000, Supp. 2007)
S. C. Code Ann. Section 12-36-2120(36) (2000)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (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.

Question:
What is the application of the sales and use tax with respect to tangible personal property
purchased at wholesale that is withdrawn from inventory and used or consumed in
connection with the business, or used or consumed by the person withdrawing it, whether
such tangible personal property is withdrawn, used or consumed within or without South
Carolina?

Conclusion:
Since a withdrawal, use, or consumption of tangible personal property purchased at
wholesale each constitute a “retail sale,” any one such event occurring in South Carolina
constitutes a “retail sale” within South Carolina and is subject to the tax based on the fair
market value of the tangible personal property that is withdrawn, used or consumed in
connection with the business or used or consumed by the person withdrawing it.
For example:
(1) If tangible personal property is withdrawn from inventory in South Carolina
for use or consumption inside or outside of South Carolina, then the sales tax is
due based on the fair market value of the tangible personal property since the
withdrawal (“retail sale”) of the tangible personal property occurred within South
Carolina. See Exhibit “A” for more details.
(2) If tangible personal property is withdrawn from inventory outside of South
Carolina for use or consumption in South Carolina and then used and consumed
in South Carolina, then the use tax is due based on the fair market value of the
tangible personal property since the withdrawal outside of South Carolina
constitutes a “purchase at retail” and the use or consumption of the tangible
personal property occurred within South Carolina.
However, a credit under Code Section 12-36-1310(C) will be allowed against the
South Carolina use tax for any tax legally due and paid in the other state on the
withdrawal occurring in that state.
See Exhibit “A” for more details.
(3) If tangible personal property is transferred from inventory in South Carolina to
an inventory outside of South Carolina where it will be held for sale, then no sales
tax is due if any tangible personal property is subsequently withdrawn, used, or
consumed outside of South Carolina since a withdrawal, use or consumption
(“retail sale”) of the tangible personal property has not occurred in South
Carolina. If, however, any tangible personal property is subsequently withdrawn
from the inventory outside of South Carolina for use or consumption in South
Carolina, see Example #2 above for guidance. See Exhibit “A” for more details
(4) If tangible personal property is transferred from inventory outside of South
Carolina to an inventory in South Carolina where it will be held for sale, then the
no sales tax is due until the tangible personal property is either sold at retail in
South Carolina or is withdrawn, used or consumed (“retail sale”) in South
Carolina. See Exhibit “A” for more details.
Tangible personal property withdrawn from inventory and used or consumed in
connection with the business or used or consumed by the person withdrawing it includes,
but is not limited to, tangible personal property used by the business, given to employees

for their personal use, or given to employees to give away to customers or potential
customers as a promotion or for purposes of goodwill.
For more detailed examples, see the attached charts in Exhibit “A” of this advisory
opinion.
Facts:
Tangible personal property is purchased at wholesale by a wholesaler or retailer for resale
to retailers or consumers. The tangible personal property will be stored in inventory at a
distribution facility, warehouse, or retail facility.
Some items in inventory will not be sold, but withdrawn from the inventory and sent to
employees to personally use or consume. Examples include, but are not limited to,
clothing, sporting equipment, or household items the employee will wear or use or
consume. Other items in inventory will also not be sold, but withdrawn from the
inventory and sent to employees to give away free of charge to customers as a promotion.
In some cases, the items will be withdrawn from inventory held in South Carolina and
sent to employees outside of South Carolina to be used, consumed or given away as a
promotion outside of South Carolina. In other cases, the items will be withdrawn from
inventory held outside of South Carolina and sent to employees in South Carolina to be
used, consumed or given away as a promotion in South Carolina.
Discussion:
Code Section 12-36-910(A) imposes the sales tax and states:
A sales tax, equal to [six] percent 1 of the gross proceeds of sales, is
imposed upon every person engaged or continuing within this State in the
business of selling tangible personal property at retail.
Code Section 12-36-1310(A) imposes the use tax and states:
A use tax is imposed on the storage, use, or other consumption in this
State of tangible personal property purchased at retail for storage, use, or
other consumption in this State, at the rate of [six] percent 2 of the sales
1

Beginning June 1, 2007, the total state sales and use tax rate increased to 6%. Code Section 12-36-1110,
which increased the sales and use tax rate by 1% beginning June 1, 2007, states:
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.
2

See footnote #1.

