When does South Carolina's residential-electricity exemption apply to assisted living, nursing homes, healthcare facilities, dormitories, and prisons?

Plain-English summary

South Carolina Revenue Ruling 17-4 says the residential-electricity exemption turns on the character of the space: it must serve as a residence rather than a business, healthcare, institutional, temporary, or transient facility.

Electricity sold to a nursing home or healthcare facility is taxable. The ruling includes hospitals, rehabilitation centers, psychiatric-care centers, drug- and alcohol-treatment facilities, hospice-care centers, and similar locations whose primary purpose is skilled nursing, rehabilitative, mental-health, supervised, training, or evaluation services.

Assisted living receives a more divided treatment. Electricity for individual assisted-living apartments, necessary residential common areas, and resident-only domestic amenities can be exempt. Centrally metered business areas can also fall within the exemption when the facility's sole purpose is independent residential living with only basic personal-care support. But separately metered business areas, amenities used commercially or offered to nonresidents for a fee, and any healthcare or supervised-care area are taxable.

For a mixed meter serving both residential and taxable care or business areas, the ruling allowed the facility to give the utility Form ST-8, buy all electricity without tax, and then remit use tax on the nonresidential portion. Its example permitted a square-footage allocation. Facilities should verify current forms and procedures before using that method.

Electricity for college dormitories, professional-training dormitories, summer-camp housing, and prisons is taxable. The ruling classifies these uses as temporary, transient, or institutional rather than residential for the exemption.

What this means for you

Assisted-living operators

Map each meter and area by use. Residential apartments and integral resident spaces may qualify, while skilled-care wings and commercial areas do not. Central metering and the facility's primary purpose affect the treatment of office and maintenance areas.

Nursing homes and healthcare providers

The ruling does not extend the residential exemption merely because patients live or sleep at the facility. When the primary purpose is healthcare, skilled nursing, rehabilitation, hospice, treatment, or similar supervised care, the electricity is taxable.

Colleges, training centers, camps, and correctional facilities

Dormitory or institutional occupancy does not qualify as residential use under this ruling, so the electricity is taxable.

Common questions

Q: Is all assisted-living electricity exempt?
A: No. Residential apartments and qualifying common areas can be exempt, but healthcare, supervised-care, separately metered business, and commercial amenity areas are taxable.

Q: Is electricity for a nursing home exempt because residents live there long term?
A: No. The ruling treats the nursing home's skilled-care purpose as taxable rather than residential.

Q: How can a mixed-use assisted-living meter be handled?
A: Under the 2017 procedure, the facility could use Form ST-8 and accrue use tax on the taxable portion, with square footage offered as one allocation method. Verify the current process.

Q: Are college dormitories exempt?
A: No. The ruling treats college, professional-training, and summer-camp dormitories as taxable temporary, transient, or institutional uses.

Q: Is prison electricity exempt as residential?
A: No. The ruling treats prisons as taxable institutions.

Citations and references

• S.C. Code Ann. Section 12-36-2120(33) (electricity and fuels used for residential purposes)
• SC Regulation 117-323 (definition of residential purposes and excluded temporary or transient dwellings)
• SC Revenue Ruling #92-4 (apartment-complex common areas and amenities)
• SC Revenue Ruling #17-1 (vacant apartments, residential outbuildings, and HOA common areas)

Subject

Residential Electricity Exemption Nursing Homes, Assisted Living Facilities, Healthcare Facilities, Dormitories and Prisons

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR17-4.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 12265, Columbia, South Carolina 29211

SC REVENUE RULING #17-4

SUBJECT:

Residential Electricity Exemption
Nursing Homes, Assisted Living Facilities, Healthcare Facilities,
Dormitories and Prisons
(Sales and Use Tax)

EFFECTIVE DATE:

Applies to all periods open under the statute.

REFERENCES:

S.C. Code Ann. Section 12-36-2120(33) (2014)
S.C. Regulation 117-323 (2012)

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 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 Department advisory opinion.

Introduction:
South Carolina exempts from the sales and use tax the sale of electricity and other fuels used for
“residential purposes.”
The purpose of this advisory opinion is to address the application of the exemption to nursing
homes, assisted living facilities, healthcare facilities, dormitories and prisons.

