When are South Carolina hotel stays for government, diplomatic, nonprofit, or Red Cross travelers exempt from sales tax?

Plain-English summary

The South Carolina Department of Revenue gave hotels a category-by-category guide to lodging exemptions. The result generally depended on who purchased the room and who was directly liable for payment.

Federal-government, federal-credit-union, and American Red Cross stays were exempt when the organization was billed directly, its centrally billed card was used, or payment came by its check. The same stay was taxable when the employee paid and later received reimbursement. State and local government employee lodging was taxable regardless of whether the employee or government paid.

Foreign diplomats qualified only to the extent authorized by a valid Office of Foreign Missions exemption card, with the required protocol number recorded. Among nonprofit organizations, the ruling recognized a narrow lodging exemption only for an employee of a qualifying charitable hospital predominantly serving children without charge, and only with direct hospital payment. Lodging for employees of other nonprofits was taxable.

What this means for you

Hotels and lodging operators

The traveler's employer or official purpose alone did not establish exemption. Verify the exempt entity, the card or payment method, and any required identification before removing tax.

Government and nonprofit travelers

Personal payment followed by reimbursement often produced a taxable stay. The ruling treated the employee as the purchaser when the employee was directly billed and responsible for payment.

Accountants and tax professionals

Separate South Carolina's state accommodations and Department-administered local option sales taxes from any county-collected local accommodations tax. This ruling expressly left the latter outside its scope.

Common questions

Q: Is a federal employee's official hotel stay automatically exempt?
A: No. It was exempt when the federal government was directly billed or paid; it was taxable when the employee paid and was reimbursed.

Q: Are state or local government employee stays exempt?
A: No. The ruling treated them as taxable even when the government paid the charge.

Q: How did the ruling treat federal credit unions and the Red Cross?
A: Direct organizational payment qualified, while employee payment followed by reimbursement did not.

Q: Are all nonprofit employee stays exempt?
A: No. The ruling recognized only the described statutory category for a qualifying charitable children's hospital; other nonprofit employee lodging was taxable.

Q: What was required for a diplomat's exemption?
A: A qualifying Office of Foreign Missions card, compliance with its stated exemption limits, and recording the protocol identification number on the transaction record.

Q: Did this ruling cover every local lodging tax?
A: No. It expressly excluded local accommodations taxes due to and collected directly by a county.

Citations and references

• S.C. Code § 12-36-920(A)-(B) (accommodations and additional guest charges)
• S.C. Code § 12-36-2120(1) (sales the state is constitutionally or federally prohibited from taxing)
• S.C. Code § 12-36-2120(2) (federal-government purchases)
• S.C. Code § 12-36-2120(41) and (47) (nonprofit-related exemptions discussed in the ruling)
• SC Revenue Ruling 09-1 (federal credit-card billing guidance)
• SC Revenue Ruling 04-1 (superseded by this ruling)
• Department of Employment v. United States, 385 U.S. 355 (1966) (American Red Cross as a federal instrumentality)

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR09-2.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 #09-2

SUBJECT:

Accommodations Furnished to Government Employees, Foreign
Diplomats, and Nonprofit Organization Employees
(Sales Tax)

EFFECTIVE DATE: November 30, 2008
SUPERSEDES:

SC Revenue Ruling #04-1

REFERENCES:

S. C. Code Ann. Section 12-36-920 (Supp. 2008)
S. C. Code Ann. Section 12-36-2120 (Supp. 2008)
S. C. Code Ann. Section 12-36-1110 (Supp. 2008)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2008)
S.C. Code Ann. Section 1-23-10(4) (2008)
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.

Code Section 12-36-920 provides for a 7% sales tax on accommodations (a 5% State sales tax
and a 2% accommodations tax) and a 6% State sales tax on additional guest charges. The statute
reads:
(A) A sales tax equal to seven percent is imposed on the gross proceeds derived from the
rental or charges for any rooms, campground spaces, lodgings, or sleeping
accommodations furnished to transients by any hotel, inn, tourist court, tourist camp,
motel, campground, residence, or any place in which rooms, lodgings, or sleeping
accommodations are furnished to transients for a consideration. This tax does not apply
where the facilities consist of less than six sleeping rooms, contained on the same
premises, which is used as the individuals place of abode. The gross proceeds derived
from the lease or rental of sleeping accommodations supplied to the same person for a
period of ninety continuous days are not considered proceeds from transients. The tax
imposed by this subsection (A) does not apply to additional guest charges as defined in
subsection (B).

