How were micro-distillery tours and liquor tastings taxed before the May 17, 2021 law change?

Plain-English summary

South Carolina Revenue Ruling #19-3 explains the tax rules that applied to micro-distillery tours and liquor tastings from July 1, 2019 until the law changed on May 17, 2021. RR #22-1 superseded it for later tours and tastings.

Under RR #19-3, when liquor was provided as part of a paid tour, the true object was the liquor sale rather than admission to a place of amusement. The full charge was subject to South Carolina sales tax and the 5% liquor-by-the-drink excise tax, while admissions tax did not apply.

The same two taxes applied when the tour was free but the tasting carried a charge. If a $10 tour included liquor at no separate charge, both taxes used $10 as gross proceeds. If a $15 package included a tasting worth $10 and a t-shirt worth $5, sales tax applied to the full $15, liquor-by-the-drink tax applied to the $10 liquor value, and admissions tax did not apply.

When both the tour and tasting were free, no admissions tax applied. The distillery owed sales tax on the retail bottle value of the South Carolina-manufactured liquor it used and liquor-by-the-drink tax on the retail value of the drinks served. In the ruling's example, those measures were $75 for the bottle and $10 for the tasting.

What this means for you

Historical returns before May 17, 2021

Use RR #19-3 for the covered period. A paid tasting experience was taxed as a liquor transaction, not an admission, and could carry both sales tax and liquor-by-the-drink tax.

Tours on or after May 17, 2021

Use RR #22-1 instead. The later ruling says the 2021 law change prohibited charging for tasting liquor and changed the treatment of tour charges.

Merchandise and giveaways

Under RR #19-3, a tasting shot glass included as the liquor container qualified for the container exemption, while a shot glass sold separately remained taxable. A t-shirt included in the package entered sales-tax gross proceeds but not the liquor-by-the-drink tax base beyond the liquor's retail value.

Common questions

Q: Was a paid tour with an included tasting subject to admissions tax?
A: No. The ruling treated liquor as the true object and applied sales and liquor-by-the-drink taxes instead.

Q: Were free tastings tax-free?
A: No. Sales tax applied to the retail bottle value of manufactured liquor used, and liquor-by-the-drink tax applied to the retail value of the drinks served.

Q: Is RR 19-3 current?
A: No. RR #22-1 superseded it for tours and tastings conducted on or after May 17, 2021.

Citations and references

• S.C. Code Ann. §§ 12-36-90 and 12-36-910 — gross proceeds and sales tax
• S.C. Code Ann. § 12-33-245 — 5% liquor-by-the-drink excise tax
• S.C. Code Ann. §§ 12-21-2410 and 12-21-2420 — admissions tax
• S.C. Code Ann. §§ 61-6-1140 and 61-6-1150 — micro-distillery tastings and sales
• SC Revenue Ruling #22-1 — superseding guidance effective May 17, 2021

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR19-3.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 29214-0575

SC REVENUE RULING #19-3

SUBJECT:

Micro-Distillery Tours and Liquor Tastings
(Sales Tax, Admissions Tax, and Liquor by the Drink Excise Tax)

EFFECTIVE DATE:

July 1, 2019

SUPERSEDES:

All previous advisory opinions and any oral directives in conflict
herewith.

REFERENCES:

S.C. Code Ann. Section 12-36-90 (2014; Supp. 2018)
S.C. Code Ann. Section 12-36-910 (2014)
S.C. Code Ann. Section 12-33-245 (2014)
S.C. Code Ann. Section 12-36-2120 (2014)
S.C. Code Ann. Section 12-21-2410 (2014)
S.C. Code Ann. Section 12-21-2420 (2014; Supp. 2018)
S.C. Code Ann. Section 61-6-1140 (Supp. 2018)
S.C. Code Ann. Section 61-6-1150 (Supp. 2018)

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
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.

INTRODUCTION
Licensed micro-distilleries in South Carolina are permitted to sell liquor and offer tastings to
consumers so long as the sales and tastings are held in conjunction with a tour of the on-site
licensed premises.

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Questions have arisen concerning the application of the sales tax, admissions tax, and the liquor
by the drink tax to tours and tastings conducted by micro-distilleries. This document explains
how the sales tax, the admissions tax, and the liquor by the drink tax apply to these tours and
tastings. 1
A discussion of the law is followed by examples.

