What must a South Carolina datacenter do to qualify computers, equipment, software, and electricity for the sales-tax exemption?
Apply this to your situation
This page answers the general question as of 2013. Ezel answers yours, under current South Carolina tax law, with citations.
Plain-English summary
South Carolina Revenue Ruling 13-5 explains the sales-and-use-tax exemption for qualifying datacenters. The exemption can cover original and replacement computers, servers, networking and storage equipment, hardware, software, cooling systems, related components, electricity used by the datacenter, and property used to generate, transform, transmit, distribute, or manage electricity at the site.
The facility must be at one South Carolina location, provide hosting or data-processing infrastructure, and have concurrently maintainable power and cooling systems with redundant capacity and multiple distribution paths.
The ruling requires either:
- at least $50 million of real or personal property investment by one taxpayer over five years; or
- at least $75 million of aggregate investment when more than one taxpayer invests at the facility.
The facility must also create at least 25 full-time jobs, average the compensation level stated in the statute, and maintain those jobs for three consecutive years after meeting the investment and job requirements. Department of Commerce certification and written notices to both Commerce and Revenue are required before the exemption can be used.
What property qualifies
The ruling identifies qualifying property such as servers, routers, switches, power units, network devices, hard drives, processors, memory modules, motherboards, racks, cabling, cooling apparatus, storage devices, connectivity equipment, peripheral systems, software, and repair or replacement parts.
It also covers eligible electrical property, including exterior substations and other property used to generate, transform, transmit, distribute, or manage electricity at the datacenter. Later purchases replacing deployed equipment or supporting future expansions can qualify under the ruling.
The exemption applies only to property used at the specific certified datacenter. It is not a taxpayer-wide exemption for equipment at other locations.
Electricity limits
Not all electricity consumed at the site is exempt. The ruling excludes electricity used for purposes such as administrative and supervisory offices, parking lots, warehouses, maintenance shops, comfort air conditioning, personnel elevators, cafeterias, first-aid rooms, supply rooms, water coolers, and similar non-datacenter uses.
If the facility later falls below the required qualifying-job level, the equipment exemption stops until the job requirement is restored. The electricity exemption becomes proportional: the exempt percentage is the number of qualifying jobs divided by 25.
Notice, certification, and timing
The taxpayer or facility must notify both the Department of Revenue and Department of Commerce in writing. The five-year investment and job-creation period begins with the notice and Commerce certification, as described in the ruling.
After meeting the requirements, or at the end of the five-year period, the taxpayer must notify Revenue whether the requirements were met and provide the proof Revenue requests. The Department issues an exemption certificate for qualifying purchases. Misuse of that certificate makes the purchaser liable for tax, interest, and penalties.
The ruling states that the exemption applies only to a datacenter certified before January 1, 2032 and continues for an additional ten-year period for a taxpayer certified by December 31, 2031. Those statutory dates should be checked against current law before planning an investment.
Investment and job details
Qualifying investment is real or personal property at the single datacenter, including land, buildings, computers, equipment, fixtures, furniture, infrastructure, machinery, office equipment, and site preparation. Wages, employee benefits, taxes, raw materials, and inventory do not count.
The 25 jobs must be full-time positions requiring at least 35 hours per week for the company's normal operating year. Their average cash compensation must meet the statutory percentage of state or county per-capita income described in the ruling. After the investment and job thresholds are met within five years, those jobs must be maintained for three consecutive years.
Failure and recordkeeping
If the taxpayer fails to meet the investment or job-creation requirements by the end of five years, the Department may assess state and local sales or use tax on purchases previously treated as exempt.
The taxpayer must retain evidence supporting both the investment and job requirements, including closing documents, construction contracts, paid invoices, and payroll records. The assessment limitations period is suspended during the notice-to-final-report period and during the three-year job-maintenance period, as described in the ruling.
Common questions
Q: Does the exemption cover replacement servers and repair parts?
A: Yes, when they are qualifying property used at the certified datacenter.
Q: Is all electricity at the facility exempt?
