How does South Carolina sales and use tax apply to kayak and paddle-board rentals, tours, and businesses that do both?

Plain-English summary

South Carolina Revenue Ruling 15-1 divided kayak and paddle-board businesses into three models.

Rental-only business

Customer rental charges were subject to state sales and use tax plus applicable local tax. Because the business acquired the kayaks and boards to rent them to customers, it could buy them at wholesale using a resale certificate without paying tax at purchase.

Tour-only business

The charge for a guided river or lake tour was a nontaxable service charge. But the tour company was the consumer of the kayaks and boards it used to provide that service, so its equipment purchases were taxable. It paid the seller or remitted use tax directly to the Department.

Business offering rentals and tours with the same equipment

Rental charges remained taxable. When wholesale-bought rental equipment was instead used to provide a tour, that use was a taxable withdrawal for use.

The business could account for that tax in one of two ways:

1. pay tax on the full equipment purchase price, after which later tour use created no additional withdrawal tax; or
2. buy the equipment at wholesale and report tax each time it was used on a tour, measured by the customary fair market rental value for the same period.

Once the business chose a method, Regulation 117-318.4 required it to continue until the Department gave written permission to change.

The ruling's numerical example

If a kayak rented for $20 per hour and a guided tour cost $100 per hour, the rental itself was taxable on $20. When the same wholesale-bought kayak was used on the tour, tax was due on $20 of the $100 tour charge as the kayak's fair market rental value—not on the full $100 service charge.

If the business had already paid tax on the kayak's full purchase price, no additional withdrawal-for-use tax was due for using it on that tour.

Retail-license point

A business selling or renting kayaks, paddle boards, souvenirs, clothing, food, or other tangible personal property needed a retail license. A tour-only service provider that did not make retail sales was treated differently under the ruling's facts.

Common questions

Q: Are kayak rental charges taxable?

A: Yes, including applicable local sales and use tax.

Q: Is a guided kayak tour taxable?

A: The tour charge itself was a nontaxable service under RR 15-1.

Q: Can a tour-only company buy kayaks tax-free for resale?

A: No. It used the equipment to provide its service and was the taxable consumer.

Q: What if the same kayak is rented and used on tours?

A: Rental receipts were taxable, and tour use triggered withdrawal-for-use tax unless tax had already been paid on the equipment's full purchase price.

Q: Can the business switch accounting methods whenever it wants?

A: No. The regulation required written Department permission to change after making an election.

Citations and references

• S.C. Code Ann. Sections 12-36-910 and 12-36-1310 (sales and use tax)
• S.C. Code Ann. Section 12-36-100 (leases and rentals included in sales)
• S.C. Code Ann. Sections 12-36-110 and 12-36-120 (retail and wholesale sales)
• S.C. Code Ann. Section 12-36-90 (fair market value of wholesale property withdrawn for use)
• S.C. Regulation 117-318.4 (rental property also used by the renter)
• SC Revenue Procedure #08-2 (resale certificates referenced by the ruling)

Subject

Kayaks and Paddle Boards – Rentals and Tours

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR15-1.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 #15-1

SUBJECT:

Kayaks and Paddle Boards – Rentals and Tours
(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) (2014)
S. C. Code Ann. Section 12-36-1310 (A)(2014)
S. C. Code Ann. Section 12-36-1110 (2014)
S. C. Code Ann. Section 12-36-60 (2014)
S. C. Code Ann. Section 12-36-100 (2014)
S. C. Code Ann. Section 12-36-110 (2014)
S. C. Code Ann. Section 12-36-120 (2014)
S. C. Code Ann. Section 12-36-90 (2014)
SC Regulation 117-318.4

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2014)
S. C. Code Ann. Section 1-23-10(4) (2005)
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 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 South Carolina sales and use tax to the following kayak and paddle
board businesses:

1. A business that only rents kayaks and paddle boards and does not conduct tours.
2. A business that only conducts tours of rivers and lakes using kayaks and paddle boards
   and does not rent kayaks and paddle boards.

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3. A business that rents kayaks and paddle boards and also conducts tours using the same
kayaks and paddle boards.
Conclusion:
The South Carolina sales and use tax applies to the kayak and paddle board rental and tour
industry as follows:

1. If the business only rents kayaks and paddle boards and does not conduct tours, then
   rentals of the kayaks and paddle boards by the business to customers are subject to the
   State sales and use tax, plus any applicable local sales and use tax.
   The purchases by the business of the kayaks and paddle boards that it will rent to
   customers are wholesale purchases and are not subject to the tax. The business may
   purchase the kayaks and paddle boards at wholesale (not subject to the tax) by providing
   the seller of the kayaks and paddle boards a resale certificate.
   For additional information on resale certificates, see SC Revenue Procedure #08-2.
2. If the business only conducts tours of rivers and lakes using kayaks and paddle boards
   and does not rent kayaks and paddle boards, then the charge for the tour is a charge for a
   service that is not subject to State and local sales and use taxes.
   The purchases by the business of the kayaks and paddle boards that it will use in
   conducting the tours of rivers and lakes are purchases at retail by the business and are
   subject to the State sales and use tax, plus any applicable local sales and use tax.
   Note: Since the business is purchasing the kayaks and paddle boards at retail, the
   business will either pay the tax to the supplier at the time of purchase or remit the use tax
   directly to the Department on its purchase of the kayaks and paddle boards.
3. If the business rents kayaks and paddle boards and also conducts tours using the same
   kayaks and paddle boards, then:
   a. The rentals of the kayaks and paddle boards by the business to customers are
   subject to the State sales and use tax, plus any applicable local sales and use tax.
   b. The use of the same kayaks and paddle boards in providing tours is a “withdrawal
   for use” subject to the State sales tax, plus any applicable local sales tax. The
   business may elect one of two methods to pay the tax on its withdrawals for use:
   (i) the business may purchase all its kayaks and paddle boards at retail by paying
   the tax to the seller at the time of purchase or remitting the use tax directly to the
   Department on its purchase of the kayaks and paddle boards and no further tax is
   due on any future withdrawal for use of the kayaks and paddle boards when used
   in providing a tour; or (ii) the business may purchase all its kayaks and paddle
   boards at wholesale (not subject to the tax) and remit the tax on the fair market
   rental value of a kayak or paddle board each time it is used in providing a tour.