3

price of the property, regardless of whether the retailer is or is not engaged
in business in this State.
Code Section 12-36-60 defines the term “tangible personal property” and states:
“Tangible personal property” means personal property which may be seen,
weighed, measured, felt, touched, or which is in any other manner
perceptible to the senses. It also includes services and intangibles,
including communications, laundry and related services, furnishing of
accommodations and sales of electricity, the sale or use of which is subject
to tax under this chapter and does not include stocks, notes, bonds,
mortgages, or other evidences of debt. Tangible personal property does
not include the transmission of computer database information by a
cooperative service when the database information has been assembled by
and for the exclusive use of the members of the cooperative service.
Based on the above, in order for the sales or use tax to apply, there must be a retail sale of
tangible personal property.
Code Section 12-36-110, defines the terms “retail sale” and “sale at retail” to mean, in
part:
Sale at retail and retail sale mean all sales of tangible personal property
except those defined as wholesale sales. The quantity or sales price of
goods sold is immaterial in determining if a sale is at retail.

(1) The terms include:

(c) the withdrawal, use, or consumption of tangible personal property
by anyone who purchases it at wholesale, except: 3
(i) withdrawal of tangible personal property previously withdrawn
and taxed by such business or person,
(ii) tangible personal property which becomes an ingredient or
component part of tangible personal property manufactured or
compounded for sale,

3

The exceptions listed in this provision are not discussed in this document for purposes of simplifying the
discussion.

4

(iii) tangible personal property used directly in manufacturing,
compounding, or processing tangible personal property for sale,
(iv) materials, containers, cores, labels, sacks, or bags used incident
to the sale and delivery of tangible personal property;
(v) a motor vehicle operated with a dealer, transporter, or
manufacturer, or education license plate and used in accordance with
the provisions of Section 56-3-2320 or 56-3-2330; (Emphasis
added.)
Code Section 12-36-120 defines the terms “wholesale sale” and “sale at wholesale” to
mean, in part, a sale of:
… tangible personal property to licensed retail merchants, jobbers, dealers,
or wholesalers for resale, and do not include sales to users or consumers
not for resale;
Based on the above, a “retail sale” includes:
(1) the withdrawal of tangible personal property by anyone who purchased it at
wholesale;
(2) the use of tangible personal property by anyone who purchased it at
wholesale; or,
(3) the consumption of tangible personal property by anyone who purchased it at
wholesale.
Code Section 12-36-90 defines the term “gross proceeds of sales,” which is the basis for
calculating the sales tax, in part as:
… the value proceeding or accruing from the sale, lease, or rental of
tangible personal property.
(1) The term includes:

(c) the fair market value of tangible personal property previously
purchased at wholesale which is withdrawn from the business or stock
and used or consumed in connection with the business or used or
consumed by any person withdrawing it, except for: 4

4

The exceptions listed in this provision are not discussed in this document for purposes of simplifying the
discussion.

5

(i) withdrawal of tangible personal property previously withdrawn
and taxed by such business or person;
(ii) tangible personal property which becomes an ingredient or
component part of tangible personal property manufactured or
compounded for sale;
(iii) tangible personal property replacing defective parts under
written warranty contracts if:
(A) the warranty, maintenance, service, or similar contract is
given without charge, at the time of original purchase of the
defective property, or the tax was paid on the sale or renewal of
warranty, maintenance, or similar service contract for tangible
personal property of which the defective part was a component,
whether or not such contract was purchased in conjunction with
the sale of tangible personal property,
(B) in the case of a warranty, maintenance, service, or similar
contract that is given without charge at the time of original
purchase of the defective property, the tax was paid on the sale of
the defective part or on the sale of the property of which the
defective part was a component, and
(C) the warrantee is not charged for any labor or materials,
(iv) an automobile furnished without charge to a high school for use
solely in student driver training programs;
(v) a new motor vehicle used by a dealer as a demonstrator.
(Emphasis added.)
Based on the above, tangible personal property purchased at wholesale is subject to the
sales tax based upon its fair market value 5 when it is (1) withdrawn from the business or
stock and (2) used or consumed in connection with the business or used or consumed by
the person withdrawing it.
5

SC Regulation 117-309.17, concerning withdrawals from stock by merchants, states:
To be included in gross proceeds of sales is the money value of property purchased at
wholesale for resale purposes and subsequently withdrawn from stock for use or
consumption by the purchaser.
The value to be placed upon such goods is the price at which these goods are offered for
sale by the person withdrawing them. All cash or other customary discounts which he
would allow to his customers may be deducted; however, in no event can the amount
used as gross proceeds of sales be less than the amount paid for the goods by the person
making the withdrawal.