A: No. Electricity for administrative, employee-comfort, parking, storage, maintenance, and other listed non-datacenter uses remains taxable.
Q: Can investment at another company location count?
A: No. The ruling limits the investment to real or personal property at the single datacenter facility.
Q: What happens if qualifying employment drops below 25 jobs?
A: The equipment exemption is unavailable until the prior job requirement is restored, and the electricity exemption is reduced proportionately.
Citations and references
- S.C. Code Ann. § 12-36-2120(79) — datacenter definitions, exempt property, investment, jobs, notices, certification, recapture, and stated expiration rules
- S.C. Code Ann. § 12-36-2510 — exemption-certificate authority cited by the ruling
- S.C. Code Ann. § 12-54-85 — assessment limitations and suspension periods discussed by the ruling
Subject
Datacenter Computers, Computer Equipment, Computer Hardware and Software, and Electricity
Source
- Landing page: https://dor.sc.gov/advisory-opinion-search
- Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR13-5.pdf
Original ruling text
State of South Carolina
Department of Revenue
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 125, Columbia, South Carolina 29214
SC REVENUE RULING #13-5
SUBJECT:
Datacenter Computers, Computer Equipment, Computer Hardware and
Software, and Electricity
(Sales and Use Taxes)
EFFECTIVE DATE:
June 7, 2012
SUPERSEDES:
All previous documents and any oral directives in conflict herewith.
REFERENCE:
S.C. Code Ann. Section 12-36-2120(79) (Supp. 2012)
AUTHORITY:
S.C. Code Ann. Section 12-4-320 (2000)
S.C. Code Ann. Section 1-23-10(4) (Supp. 2012)
SC Revenue Procedure #09-3
SCOPE:
The purpose of a Revenue Ruling is to provide guidance to the public. It
is an advisory opinion issued to apply principles of tax law to a set of
facts or a 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:
In 2012, the General Assembly enacted a sales and use tax exemption for computers, computer
equipment, computer hardware, and computer software used within a datacenter that meets
certain requirements. The exemption also applies to electricity used by the datacenter and
property used for the generation, transformation, transmission, distribution, or management of
electricity located and used at the datacenter.
The purpose of this advisory opinion is to address various issues related to this new exemption.
LAW:
Code Section 12-36-2120(79) exempts from the sales and use tax:
(A)(1) original or replacement computers, computer equipment, and computer
hardware and software purchases used within a datacenter; and
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(2) electricity used by a datacenter and eligible business property to be located
and used at the datacenter. This subsubitem does not apply to sales of electricity
for any other purpose, and such sales are subject to the tax, including, but not
limited to, electricity used in administrative offices, supervisory offices, parking
lots, storage warehouses, maintenance shops, safety control, comfort air
conditioning, elevators used in carrying personnel, cafeterias, canteens, first aid
rooms, supply rooms, water coolers, drink boxes, unit heaters and waste house
lights.
(B) As used in this section:
(1) 'Computer' means an electronic device that accepts information in digital or
similar form and manipulates it for a result based on a sequence of instructions.
(2) 'Computer equipment' means original or replacement servers, routers,
switches, power units, network devices, hard drives, processors, memory
modules, motherboards, racks, other computer hardware and components,
cabling, cooling apparatus, and related or ancillary equipment, machinery, and
components, the primary purpose of which is to store, retrieve, aggregate, search,
organize, process, analyze, or transfer data or any combination of these, or to
support related computer engineering or computer science research. This also
includes equipment cooling systems for managing the performance of the
datacenter property, including mechanical and electrical equipment, hardware for
distributed and mainframe computers and servers, data storage devices, network
connectivity equipment, and peripheral components and systems.
(3) 'Computer software' means a set of coded instructions designed to cause a
computer or automatic data processing equipment to perform a task.
(4) 'Concurrently maintainable' means capable of having any capacity component
or distribution element serviced or repaired on a planned basis without
interrupting or impeding the performance of the computer equipment.