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(B) A sales tax of [six] percent is imposed on additional guest charges at any place where
rooms, lodgings, or accommodations are furnished to transients for a consideration,
unless otherwise taxed under this chapter. The term additional guest charges includes,
but is not limited to:
(1) room service;
(2) amenities;
(3) entertainment;
(4) special items in promotional tourist packages;
(5) laundering and dry cleaning services;
(6) in-room movies;
(7) telephone charges;
(8) rentals of meeting rooms; and
(9) other guest services.
Code Section 12-36-2120 provides certain exemptions from the sales tax on accommodations
and additional guest charges. Exemptions are available for:

1. The federal government (including federally chartered credit unions and the American Red
   Cross). Code Section 12-36-2120(2) exempts tangible personal property sold to the federal
   government.
2. Foreign diplomats. Code Section 12-36-2120(1) exempts sales of tangible personal property
   which the State is prohibited from taxing by the Constitution or laws of the United States of
   America or this State.
3. Nonprofit organizations. Code Section 12-36-2120(41) exempts items sold by organizations
   under Section 12-37-220A(3) and (4) and B(5), (6), (7), (8), (12), (16), (19), (22), and (24), if
   the net proceeds are used exclusively for exempt purposes and no benefit inures to any
   individual. Code Section 12-36-2120(47) exempts tangible personal property sold to
   charitable hospitals predominately serving children exempt under Section 12-37-220, where
   care is provided without charge to the patient.
   The purpose of this advisory opinion is to assist the hospitality industry in determining the
   proper taxation of accommodations furnished to employees of the government, federal credit
   unions, nonprofit organizations, the American Red Cross, and foreign diplomats. Note: This
   document addresses the 7% sales tax on accommodations and any local option sales taxes
   collected by the Department; it does not address any local taxes on accommodations that may be
   due and collected directly by a county.
4. Federal Government Employee. The taxability of accommodations furnished to a federal
   government employee depends upon whether the sale is between the retailer and the
   employee or between the retailer and the federal government. SC Revenue Ruling #09-1 –
   Federal Employee Credit Cards for more detailed information.
   a. Taxable Accommodations – Sales Between Retailer and Federal Employee.
   Accommodations furnished to a federal government employee conducting official
   business are subject to sales tax when the employee pays for the charge and is reimbursed
   by the federal government.
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b. Exempt Accommodations – Sales Between Retailer and Federal Government.
Accommodations furnished to a federal government employee conducting official
business are exempt from sales tax if: (1) the federal government is billed directly, (2) the
federal employee uses a credit card that is billed directly to the federal government (see
discussion below), or (3) the federal employee pays with a federal government check.
The following briefly explains the applicability of sales tax on accommodations purchased by
a federal employee with a US Government travel credit card and integrated credit card.
Travel Charge Card. This card is used for official government travel and travel related
expenses. The taxability of the purchase depends on whether the employee or the federal
government is billed as described below:
a. Individually Billed Taxable Sale. Travel charge cards that are billed to the employee
are subject to sales tax. The partial account numbers for these travel charge cards are:
Visa #4486 and #4614 and the sixth digit is 1, 2, 3 or 4;
Mastercard #5565 and #5568 and the sixth digit is 1, 2, 3 or 4.
b. Centrally Billed Exempt Sale. Travel charge cards that are billed directly to the
federal government are not subject to sales tax. The partial account numbers for these
charge cards are:
Visa #4486 and #4614 and the sixth digit is 0,6,7,8 or 9;
Mastercard #5565 and #5568 and the sixth digit is 0,6,7,8 or 9.
Integrated Charge Card. The integrated charge card combines two or more business lines
(i.e., travel, fleet, and/or purchase) and offers a single card for all purchases. Currently,
this card is used only by the Department of the Interior. The Department of Interior’s
Mastercard begins with #5565 or #5568. If the 6th digit is 6, 7, 8, or 9, then the
accommodations furnished are centrally billed to the federal government and are exempt
from sales and use tax; if the 6th digit is 1, 2, 3, or 4, then the accommodations furnished
are directly billed to the employee are a subject to sales tax.

2. State or Local Government Employee. Sales of accommodations to any state or local
   government employee (including an employee of a school district, college, etc.) are subject to
   sales tax regardless of whether the state or local government or the employee pays for the
   charges.
3. Federal Credit Union Employee. The taxability of accommodations furnished to a federal
   credit union employee depends upon whether the sale is between the retailer and the
   employee or between the retailer and the federal credit union 1 .