6

In considering these two provisions together, the statute does not require that withdrawal,
use and consumption all take place in South Carolina. Since a withdrawal, use, or
consumption of tangible personal property purchased at wholesale each constitute a
“retail sale,” any one such event occurring in South Carolina constitutes a “retail sale”
within South Carolina and is subject to the tax based on the fair market value of the
tangible personal property that is or will be used or consumed in connection with the
business or used or consumed by the person withdrawing it.
Furthermore, with respect to tangible personal property withdrawn outside of South
Carolina for use or consumption in South Carolina, we must consider whether the sales
tax or use tax is imposed and whether a credit allowed for a sales tax or use tax paid in
another state on the withdrawal in that state?
As stated above, a withdrawal, use or consumption of tangible personal property by
anyone who purchases it at wholesale is a retail sale.
Code Section 12-36-1310(A) imposes the use tax and states:
A use tax is imposed on the storage, use, or other consumption in this
State of tangible personal property purchased at retail for storage, use, or
other consumption in this State, at the rate of [six] percent 6 of the sales
price of the property, regardless of whether the retailer is or is not engaged
in business in this State. (Emphasis added)
Code Section 12-36-130 defines “sales price” 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.
Code Section 12-36-1310(C) authorizes a credit for taxes paid in another state and reads:
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. (Emphasis added.)
Therefore, since a withdrawal is a retail sale under Code Section 12-36-110, it also
constitutes a “purchase at retail.”
Based on the above, the use or consumption of tangible personal property withdrawn
outside of South Carolina is subject to the use tax when the withdrawal outside the state
6

See footnote #1.

7

is for the purpose of using or consuming the tangible personal property in South Carolina.
The withdrawal outside the state is a “purchase at retail” under Code Section 12-361310(A) and Code Section 12-36-110 and the fair market value upon which the tax is
based is the “sales price” (the amount for which tangible personal property was sold
under Code Sections 12-36-110 and 12-36-130) for purposes of the South Carolina use
tax.
In addition, a credit under Code Section 12-36-1310(C) will be allowed against the South
Carolina use tax for any sales or use tax legally due and paid in the other state on the
withdrawal occurring in that state.
Finally, with respect to tangible personal property withdrawn in South Carolina for use or
consumption outside of South Carolina, we must consider whether Code Section 12-362120(36) is applicable.
Code Section 12-36-2120(36) exempts from the tax:
tangible personal property where the seller, by contract of sale, is
obligated to deliver to the buyer, or to an agent or donee of the buyer, at a
point outside this State or to deliver it to a carrier or to the mails for
transportation to the buyer, or to an agent or donee of the buyer, at a point
outside this State;
While a withdrawal is a retail sale under the law, a contract – an agreement between two
or more parties – does not exist. Therefore, the exemption in Code Section 12-362120(36) does not apply to tangible personal property withdrawn in South Carolina for
use or consumption outside of South Carolina by the business or person withdrawing it.
The attached charts shown as Exhibit “A” should provide guidance.
Note: This advisory opinion concerns tangible personal property purchased at
wholesale for resale, but withdrawn from inventory and used and consumed by the
business or the person withdrawing it. It does not address tangible personal
property manufactured for sale by a manufacturer but used and consumed by the
manufacturer. For information on manufacturers using and consuming tangible
personal property they manufacture, see Code Section 12-36-910(B)(4) and Code
Section 12-36-1310(B)(4).
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Ray N. Stevens
Ray N. Stevens, Director
July 18
, 2008
Columbia, South Carolina

8

Exhibit A
(The attached charts are intended to provide guidance for most taxpayers who withdraw,
use or consume tangible personal property from inventory in connection with their
business or who withdraw, use or consume tangible personal property from inventory for
their personal use. It is not intended to provide all possible examples of the withdrawal,
use, or consumption of tangible personal property from a taxpayer’s inventory.)

Situation #1 – Employee’s Personal Use: Tangible personal property has been purchased at
wholesale by a wholesaler or retailer for resale to retailers or consumers. The tangible
personal property will be stored in inventory at a distribution facility, warehouse, or retail
facility. Some items in inventory will not be sold, but withdrawn from the inventory and
sent to employees to personally use or consume. Examples include, but are not limited to,
clothing, sporting equipment, or household items the employee will wear or use or consume.
Event in South Carolina
The tangible personal
property is withdrawn from
inventory in South Carolina
and given to or shipped to an
employee in South Carolina
for use or consumption either
in South Carolina or outside
of South Carolina.
The tangible personal
property is withdrawn from
inventory in South Carolina
and shipped to an employee
outside of South Carolina.