(5) 'Datacenter' means a new or existing facility at a single location in South
Carolina:
(i) that provides infrastructure for hosting or data processing services and that
has power and cooling systems that are created and maintained to be
concurrently maintainable and to include redundant capacity components and
multiple distribution paths serving the computer equipment at the facility.
Although the facility must have multiple distribution paths serving the
computer equipment, a single distribution path may serve the computer
equipment at any one time;
(ii)(a) where a taxpayer invests at least fifty million dollars in real or personal
property or both over a five year period; or
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(b) where one or more taxpayers invests a minimum aggregate capital
investment of at least seventy-five million dollars in real or personal property
or both over a five year period;
(iii) where a taxpayer creates and maintains at least twenty-five full-time jobs
at the facility with an average cash compensation level of one hundred fifty
percent of the per capita income of the State or of the county in which the
facility is located, whichever is lower, according to the most recently published
data available at the time the facility is certified by the Department of
Commerce;
(iv) where the jobs created pursuant to subitem (B)(5)(iii) are maintained for
three consecutive years after a facility with the minimum capital investment
and number of jobs has been certified by the Department of Commerce; and
(v) which is certified by the Department of Commerce pursuant to subitem
(D)(1) under such policies and procedures as promulgated by the Department
of Commerce.
(6) 'Eligible business property' means property used for the generation,
transformation, transmission, distribution, or management of electricity, including
exterior substations and other business personal property used for these purposes.
(7) 'Multiple distribution paths' means a series of distribution paths configured to
ensure that failure on one distribution path does not interrupt or impede other
distribution paths.
(8) 'Redundant capacity components' means components beyond those required to
support the computer equipment.
(C)(1) To qualify for the exemption allowed by this item, a taxpayer, and the
facility in the case of a seventy-five million dollar investment made by more than
one taxpayer, shall notify the Department of Revenue and Department of
Commerce, in writing, of its intention to claim the exemption. For purposes of
meeting the requirements of subitems (B)(5)(ii) and (B)(5)(iii), capital investment
and job creation begin accruing once the taxpayer notifies each department. Also,
the five-year period begins upon notification.
(2) Once the taxpayer meets the requirements of subitem (B)(5), or at the end of
the five-year period, the taxpayer shall notify the Department of Revenue, in
writing, whether it has or has not met the requirements of subitem (B)(5). The
taxpayer shall provide the proof the department determines necessary to
determine that the requirements have been met.
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(D)(1) Upon notifying each department of its intention to claim the exemption
pursuant to subitem (C)(1), and upon certification by the Department of
Commerce, the taxpayer may claim the exemption on eligible purchases at any
time during the period provided in Section 12-54-85(F), including the time period
prior to subitem (B)(5)(iv) being satisfied.
(2) For purposes of this section, the running of the periods of limitations for
assessment of taxes provided in Section 12-54-85 is suspended for:
(i) the time period beginning with notice to each department pursuant to
subitem (C)(1) and ending with notice to the Department of Revenue pursuant
to subitem (C)(2); and
(ii) during the three year job maintenance requirement pursuant to subitem
(B)(5)(iv).
(E) Any subsequent purchase of or investment in computer equipment, computer
hardware and software, and computers, including to replace originally deployed
computer equipment or to implement future expansions, likewise shall qualify for
the exemption provided in this subitem, regardless of when the taxpayer makes
the investments.
(F)(1) If a taxpayer receives the exemption for purchases but fails to meet the
requirements of subitem (B)(5) at the end of the five-year period, the department
may assess any state or local sales or use tax due on items purchased.
(2) If a taxpayer meets the requirements of subitem (B)(5), but subsequently fails
to maintain the number of full-time jobs with the required compensation level at
the facility, as previously required pursuant to subitem (B)(5)(iii), the taxpayer is:
(i) not allowed the exemption for items described in subitem (A)(1) until the
taxpayer meets the previous qualifying jobs requirements pursuant to subitem
(B)(5)(iii); and
(ii) allowed the exemption for electricity pursuant to subitem (A)(2), but the
exemption only applies to a percentage of the sale price, calculated by dividing
the number of qualifying jobs by twenty-five.
