Do sales and long-term leases of barges qualify for South Carolina's maximum tax as boats?

Plain-English summary

South Carolina Revenue Ruling #18-5 treats a barge as a boat for the maximum sales and use tax. Effective July 1, 2017, the applicable tax is 5% with a $500 cap.

The ruling relies on the ordinary definition of a barge as a large, usually flat-bottomed boat and the statutory definition of a vessel as watercraft used or capable of use as transportation on water.

A retail lease can receive the same cap, but only when it is in writing, expressly states a term longer than 90 continuous days, and remains in force for that period. Each renewal is a new tax event and receives the cap only if the renewal independently meets those requirements.

Two limitations are critical. A barge of more than 50 tons burden is exempt from both sales and use tax and casual excise tax under § 12-36-2120(21). But a barge permanently affixed to a dock, the ocean, a lake or river bottom, or other realty is not being used as a boat and receives neither the maximum-tax treatment nor that barge exemption.

What this means for you

Barge buyers

Determine first whether the barge is mobile watercraft or permanently affixed real property. Then check the more-than-50-tons-burden exemption before applying the $500 cap.

Barge lessors

Put the term in writing and make it longer than 90 continuous days if the transaction is intended to qualify. Apply the same documentation test to every renewal.

Private-party transactions

The ruling also classifies a qualifying barge as a boat under the casual excise tax provisions, subject to the separate rules governing title, purchaser liability, prior tax, and exemptions.

Common questions

Q: Is every barge taxed up to $500?
A: No. A qualifying barge over 50 tons burden is exempt, while a permanently affixed barge does not receive the boat cap or exemption.

Q: Does a 90-day lease qualify?
A: No. The written term must exceed 90 continuous days.

Q: Does a lease renewal automatically keep the cap?
A: No. The renewal must itself be written and exceed 90 continuous days.

Citations and references

• S.C. Code Ann. § 12-36-2110 — maximum tax on boats
• S.C. Code Ann. § 12-36-2120(21) — barge exemption over 50 tons burden
• S.C. Code Ann. § 12-36-100 — leases included as sales
• S.C. Code Ann. § 50-21-10 — boat and vessel definitions

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR18-5.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 #18-5

SUBJECT:

Barges - Maximum Sales and Use Tax Provisions
(Sales and Use Tax)

EFFECTIVE DATE:

July 1, 2017

SUPERSEDES:

SC Revenue Ruling #06-6 and all previous documents and any oral
directives in conflict herewith.

REFERENCES:

S.C. Code Ann. Section 12-36-2110 (2014; Supp. 2017)
S.C. Code Ann. Section 12-36-2120(21) (2014)
S.C. Code Ann. Section 50-21-10 (Supp. 2017)

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 Department advisory opinion.

Purpose of Update:
The purpose of this advisory opinion is to update SC Revenue Ruling #06-6 to address the
increase in the maximum sales and use tax on boats as part of Act No. 40 of 2017, “The South
Carolina Infrastructure and Economic Development Reform Act.” The Act increased the
maximum sales and use tax on boats from 5% but not more than $300, to 5% but not more than
$500. The increase became effective on July 1, 2017.
Questions:

1. Is the sale at retail of a barge entitled to a maximum sales and use tax as a “boat” under Code
   Section 12-36-2110?
   1

2. Is the lease at retail of a barge entitled to a maximum sales and use tax as a “boat” under
Code Section 12-36-2110?

Conclusions:

1. It is the Department’s opinion that the sale of a barge is entitled to a maximum sales and use
   tax under Code Section 12-36-2110 as a “boat.”
2. It is the Department’s opinion that the lease at retail of a barge is entitled to a maximum sales
   and use tax under Code Section 12-36-2110 as a “boat,” provided (1) the lease is in writing
   and (2) the lease specifically states a term of, and remains in force for, a period in excess of
   ninety continuous days.
   In addition, the sales or use tax applies to each renewal of the lease, and a maximum sales
   and use tax for that renewal will only apply if (1) the lease renewal is in writing and (2) the
   lease renewal specifically states a term of, and remains in force for, a period in excess of
   ninety continuous days.
   Note 1: A barge of “more than fifty tons burden” is exempt from the sales and use tax, and the
   casual excise tax, under Code Section 12-36-2120(21).
   Note 2: A barge that is permanently affixed to (1) a dock, (2) the ocean, lake or river bottom, or
   (3) any other realty is not used as a “boat” and is not entitled to a maximum sales and use tax
   under Code Section 12-36-2110 or the exemption under Code Section 12-36-2120(21).
   Discussion:
   The first issue concerns whether the sale of a barge qualifies for a maximum sales and use tax.
   Effective July 1, 2017, Code Section 12-36-2110(A) reads, in part:
   (A)(1) The maximum tax imposed by this chapter is [five] 1
   hundred dollars for each sale made after June 30, 1984, or lease
   executed after August 31, 1985, of each:

(d) boat;

(2) In the case of a lease, the total tax rate required by this section
applies on each payment until the total tax paid equals [five]
hundred dollars. Nothing in this section prohibits a taxpayer from
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Effective after June 30, 2017, the maximum sales and use tax imposed pursuant to this chapter on the sale, lease, or
registration of an item enumerated in item (1) is increased from $300 to $500. Code Section 12-36-2110(A)(4).

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paying the total tax due at the time of execution of the lease, or
with any payment under the lease. To qualify for the tax limitation
provided by this section, a lease must be in writing and specifically
state the term of, and remain in force for, a period in excess of
ninety continuous days.
It is an accepted practice in South Carolina to resort to the dictionary to determine the literal
meaning of words used in statutes. See Hay v. South Carolina Tax Commission, 273 S.C. 269,
255 S.E.2d 837 (1979); Fennell v. South Carolina Tax Commission, 233 S.C. 43, 103 S.E.2d 424
(1958); Etiwan Fertilizer Co. v. South Carolina Tax Commission, 217 S.C. 484, 60 S.E.2d 682
(1950).
The Second College Edition of The American Heritage Dictionary defines the words “boat” and
“barge” as follows:
Boat

1. A relatively small, usually open craft. 2. A ship. …

Barge 1. A long, large, usually flat-bottomed boat that is unpowered
and towed by other craft, used for transporting freight. 2. A
large pleasure boat. 3. A powerboat reserved for the use of a
flag officer.
Although not controlling, the definitions found in Code Section 50-21-10 provide further insight
into whether a barge should be considered a boat. Code Sections 50-21-10(2) and (25),
respectively, define a “boat” as “a vessel,” and define a “vessel” as “every description of
watercraft, other than a seaplane regulated by the federal government, used or capable of being
used as a means of transportation on water.”
Based on the above, the sale at retail of a barge is entitled to a maximum sales and use tax under
Code Section 12-36-2110 as a “boat.”
The second issue concerns the application of a maximum sales and use tax to the lease of a
barge.
Code Section 12-36-100 defines the term “sale” to include “a rental, lease, or other form of
agreement.” In addition, as stated above, the maximum sales and use tax provisions of Code
Section 12-36-2110(A), which includes boats, state in part:
(2) In the case of a lease, the total tax rate required by this section
applies on each payment until the total tax paid equals [five]
hundred dollars. Nothing in this section prohibits a taxpayer from
paying the total tax due at the time of execution of the lease, or
with any payment under the lease. To qualify for the tax limitation
provided by this section, a lease must be in writing and specifically
state the term of, and remain in force for, a period in excess of
ninety continuous days.
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Therefore, the lease at retail of a barge is entitled to a maximum sales and use tax under Code
Section 12-36-2110 as a “boat,” provided (1) the lease is in writing and (2) the lease specifically
states a term of, and remains in force for, a period in excess of ninety continuous days.
The sales or use tax applies to each renewal of the lease, and a maximum sales and use tax for
that renewal will only apply if (1) the lease renewal is in writing and (2) the lease renewal
specifically states a term of, and remains in force for, a period in excess of ninety continuous
days.
In addition, based on the above discussion, a barge is also considered a boat under the casual
excise tax provisions found in Code Sections 12-36-1710 through 12-36-1740.
Note 1: A barge of “more than fifty tons burden” is exempt from the sales and use tax, and the
casual excise tax, under Code Section 12-36-2120(21).
Note 2: A barge that is permanently affixed to (1) a dock, (2) the ocean, lake or river bottom, or
(3) any other realty is not used as a “boat” and is not entitled to the maximum sales and use tax
under Code Section 12-36-2110.
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/W. Hartley Powell
W. Hartley Powell, Director
May 2
, 2018
Columbia, South Carolina

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