Law and Discussion:
Code Section 12-36-2120 provides exemptions from the sales and use tax and reads, in part:
Exempted from the taxes imposed by this chapter are the gross proceeds of sales,
or sales price of:

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(33) electricity, natural gas, fuel oil, kerosene, LP gas, coal, or any other
combustible heating material or substance used for residential purposes....
Regulation 117-323 defines the term “residential purposes” and provides as follows:
... the term “residential purposes” ... is construed to mean any space or area
occupied by one or more individuals with the intent that such space or area serves
as a residence, house, dwelling or abode. Included in the exemption are single
family houses, duplexes, condominium units, apartments and mobile homes of a
permanent type used by a person or persons as a place of residence, house,
dwelling or abode. All sales to such locations would be exempt.
Electricity, natural gas, fuel, oil, coal or any other type of combustible heating
materials centrally metered or delivered to a central storage tank (or area) to
duplexes, condominium units, apartments or mobile homes of a permanent type,
and billed as such, would be considered as used for residential purposes and
exempt.
Excluded from the exemption are hotels, motels, dormitories, nursing homes,
summer camps, resort lodges and other dwellings of a temporary or transient
nature. All sales to such locations would be taxable.
The Attorney General, in an opinion dated August 23, 1979, addressed the meaning of the term
residential purposes and concluded the literal meaning of the term should apply. This decision
was based in part on the reasoning that:
...the word “residence” in a restrictive covenant is equivalent to “residential” and
is used in contradistinction to “business,” and that if a building is used as a place
of abode and no business carried on, it would be used for “residence purposes”
only, whether occupied by one family or a number of families. Jernigan v. Capps,
187 Va. 73, 45 S.E.2d 886. Also, the terms “residence purposes” and
“residences” require use of the property for living purposes as distinguished from
uses for business or commercial purposes. MacDonald v. Painter, Texas, 441
S.W.2d 179.
The Department followed the above guidance in SC Revenue Ruling #92-4 in addressing the
application of the exemption to apartment complexes.
In SC Revenue Ruling #92-4, the Department concluded:
Exempt Sales of Electricity:
The following sales of electricity to an apartment complex used exclusively as a
residence are exempt from sales tax under Code Section 12-36-2120(33):

1. Electricity provided to individual apartment units.

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2. Electricity provided to common areas which are integral and necessary to the
individual apartment unit’s residential use, such as hallways, parking lots, trash
compactors and entrance gates.

3. Electricity provided to residential apartment amenities, such as laundry facilities, pool
   and club houses, and tennis courts, if the amenities are (1) used exclusively for
   domestic purposes, and (2) used only by apartment residents and their non-paying
   guests.
4. Electricity provided for use in business related areas of the apartment complex (e.g.
   office area, maintenance facilities, and repair facilities), if the electricity for the entire
   apartment complex is centrally metered and billed as such. See Regulation [117323] 1.
   Taxable Sales of Electricity:
   The following sales of electricity to an apartment complex used exclusively as a
   residence are subject to the sales tax:
5. Electricity provided to residential apartment amenities which are available for a
   business purpose or available to non-residents of the apartment complex for a fee. For
   example, an apartment complex that sells food and beverage in a lounge located at the
   apartment complex is using the area for a business purpose.
6. Electricity provided for use in business related areas of the apartment complex (e.g.
   office area, maintenance facilities, and repair facilities), if the electricity for the entire
   apartment complex is not centrally metered and billed as such. See Regulation [117323] 2.
   Based on the above, electricity must be used for residential purposes and not business,
   institutional, or other non-residential purposes in order to be exempt under Code Section 12-362120(33). 3 In addition, electricity used for dwellings of a temporary or transient nature does not
   qualify as electricity used for residential purposes under Code Section 12-36-2120(33).
   Therefore, electricity used for the operation of (1) facilities that provide skilled nursing care,
   rehabilitative care, psychiatric care, hospice care, drug treatment, alcohol treatment, or similar
   care; (2) facilities that provide a dwelling of a temporary or transient nature (e.g., hotels, motels,
   resort lodges, summer camps, dormitories); or (3) facilities in the nature of an institution (e.g.,
   prisons, colleges, professional training centers) would not be exempt.

1
The Department reorganized and renumbered its regulations after the issuance of SC Revenue Ruling #92-4. SC
Regulation 117-177, as originally cited in SC Revenue Ruling #92-4, is now SC Regulation 117-323.
2
See footnote #1.
3
See also SC Revenue Ruling #17-1, which addressed the application of the exemption for residential electricity to
examples involving vacant apartment units; separately metered pools, storage sheds and other structures at a single
family home; and the common areas of a neighborhood maintained by a homeowners’ association.

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Examples:
Scenario #1 - Nursing Homes:
Facts:
A nursing home is a facility with an organized nursing staff. It is operated for the purpose of
providing intermediate or skilled care for persons not in need of care at a hospital. It provides
intensive, short or long term medical care to individuals with serious health conditions in a fully
staffed and monitored facility.
Conclusion:
The sale of electricity to a nursing home, as described in the facts, is subject to the sales and use
tax. See SC Regulation 117-323.
Scenario #2 – Assisted Living Facilities
Facts:
An assisted living facility offers a housing alternative for older adults who can live
independently but may need a limited amount of assistance. However, an assisted living facility
is not for older adults who require the intensive medical care or skilled nursing care provided in
nursing homes. Typically, the basic personal care support services offered in assisted living
facilities include:
•
•
•
•
•
•
•

daily meals
basic housekeeping
laundry
health and exercise programs
social programs
transportation
access to medical services