(G) This subitem only applies to a datacenter that is certified by the Department
of Commerce pursuant to subitem (D)(1) prior to January 1, 2032. However, this
item shall continue to apply to a taxpayer that is certified by December 31, 2031,
for an additional ten year period. Upon the end of the ten year period, this subitem
is repealed.
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QUESTIONS AND ANSWERS:
Datacenter Requirements
- Q. What is a datacenter for purposes of the sales and use tax exemption in Code Section 1236-2120(79)?
A. A “datacenter” for purposes of the sales and use tax exemption in Code Section 12-362120(79) is a new or existing facility at a single location in South Carolina that provides
infrastructure for hosting or data processing services and that has power and cooling
systems that are created and maintained to be concurrently maintainable 1 and to include
redundant capacity components 2 and multiple distribution paths 3 serving the computer
equipment at the facility. Although the facility must have multiple distribution paths
serving the computer equipment, a single distribution path may serve the computer
equipment at any one time (Code Section 12-36-2120(79)(B)(5)). - Q. What investment and job requirements are required in order to qualify for the exemption
in Code Section 12-36-2120(79)?
A. The taxpayer must:
(a) invest, in the datacenter, at least $50 million in real or personal property or both
over a five year period. (Note: If there is more than one taxpayer investing in the
datacenter, these taxpayers must make an aggregate capital investment, at the
datacenter, of at least $75 million in real or personal property or both over a five
year period.) (Code Section 12-36-2120(B)(5)(ii));
(b) create and maintain, at the datacenter, at least 25 full-time jobs with an
average cash compensation level of the lower of 150% of per capita
income of South Carolina or 150% of the per capita income of the county
in which the datacenter is located. Such jobs must be created within the
five year period. (Note: The per capita income is based on the most
recently published data available at the time the datacenter is certified by
the Department of Commerce.) (Code Section 12-36-2120(B)(5)(iii)); and,
(c) maintain the 25 jobs created at the datacenter for three consecutive years after the
datacenter has been certified as having met the investment and jobs requirements.
(Code Section 12-36-2120(79)(B)(5)(iv)). See Question #21.
1 “Concurrently maintainable” means capable of having any capacity component or distribution element serviced or
repaired on a planned basis without interrupting or impeding the performance of the computer equipment (Code
Section 12-36-2120(79)(B)(4)).
2 “Redundant capacity components” means components beyond those required to support the computer equipment
(Code Section 12-36-2120(79)(B)(8)).
3 “Multiple distribution paths” means a series of distribution paths configured to ensure that failure on one
distribution path does not interrupt or impede other distribution paths (Code Section 12-36-2120(79)(B)(7)).
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Note: The taxpayer or facility must notify the Department of Revenue in
writing at the above address once it meets the definitional requirements of a
datacenter found in Code Section 12-36-2120(79)(B)(5) (which includes the
investment and jobs creation requirements), or at the end of the five year
investment period, that it has or has not met these requirements.
Tangible Personal Property Eligible for the Datacenter Exemption
- Q. What purchases of tangible personal property by a taxpayer for use at a qualifying
datacenter are exempt from the tax?
A. The following purchases for use at a qualifying datacenter are exempt from the sales and
use tax:
Computers
“Computers” are electronic devices that accept information in digital or similar form
and manipulate it for a result based on a sequence of instructions (Code Section 1236-2120(79)(B)(1)).
Computer equipment
“Computer equipment” means original or replacement servers, routers, switches,
power units, network devices, hard drives, processors, memory modules,
motherboards, racks, other computer hardware and components, cabling, cooling
apparatus, and related or ancillary equipment, machinery, and components, the
primary purpose of which is to store, retrieve, aggregate, search, organize, process,
analyze, or transfer data or any combination of these, or to support related computer
engineering or computer science research. This also includes equipment cooling
systems for managing the performance of the datacenter property, including
mechanical and electrical equipment, hardware for distributed and mainframe
computers and servers, data storage devices, network connectivity equipment, and
peripheral components and systems (Code Section 12-36-2120(79)(B)(2)).