1

South Carolina Attorney General Opinion #S-OAG-59 concluded that federally chartered credit unions are
instrumentalities of the federal government.

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a. Taxable Accommodations – Sale Between Retailer and Federal Employee.
Accommodations furnished to a federal credit union employee are subject to sales tax
when the employee pays for the charge and is reimbursed by the federal credit union.
b. Exempt Accommodations – Sale Between Retailer and Federal Credit Union.
Accommodations furnished to a federal credit union employee are exempt from sales tax
if: (1) the federal credit union is billed directly, (2) the federal credit union employee uses
a credit card that is billed directly to the federal credit union, or (3) the federal credit
union employee pays with a federal credit union check. Note: This exemption does not
apply to a federal credit union employee who works for an association that represents
various federal credit unions if the association pays the charges since the association is
not a federal credit union.

4. Foreign Diplomats. Accommodations furnished to foreign diplomats are exempt from sales
   tax in accordance with the type of card issued by, and the level of exemption authorized by,
   the Office of Foreign Mission. Retailers furnishing accommodations to foreign officials are
   required to record the protocol identification number from the tax exemption card on the
   invoice, bill of sale, cash register tape, or other written evidence of the transaction. See SC
   Information Letter #03-25 – Foreign Diplomats for more detailed information.
   Exemption Cards Issued by the Office of Foreign Missions. The two types of tax exemption
   cards are:
5. Personal Tax Exemption Card. This card is used for exemption from state and local sales,
   restaurant, lodging, and similar taxes normally charged to a customer, and may be used
   only for the personal use of the bearer whose picture appears on the front of the card.
   Vendors may ask to see additional forms of identification, such as diplomatic I.D., or
   driver’s license.
6. Mission Tax Exemption Card. This card is issued to embassies, consulates, and
   international organizations for official purchases only and for the sole benefit of the
   mission identified on the face of the card. All purchases must be made in the name of the
   mission and paid for by mission check or credit card (not cash or personal check).
   Personal purchases are prohibited.
   Each tax exemption card contains the individual’s name, photograph, mission employed by,
   an expiration date, and a protocol identification number for identification purposes. Each
   card will have one of two different levels of sales and use tax exemption and is indicated by
   the color of the card and the written explanation in the colored box. A card with a blue strip
   exempts the bearer from all state and local taxes on all personal and official purchases. A
   card with a yellow stripe allows a full tax exemption on all personal and official purchases
   except restricted categories or amounts identified on the face of the card. The tax exemption
   card, however, is not valid for exemption from taxes on telephones, other utilities, or gasoline
   purchases.

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5. Nonprofit Organization. Only accommodations furnished to an employee of a charitable
hospital predominately serving children exempt under Section 12-37-220, where care is
provided without charge to the patient as provided in Code Section 12-36-2120(47) are
exempt from sales tax if: (1) the qualifying hospital is billed directly for the transaction, (2)
the qualifying hospital employee uses a credit card that is billed directly to the hospital, or (3)
the nonprofit employee pays with a hospital check.
Sales of accommodations to employees of all other nonprofit organizations are subject to
sales tax regardless of whether the nonprofit organization or the employee pays for the
charges. See SC Revenue Procedure #03-6 – Exemption Certificates – Sales by Certain
Nonprofit Organizations for more detailed information.

6. American Red Cross Employee. The taxability of accommodations furnished to an American
   Red Cross 2 employee depends upon whether the sale is between the retailer and the
   employee or between the retailer and the American Red Cross.
   a. Taxable Accommodations - Accommodations furnished to an American Red Cross
   employee is subject to sales tax when the employee pays for the charge and is reimbursed
   by the American Red Cross.
   b. Exempt Accommodations - Accommodations furnished to an American Red Cross
   employee are exempt from sales tax if: (1) the American Red Cross is billed directly, (2)
   the American Red Cross employee uses a credit card that is billed directly to the
   American Red Cross, or (3) the American Red Cross employee pays with an American
   Red Cross check.
   SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Ray N. Stevens
Ray N. Stevens, Director
, 2009
February 23
Columbia, South Carolina

2

The American Red Cross is an instrumentality of the United States government. See
Department of Employment et.al. v. United States, 385 U.S. 355 (1966).
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