Note: Some assisted living facilities are attached to, or share a campus with, a skilled nursing
facility.
Conclusion:
The application of the sales and use tax on sales of electricity to an assisted living facility is
similar to the application of the sales and use tax on sales of electricity to apartment complexes.
The following provides guidance as to exempt sales and taxable sales of electricity to an assisted
living facility:

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Exempt Sales of Electricity:
The following sales of electricity to an assisted living facility are exempt from sales
tax under Code Section 12-36-2120(33):

1. Electricity provided to an individual assisted living apartment in the assisted
   living facility.
2. Electricity provided to common areas which are integral and necessary to the
   individual assisted living apartment’s residential use, such as hallways, parking lots,
   trash compactors and entrance gates.
3. Electricity provided to residential assisted living facility amenities, such as a pool or
   club house, if the amenities are (1) used exclusively for domestic purposes, and (2)
   used only by assisted living apartment residents and their non-paying guests.
4. Electricity provided for use in business related areas of the assisted living facility
   (e.g. office area, maintenance facilities, and repair facilities), if the assisted living
   facility’s sole purpose is to provide independent residential living with only basic
   personal care support services (e.g., ensuring medicine is taken, transportation) and
   the electricity is centrally metered and billed as such.
   Taxable Sales of Electricity:
   The following sales of electricity to an assisted living facility are subject to the sales
   tax:
5. Electricity provided to residential assisted facility amenities which are available for a
   business purpose or available to non-residents of the assisted living facility complex
   for a fee. For example, an assisted living facility that sells snacks, beverages,
   toiletries, and other items in a convenience store located in the assisted living facility
   is using the area for a business purpose.
6. Electricity provided for use in business related areas of the assisted living facility
   (e.g. office area, maintenance facilities, and repair facilities), if the electricity for the
   entire assisted living facility is not centrally metered and billed as such.
7. Electricity provided to any area of the facility that provides healthcare or supervised
   care in a manner similar to a nursing home, rehabilitation center, psychiatric care
   facility, drug treatment facility, alcohol treatment facility, hospice care center, or any
   other similar facility.
   If the facility has an electric meter that services only residential areas, then the taxpayer may file
   a single sale exemption certificate (Form ST-8) with the power company in order to purchase the
   electricity provided through that meter exempt from the tax.
   If the facility has an electric meter that services both residential areas and business and health or
   supervised care areas (e.g., skilled nursing care area), the facility may also file a single sale
   exemption certificate (Form ST-8) with the power company. By filing the single sale exemption
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certificate with the power company, the facility becomes liable for the tax. This will allow the
facility to purchase all its electricity tax free, and remit the tax on that portion of the electricity
not used for residential purposes by filing a monthly or quarterly use tax return with the
Department. 4 The calculation of the tax due may be based on square footage. For example, if
60% of the square footage of the facility is used for residential purposes and 40% of the square
footage is used for business and health or supervised care purposes, then the facility would report
and remit the tax on 40% of the purchase price of the electricity provided through the meter.
Note: This conclusion does not apply to facilities whose primary purpose is to provide healthcare
or supervised care, such as hospitals, nursing homes, rehabilitation centers, psychiatric care
centers, drug treatment facilities, alcohol treatment facilities, and other similar facilities that
provide skilled nursing care, rehabilitative care, hospice care, mental health treatment, or similar
care or that provide training or evaluation. See Scenarios #1 and #3.
Scenario #3 – Healthcare Facilities
Facts:
A healthcare facility is any location whose primary purpose is to provide healthcare. Healthcare
facilities include hospitals, rehabilitation centers, psychiatric care centers, drug treatment
facilities, alcohol treatment facilities, and other similar facilities that provide skilled nursing care,
rehabilitative care, hospice care, mental health treatment, or similar care or that provide training
or evaluation.
Conclusion:
The sale of electricity to a healthcare facility, as described in the facts, is subject to the sales and
use tax.
Scenario #4 – Dormitories at Colleges, Professional Training Facilities, and Summer
Camps
Facts:
A dormitory is a building at a college or university containing a number of private or semiprivate
rooms for students attending and residing at the college or university. A dormitory is also a
building containing a number of private or semiprivate rooms for trainees at a training facility for
various types of professions (e.g., firefighters, law enforcement) or for campers at a summer
camp.
Conclusion:
The sale of electricity to a college, a training center, or a summer camp for use in dormitories is
subject to the sales and use tax. See SC Regulation 117-323.
4

If the facility is not already registered with the Department for sales or use tax purposes, the facility will need to
register with the Department for use tax purposes by completing Form SCDOR-111, the “South Carolina
Department of Revenue Tax Registration Application.”

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Scenario #5 – Prisons
Facts:
A prison is a building operated by or on behalf of the state, county or other political subdivision
in which people are legally held as a punishment for a crime they have committed or while
awaiting trial.
Conclusion:
The sale of electricity to a prison is subject to the sales and use tax.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/W. Hartley Powell
W. Hartley Powell, Director
August 28
, 2017
Columbia, South Carolina

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