Computer software
“Computer software” means a set of coded instructions designed to cause a computer
or automatic data processing equipment to perform a task (Code Section 12-362120(79)(B)(3)).
Electricity
Eligible business property
“Eligible business property” is property used for the generation, transformation,
transmission, distribution, or management of electricity, including exterior
substations and other business personal property used for these purposes (Code
Section 12-36-2120(79)(B)(6)).
Note: The exemption applies to any subsequent purchase of computer equipment,
computer hardware and software, and computers, including to replace originally deployed
computer equipment or to implement future expansions (Code Section 12-362120(79)(E)).
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4. Q. Are replacement parts and repair parts for computers, computer equipment, and eligible
business property that qualify for the exemption also exempt from the tax?
A. Yes, Purchases of replacement parts and repair parts for computers, computer equipment,
and eligible business property that qualify for the exemption also qualify for the
exemption (Code Section 12-36-2120(79)(A)(1) and (B)(2)).
- Q. Is all electricity used at a qualifying datacenter exempt?
A.
No. The exemption for electricity only applies to electricity used in the datacenter.
Examples of places where the use of electricity is not exempt include:
administrative offices
cafeterias
canteens
comfort air conditioning
drink boxes
elevators used in carrying personnel
first aid rooms
maintenance shops
parking lots
safety control
storage warehouses
supervisory offices
supply rooms
unit heaters
waste house lights
water coolers
See Code Section 12-36-2120(79)(A)(2).
Note: If a taxpayer meets the definitional requirements of a “datacenter” in Code
Section 12-36-2120(79)(B)(5), but subsequently fails to maintain the number of
full-time jobs with the required compensation level at the facility as required in
Code Section 12-36-2120(79)(B)(5)(iii), the taxpayer is still allowed the
exemption for electricity, but the exemption only applies to a percentage of the
sale price, calculated by dividing the number of qualifying jobs by twenty-five.
(See Code Section 12-36-2120(79)(F)(2).)
Notification Requirements
- Q. When and how must a taxpayer notify the Department of Revenue and the Department of
Commerce of the taxpayer’s intent to start using the exemption?
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A. Before a taxpayer or a facility may use the exemption, the taxpayer or facility must notify
the Department of Revenue and the Department of Commerce (Code Section 12-362120(79)(C)(1)). The notification must be in writing and mailed to the following two
addresses
S.C. Department of Revenue
Taxpayer Services & Operations
License and Registration Unit
P.O. Box 125
Columbia, S.C. 29214-0140
S.C. Department of Commerce
Datacenter Notification
1201 Main Street, Suite 1600
Columbia, SC 29201-3200
The written notice should include the taxpayer’s name, address, retail license number or
use tax registration number, the location of records, a brief description of the qualifying
investment and job creation, a brief description of property claimed to be exempt from
tax and where it will be used, the name and addresses of each taxpayer investing in the
facility (if more than one), and the name and telephone number of a person to contact
with respect to the exemption.
Important Note: The taxpayer or facility must also notify the Department of
Revenue in writing at the above address once it meets the definitional requirements
of a datacenter found in Code Section 12-36-2120(79)(B)(5) (which includes the
investment and jobs creation requirements), or at the end of the five year
investment period, that it has or has not met these requirements. The taxpayer or
facility must provide proof the Department of Revenue determines necessary to
determine that the requirements have been met. The taxpayer is not required to
send this second notice – that it has or has not met the definitional requirements of
Code Section 12-36-2120(79)(B)(5) – to the Department of Commerce.
Exemption - Effective Dates, Usage, and Exemption Certificate
- Q. When may the taxpayer first use the exemption?
A. The exemption is available to the taxpayer when the taxpayer notifies both the
Department of Revenue and the Department of Commerce of its intent to make the
required investment and create and maintain the required number of jobs and the
datacenter has been certified by the Department of Commerce.
Note: The Department of Revenue, under its authority in Code Section 12-36-2510 and
for the efficient administration of this exemption, will issue an exemption certificate to
the taxpayer for use in purchasing items exempt under this exemption.