The employee receives the
tangible personal property
from an inventory located
outside of South Carolina
and personally uses or
consumes the tangible
personal property in South
Carolina.

Event Outside of South
Carolina
None

The employee receives the
tangible personal property
outside of South Carolina
and personally uses or
consumes the tangible
personal property either
inside or outside of South
Carolina.
The tangible personal
property is withdrawn from
inventory outside of South
Carolina and shipped to an
employee in South Carolina.

10

Taxability of Situation #1
The taxable event is the
withdrawal from inventory in
South Carolina and the sales
tax is due based upon the fair
market value of tangible
personal property.

The taxable event is the
withdrawal from inventory in
South Carolina and the sales
tax is due based upon the fair
market value of tangible
personal property.

The taxable event is the use
or consumption of the
tangible personal property in
South Carolina and the use
tax is due based upon the fair
market value of tangible
personal property. A credit
under Code Section 12-361310(C) will be allowed
against the SC use tax for
any tax legally due and paid
in the other state on the
withdrawal in that state.

Situation #2 – Sent to Employee to Give Away as Promotion: Tangible personal property
has been purchased at wholesale by a wholesaler or retailer for resale to retailers or
consumers. The tangible personal property will be stored in inventory at a distribution
facility, warehouse, or retail facility. Some items in inventory will not be sold, but
withdrawn from the inventory and sent to employees to give away free of charge to
customers as a promotion. Examples include, but are not limited to, clothing, sporting
equipment, or household items.
Event in South Carolina
The tangible personal
property is withdrawn from
inventory in South Carolina
and shipped to an employee
in South Carolina to give
away to a customer located
either inside or outside of
South Carolina as a
promotion. The employee
receives the tangible
personal property and gives
it away as a promotion to a
customer for the customer to
use or consume.
The tangible personal
property is withdrawn from
inventory in South Carolina
and shipped to an employee
outside of South Carolina to
give away to a customer
located either inside or
outside of South Carolina as
a promotion.
The employee receives the
tangible personal property
from an inventory located
outside of South Carolina
and gives it away as a
promotion to a customer in
South Carolina for the
customer to use or consume
in South Carolina.

Event Outside of South
Carolina
None

The employee receives the
tangible personal property
outside of South Carolina
and gives it away as a
promotion to a customer
located either inside or
outside of South Carolina for
the customer to use or
consume inside or outside of
South Carolina.
The tangible personal
property is withdrawn from
inventory outside of South
Carolina and shipped to an
employee in South Carolina
to give away to a customer as
a promotion.

11

Taxability of Situation #2
The taxable event is the
withdrawal from inventory in
South Carolina and the sales
tax is due based upon the fair
market value of tangible
personal property.

The taxable event is the
withdrawal from inventory in
South Carolina and the sales
tax is due based upon the fair
market value of tangible
personal property.

The taxable event is the use
or consumption of the
tangible personal property in
South Carolina (when the
employee gave it away to a
customer as a promotion)
and the use tax is due based
upon the fair market value of
tangible personal property. A
credit under Code Section
12-36-1310(C) will be
allowed against the SC use
tax for any tax legally due
and paid in the other state on
the withdrawal in that state.

Situation #3 – Sent to Employee to Sell, but Given Away as a Promotion: Tangible personal
property has been purchased at wholesale by a wholesaler or retailer for resale to retailers
or consumers. The tangible personal property will be stored in inventory at a distribution
facility, warehouse, or retail facility. Some items in inventory are transferred from
inventory in the store, warehouse or distribution center to an employee outside of South
Carolina. The employee maintains an inventory of tangible personal property for sale and
has the authority to give away some inventory free of charge to customers as a promotion.
Examples include, but are not limited to, clothing, sporting equipment, or household items.
Event in South Carolina
The tangible personal
property is transferred from
inventory in the store or
warehouse in South Carolina
to an employee in South
Carolina who maintains an
inventory of tangible personal
property for sale. The
tangible personal property is
withdrawn from the
employee’s inventory located
in South Carolina and is
given away as a promotion to
a customer located either
inside or outside of South
Carolina for the customer to
use or consume.
The tangible personal
property is transferred from
inventory in the store or
warehouse in South Carolina
to an employee outside of
South Carolina who
maintains an inventory of the
tangible personal property for
sale.
The tangible personal
property is withdrawn from
the employee’s inventory in
South Carolina and is given
away as a promotion to a
customer located either inside
or outside of South Carolina
for the customer to use or
consume inside or outside of
South Carolina.