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For example, if a business rents kayaks for $20 per hour, then all such rentals are subject
to the State sales and use tax, plus any applicable local sales and use tax. When the same
kayak is also used in providing a tour that costs $100 per hour, then the sales tax is due
on $20 of each $100 as a “withdrawal for use” of the kayak for the tour. However, if the
business had elected to remit the tax to the seller or directly to the Department at the time
of its purchase of the kayaks and paddle boards, then no tax would be due on the
subsequent “withdrawal for use” of the kayak for each tour.
Note: If a business is selling or renting kayaks, paddle boards or any other tangible personal
property (e.g., souvenirs, clothing, food, etc.), then it will need a retail license since it will be
engaged in the business of selling tangible personal property at retail.
Facts:
Kayaking and paddle boarding are popular in South Carolina. Throughout the state, there are
businesses that rent kayaks and paddle boards and others that conduct tours of South Carolina’s
scenic waterways using kayaks and paddle boards. In some cases, these businesses do both – rent
kayaks and paddle boards and conduct tours using the same kayaks and paddle boards.
The purpose of this advisory opinion is to provide guidance as to the application of the sales and
use tax to the kayak and paddle board rental and tour industry.
Discussion:
Code Section 12-36-910(A) imposes the sales tax and states:
A sales tax, equal to [six] 1 percent 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] 2 percent of the sales 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
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2

Code Section 12-36-1110 increased the sales and use tax rate by 1% beginning June 1, 2007.
See footnote #1.

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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.
Code Section 12-36-100 defines the term “sale” to include leases and rentals of tangible personal
property.
Based on the above, in order for the sales or use tax to apply, there must be a retail sale of
tangible personal property. A retail sale includes leases and rentals.
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
(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 exceptions listed in this provision are not relevant to businesses renting kayaks and paddle boards and using
the same kayaks and paddle boards in conducting tours. Therefore, for purposes of simplifying the discussion, these
exceptions are not cited or discussed in this document.

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(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
(emphasis added).
Based on the above, tangible personal property purchased at wholesale is subject to the sales tax
based upon its fair market value 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.
SC Regulation 117-318.4 specifically addresses retailers that rent tangible personal property and
also withdraw, use or consume the same tangible personal property, and states:
Where a person customarily rents tangible personal property and customarily
withdraws the same for his own use, storage or consumption, a tax is due by such
person on each withdrawal for use, the tax to be measured by the amount he
would customarily receive as rental had the property been leased or rented for a
like period of time. In the alternative the tax may be paid on the full purchase
price of the property and no further liability incurred on withdrawals for use.
Having once elected either method of reporting on withdrawals for use, the
taxpayer must so continue unless and until permission has been received from the
department in writing to make a change. Regardless of the method selected for
accounting for the tax on withdrawals for use, the tax is due on all amounts
proceeding or accruing from the rental, lease or sale of the property.
Therefore, a business that rents kayaks and paddle boards is liable for the sales tax on all such
rentals.

4

The exceptions listed in this provision are not relevant to businesses renting kayaks and paddle boards and using
the same kayaks and paddle boards in conducting tours. Therefore, for purposes of simplifying the discussion, these
exceptions are not cited or discussed in this document.

5

If the business also uses the same kayaks and paddle boards it rents in providing a tour, the
withdrawals for use of the kayaks and paddle boards used in providing the tour are subject to the
tax based on the fair market rental value of the kayaks and paddle boards. However, as an
alternative to remitting the tax on each withdrawal for use of a kayak and paddle board used in
providing a tour, the “tax may be paid on the full purchase price of the property and no further
liability incurred on withdrawals for use.”
For example, if a business rents kayaks for $20 per hour, then all such rentals are subject to the
State sales and use tax, plus any applicable local sales and use tax. When the same kayak is also
used in providing a tour that costs $100 per hour, then the State sales tax, and any applicable
local sales tax, is due on $20 of each $100 as a “withdrawal for use” of the kayak for the tour.
However, if the business had previously elected to remit the tax to the seller, or directly to the
Department, at the time of its purchase of the kayaks and paddle boards, then no tax would be
due on the subsequent “withdrawal for use” of the kayak when used for a tour.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Rick Reames III
Rick Reames III, Director
February 5
, 2015
Columbia, South Carolina

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