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8. Q. Is the sales and use tax exemption limited to one specific datacenter facility?
A. Yes. The exemption applies only to computers, computer equipment, computer software,
electricity, and eligible business property purchased for use at a specific datacenter
facility that meets all the requirements of the exemption (Code Section 12-362120(79)(A) and (B)(5)).
- Q. How long is the datacenter sales and use tax exemption available?
A. The datacenter sales and use tax exemption only applies to a datacenter that is certified
by the Department of Commerce prior to January 1, 2032. If a datacenter is certified by
December 31, 2031, the exemption will remain in effect for an additional ten year period
until December 31, 2041. Upon the end of the ten year period, the exemption is repealed
and no further exemption is allowed (Code Section 12-36-2120(79)(G)). - Q. What must the taxpayer present to suppliers to make tax-exempt purchases under the
exemption?
A. The Department will issue an exemption certificate to the taxpayer or facility. This
certificate is to be presented to suppliers to make qualifying tax-exempt purchases. - Q. Who will be held liable for any taxes due if the certificate is used to make purchases that
do not come within the exemption - the supplier or the purchaser?
A. If the certificate is used to make purchases tax-free that do not come within the
exemption, then the purchaser, not the supplier, will be held liable for any taxes, interest
and penalties due. - Q. Is there a time limitation in which the Department may assess sales and use taxes on
purchases that do not come within the requirements of the datacenter exemption?
A. The statutory time limitations for assessing taxes under Code Section 12-54-85 apply.
However, the running of the periods of limitations for assessment of taxes provided in
Section 12-54-85 is suspended for:
(a) the time period beginning with initial notice to each department
(Department of Revenue and Department of Commerce) required under Code
Section 12-36-2120(79)(C)(1) and ending with notice to the Department of
Revenue required under Code Section 12-36-2120(79)(C)(2); and
(b) during the three year job maintenance requirement required under Code
Section 12-36-2120(79)(B)(5)(iv).
See Code Section 12-36-2120(79)(D)(2).
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Investment Requirements
- Q. When does the five-year investment period begin?
A. The five year investment period begins on the date the taxpayer or facility notifies the
Department of Revenue and the Department of Commerce of its intent to use the
exemption and upon certification by the Department of Commerce (Code Section 12-362120(79)(C)(1)). - Q. What expenditures meet the investment requirement?
A. The investment is limited to real or personal property at the single datacenter facility in
South Carolina. This includes expenditures for:
buildings
computers
computer equipment
equipment
fixtures
furniture
infrastructure development (roads, water, sewer, etc.)
land
machinery
office equipment (computers, copiers, and similar office equipment)
site preparation
Expenditures for employee wages, employee benefits, taxes, raw material and inventory
are examples of expenditures that do not meet the investment requirement. - Q. Is it required that the investment must be made at the location of the datacenter facility?
A. Yes (Code Section 12-36-2120(79)(B)(5)). - Q. If the taxpayer operating the datacenter has related entities (e.g., subsidiary corporations),
are investments by these related entities of the taxpayer at the datacenter included in
determining if the taxpayer has met the investment requirement under the exemption?
A. Yes; however, the investment requirement is $75 million (instead of $50 million) where
more than one taxpayer is investing in the datacenter (Code Section 12-362120(79)(C)(1)).
Job Requirements
- Q. How many jobs must be created and maintained at the datacenter for the taxpayer or
facility to qualify for the datacenter exemption?
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A. The taxpayer must create and maintain at least 25 full-time jobs at the datacenter facility
to qualify for the datacenter exemption (Code Section 12-36-2120(79)(B)(iii)). These
jobs must meet certain compensation requirements as discussed in Question #18.
- Q. What compensation requirements must be met in order for the jobs to qualify?