Event Outside of South
Carolina
None

The tangible personal
property is withdrawn from
the employee’s inventory
located outside of South
Carolina and is given away as
a promotion to an out-of-state
customer for the customer to
use or consume outside of
South Carolina.
The tangible personal
property is transferred from
inventory in the store or
warehouse outside of South
Carolina to an employee in
South Carolina who
maintains an inventory of the
tangible personal property for
sale.

12

Taxability of Situation #3
The taxable event is the
withdrawal from the
employee’s inventory in
South Carolina and the sales
tax is due based upon the fair
market value of tangible
personal property.

The taxable event is the
withdrawal from the
employee’s inventory outside
of South Carolina. Since the
withdrawal, use and
consumption of the tangible
personal property occurs
outside of South Carolina, no
sales or use tax is due.
The taxable event is the
withdrawal from the
employee’s inventory in
South Carolina and the sales
tax is due based upon the fair
market value of tangible
personal property.

Situation #4 – Sent to Employee to Show or Display as a Sample: Tangible personal property has
been purchased at wholesale by a wholesaler or retailer for resale to retailers or consumers. The
tangible personal property will be stored in inventory at a distribution facility, warehouse, or retail
facility. Some items in inventory will not be sold, but withdrawn from the inventory and sent to
employees as a sample to show or display to customers; however, the sample will not be available for
sale while being shown or displayed by the employee. Examples include, but are not limited to,
clothing, sporting equipment, or household items.
Event in South Carolina
The tangible personal property
is withdrawn from inventory in
South Carolina and shipped to
an employee in South Carolina
as a sample to show or display
to customers located either
inside or outside of South
Carolina. The sample is not
available for sale while being
shown or displayed by the
employee.
The tangible personal property
is withdrawn from inventory in
South Carolina and shipped to
an employee outside of South
Carolina as a sample to show or
display to customers located
either inside or outside of South
Carolina.
The employee receives the
tangible personal property from
an inventory located outside of
South Carolina and shows or
displays the sample to
customers located either inside
or outside of South Carolina.
The sample is not available for
sale while being shown or
displayed by the employee.

Event Outside of South
Carolina
None

The employee receives the
tangible personal property
outside of South Carolina and
shows or displays the sample to
customers located either inside
or outside of South Carolina.
The sample is not available for
sale while being shown or
displayed by the employee.
The tangible personal property
is withdrawn from inventory
outside of South Carolina and
shipped to an employee in
South Carolina as a sample to
show or display to customers
located either inside or outside
of South Carolina.

7

Taxability of Situation #4
The taxable event is the
withdrawal from inventory in
South Carolina and the sales tax
is due based upon the fair
market value of tangible
personal property. 7

The taxable event is the
withdrawal from inventory in
South Carolina and the sales tax
is due based upon the fair
market value of tangible
personal property. 8

The taxable event is the use,
consumption or storage of the
tangible personal property in
South Carolina and the use tax
is due based upon the fair
market value of tangible
personal property. A credit
under Code Section 12-361310(C) will be allowed against
the SC use tax for any tax
legally due and paid in the other
state on the withdrawal, use or
consumption in that state. 9

The sales tax is a transactional tax. The withdrawal from inventory is a transaction subject to the sales tax.
If the sample is returned to the distribution facility, warehouse, or retail facility for sale, this sale is a
second, separate and distinct transaction that is subject to the sales tax based on the discounted price
provided the sale is a retail sale occurring in South Carolina.
8
See footnote #6.
9
The sales tax and the use tax are transactional taxes. The use, storage or consumption of the tangible
personal property is a transaction subject to the use tax. If the sample is returned to the distribution facility,
warehouse, or retail facility for sale, this sale is a second, separate and distinct transaction that is subject to
the sales tax based on the discounted price provided the sale is a retail sale occurring in South Carolina.