A. 1. At least 25 jobs must be full-time jobs. "Full-time" means a job requiring a minimum
of thirty-five hours of an employee's time a week for the entire normal year of company
operations (Code Section 12-36-2120(79)(B)(iii)). - The 25 full-time jobs must have an average cash compensation level of 150% of the
per capita income of the State or of the county in which the datacenter facility is located,
whichever is lower. The determination of the per capita income is based on the most
recently published data available at the time the facility is certified by the Department of
Commerce (Code Section 12-36-2120(79)(B)(iii)). - The 25 full-time jobs must be maintained for three consecutive years after the
datacenter facility has been certified as having met the investment and jobs requirements.
(Code Section 12-36-2120(79)(B)(5)(iv)). See Question #2.
Note: The taxpayer or facility must notify the Department of Revenue in writing at
the above address once it meets the definitional requirements of a datacenter found
in Code Section 12-36-2120(79)(B)(5) (which includes the investment and jobs
creation requirements), or at the end of the five year investment period, that it has
or has not met these requirements. The taxpayer or facility must provide proof the
Department of Revenue determines necessary to determine that the requirements
have been met. - Q. Must the 25 full-time jobs be maintained for 3 consecutive years after the 5 year
investment period ends?
A. No. The jobs must be created during the 5 year investment period, but they do not have to
be maintained for 3 consecutive years prior to the end of the 5 year investment period.
Once the jobs have been created and the taxpayer has met the minimum dollar investment
requirement within the 5 years, then the taxpayer must maintain the 25 jobs for 3
consecutive years from that point.
For example:
(a) If a taxpayer notifies the Department of its intent to use the exemption on
January 1, 2013 and it takes until December 31, 2017 (the full 5 years
allowed) to meet the investment requirement and to create at least 25 jobs
meeting the requirements of the exemption, then the taxpayer must maintain
those 25 jobs for 3 consecutive years – 2018, 2019, and 2020.
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(b) If a taxpayer notifies the Department of its intent to use the exemption on
January 1, 2013 and it takes 3 years (until December 31, 2015) to meet the
investment requirement and to create at least 25 jobs meeting the requirements
of the exemption, then the taxpayer must maintain those 25 jobs for 3
consecutive years – 2016, 2017, and 2019.
(c) If a taxpayer notifies the Department of its intent to use the exemption on
January 1, 2013 and it takes 1 year and 6 months (until June 30, 2014) to meet
the investment requirement and to create at least 25 jobs meeting the
requirements of the exemption, then the taxpayer must maintain those 25 jobs
for 3 consecutive years from July 1, 2014 until June 30, 2017.
Failure to Meet Investment and Job Requirements
- Q. What happens if the taxpayer fails to meet the investment and job requirements of the
datacenter exemption?
A. If a taxpayer receives the exemption for purchases but fails by the end of the fiveyear period to meet the investment requirement, or fails by the end of the fiveyear period to create at least 25 full-time jobs meeting the average cash
compensation level set forth in the exemption statute, the department may assess
any state or local sales or use tax due on items purchased.
If a taxpayer meets the investment and job requirements within the five-year
period, but subsequently fails to maintain the number of full-time jobs with the
required compensation level at the facility, as required under Code Section 12-362120(79)(B)(5)(iii), the taxpayer is:
(a) not allowed the exemption for items described in Code Section 12-362120(79)(A)(1) until the taxpayer meets the previous qualifying jobs
requirements under Code Section 12-36-2120(79)(B)(5)(iii); and
(b) allowed the exemption for electricity under Code Section 12-362120(79)(A)(2), but the exemption only applies to a percentage of the
sale price, calculated by dividing the number of qualifying jobs by
twenty-five.
See Code Section 12-36-2120(79)(F).
Records
- Q. What records must taxpayers keep with respect to this exemption?
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A. Taxpayers must substantiate they have met the investment requirement and the job
requirements. Like other records maintained for tax purposes, the records must be readily
available for inspection by the Department. Examples of records that must be maintained
are real estate closing documents, building contracts, purchase invoices with evidence of
payment, and payroll records. These records must be maintained during the statutory time
period in which the Department may assess taxes as discussed in Question #12.
SOUTH CAROLINA DEPARTMENT OF REVENUE
s/William M. Blume, Jr.
William M. Blume, Jr., Director
August 25
, 2013
Columbia, South Carolina
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