13

Situation #5 – Sent to Employee to Show or Display as a Sample: Tangible personal property has
been purchased at wholesale by a wholesaler or retailer for resale to retailers or consumers. The
tangible personal property will be stored in inventory at a distribution facility, warehouse, or retail
facility. Some items in inventory will not be sold, but withdrawn from the inventory and sent to
employees as a sample to show or display to customers; however, the sample will be available for sale
while being shown or displayed by the employee. 10 Examples include, but are not limited to, clothing,
sporting equipment, or household items.
Event in South Carolina
The tangible personal property
is shipped from the distribution
facility, warehouse or retail
facility in South Carolina to an
employee in South Carolina as a
sample to show or display to
customers located either inside
or outside of South Carolina.
The sample is available for sale
while being shown or displayed
by the employee.

The tangible personal property
is shipped from the distribution
facility, warehouse or retail
facility in South Carolina to an
employee outside of South
Carolina as a sample to show or
display to customers located
either inside or outside of South
Carolina.

Event Outside of South
Carolina
None

The employee receives the
tangible personal property
outside of South Carolina and
shows or displays the sample to
customers located either inside
or outside of South Carolina.
The sample is available for sale
while being shown or displayed
by the employee.

10

Taxability of Situation #5
Since the sample is available for
sale, it is not subject to the tax
unless otherwise used or
consumed by the employee or
business in South Carolina or
until sold at retail in South
Carolina. If used or consumed
in South Carolina, the taxable
event is the use or consumption
in South Carolina and the sales
tax is due based upon the fair
market value of tangible
personal property. If sold at
retail in South Carolina, the
sales tax is due on the “gross
proceeds” of the sale. 11
Since the sample is available for
sale, it is not subject to the tax
unless otherwise used or
consumed by the employee or
business in South Carolina or
until sold at retail in South
Carolina. If used or consumed
in South Carolina, the taxable
event is the use or consumption
in South Carolina and the sales
tax is due based upon the fair
market value of tangible
personal property. If sold at
retail in South Carolina, the
sales tax is due on the “gross
proceeds” of the sale. 12

The determination that tangible personal property is available for sale while being shown or displayed by
an employee will be based on the facts and circumstance as supported by the taxpayer’s records. Factors to
consider in making this determination include but are limited to, the taxpayer’s operational requirements or
restrictions, whether the product is subsequently discounted when sold due to use (see “Note” below), the
employees’ history of selling or not selling the samples. etc. If the facts and circumstances and the
taxpayer’s records do not support that the tangible personal property is available for sale, the Department
will apply the tax as set forth in Scenario #4.
11
See footnote #6.
12
See footnote #6.

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Situation #5 – Sent to Employee to Show or Display as a Sample – Continued:

Event in South Carolina
The employee receives the
tangible personal property from
outside of South Carolina and
shows or displays the sample to
customers located either inside
or outside of South Carolina.
The sample is available for sale
while being shown or displayed
by the employee.

Event Outside of South
Carolina
The tangible personal property
is shipped from the distribution
facility, warehouse or retail
facility outside of South
Carolina to an employee in
South Carolina as a sample to
show or display to customers
located either inside or outside
of South Carolina.

Taxability of Situation #5
Since the sample is available for
sale, it is not subject to the tax
unless otherwise used or
consumed by the employee or
business in South Carolina or
until sold at retail in South
Carolina.
If used or consumed in South
Carolina, the taxable event is
the use or consumption in South
Carolina and the use tax is due
based upon the fair market
value of tangible personal
property. A credit under Code
Section 12-36-1310(C) will be
allowed against the SC use tax
for any tax legally due and paid
in the other state on the
withdrawal, use or consumption
in that state.
If sold at retail in South
Carolina, the sales tax is due on
the “gross proceeds” of the
sale. 13

Note: In this Scenario #5, its states that tangible personal property sent to employees as a sample to show or
display to customers is not subject to the tax if the sample is still available for sale while being shown or
displayed by the employee, unless “otherwise used or consumed by the employee or business in South
Carolina.” Examples of samples available for sales that are “otherwise used or consumed by the employee
or business in South Carolina” include, but are not limited to (1) an employee who shows or displays the
sample but also demonstrates how the product is used such as demonstrating the effectiveness of a vacuum
cleaner, (2) an employee who shows and displays the sample but gives it away to the customer as a
promotion or an enticement to buy the product, and (3) an employee who shows or displays the sample but
also uses a sample for his own personal use. The determination as to whether samples that are available for
sale are “otherwise used or consumed by the employee or business in South Carolina” will be based on the
facts and circumstances.

13

See footnote #8.

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