LAW AND DISCUSSION
I. SALES TAX
Code Section 12-36-910(A) imposes “a sales tax, equal to [six] 2 percent of gross proceeds of
sales, . . . upon every person engaged . . . within this State in the business of selling tangible
personal property at retail.”
The measure of the tax is the gross proceeds of the sale. “Gross proceeds of sales” means the
proceeds from the sale of tangible personal property without any deduction for the cost of
materials, labor, service, or any other expenses. Code Section 12-36-90(1)(b).
In short, the total amount charged in conjunction with the sale or purchase of tangible personal
property is subject to the tax.
Code Section 12-36-910(B)(4) also imposes the sales tax on the fair market value of tangible
personal property manufactured in South Carolina and used or consumed within South Carolina
by the manufacturer.
Micro-distilleries, which manufacture liquor, may conduct tours and tastings. For example,
micro-distilleries may charge for a tour, which includes a tasting. Some may conduct a free tour
and separately charge for a tasting, while others may give a free tour and tasting. Some may also
provide tangible personal property as part of the tour, such as souvenir shot glasses, t-shirts, etc.
The so-called “true object” test is generally used to delineate sales of tangible personal property
from sales of services. This test is one of determining the basic purpose of the buyer. 3 In
applying the principles of this test with respect to tours and tastings, it must be determined
whether the buyer is purchasing tangible personal property (liquor, t-shirt, shot glass, etc.) or
purchasing the right to enter into a place subject to the admissions tax.

1
Code Sections 61-6-1140 and 61-6-1150 establish the requirements for liquor tastings and liquor sales by a microdistillery. This document does not address these requirements.
2
Code Section 12-36-1110 increased the general state sales and use tax rate from five percent to six percent
effective June 1, 2007.
3
9 Vanderbilt Law Review 231 (1956).

2

If the tangible personal property is the true object of the transaction (e.g., the liquor, shot glass,
or t-shirt), the tour would be incidental to the sale of the tangible personal property, and the
entire charge would be subject to the sales tax. If the true object is to enter into a place subject to
the admissions tax, then any tangible personal property provided as part of the charge for the tour
would be incidental to the tour itself, and the charge for the tour would not be considered a sale
of tangible personal property. 4

II. ADMISSIONS TAX
Under the alcohol liquor laws, tastings by and sales to consumers must be held in conjunction
with a tour by the consumer of the on-site licensed premises. Code Section 61-6-1140(1). As
such, the application of the admissions tax must be addressed.
Under the admissions tax law, Code Section 12-21-2410 states:
For the purpose of this article and unless otherwise required by the context:
(1)

The word “admission” means the right or privilege to enter into or use a place or
location;

(2)

The word “place” means any definite enclosure or location; and

(3)

The word “person” means individual, partnership, corporation, association, or
organization of any kind whatsoever.

Code Section 12-21-2420 states: “There must be levied, assessed, collected, and paid upon paid
admissions to places of amusement within this State a license tax of five percent.” (Emphasis
added.) Code Section 12-21-2420 further requires that the tax “be paid by the person or persons
paying the admission price . . . .”
In summary, the tax is upon “paid admissions,” and the person paying the admission is the
taxpayer with respect to the tax, whether that person is an individual, a partnership, or
corporation. Furthermore, “paid admissions” constitute the amounts paid by patrons to enter into
or use a place of amusement.

III. ALCOHOLIC BEVERAGE LAWS
A. Liquor by the Drink Excise Tax
Code Section 61-6-1140(5) provides that a micro-distillery may charge for liquor consumed at a
tasting, but it must collect and remit the liquor by the drink excise tax pursuant to Chapter 33,
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However, the micro-distillery would still be subject to the sales tax under Code Section 12-36-910(B)(4) for the
fair market value of tangible personal property manufactured in South Carolina (i.e., liquor) and used by the microdistillery in providing free samples.

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Title 12. 5 Code Section 12-33-245 imposes an excise tax “equal to five percent of the gross
proceeds of the sales of alcoholic liquor by the drink for on-premises consumption in an
establishment licensed for sales pursuant to Article 5, Chapter 6, Title 61 . . . .” 6
For purposes of the liquor by the drink excise tax, “gross proceeds of sales” has the same
meaning as Code Section 12-36-90, except that the sales tax imposed by Chapter 36 of Title 12 is
not included. Code Section 12-36-90 provides that gross proceeds is the value proceeding or
accruing from the sale of tangible personal property. It includes the proceeds from the sale of
tangible personal property without any deduction for the cost of goods sold, cost of materials,
labor, or service, transportation costs, or any other expenses. Gross proceeds of sales, for
purposes of the liquor by the drink excise tax, also includes “the retail value of a complimentary
or discounted beverage containing alcoholic liquor, an amount charged for ice for a drink
containing alcoholic liquor, and an amount charged for a nonalcoholic beverage that is sold or
used as a mixer for a drink containing alcoholic liquor.” Code Section 12-33-245(A).
B. Sale of Alcoholic Liquors
For purposes of the laws regulating beer, wine, and alcoholic liquor, the Department has long
held that a sale is considered to take place if: 7
• There is a per drink charge;
• An admissions fee is charged to enter a place or event where these beverages are provided;
• A donation is accepted with respect to the event where these beverages are provided;
• Tickets are sold with respect to the event where these beverages are provided;
• Such beverages are provided as part of a meal for which consideration, direct or indirect,
is accepted or required; or
• Any consideration is accepted or required with respect to the event where these beverages
are provided.

CONCLUSION
Based on the above, when micro-distilleries provide liquor as part of a paid tour, the true object
of the transaction is the sale of alcoholic liquor, and therefore the charge for the tour is not
subject to the admissions tax. However, the sales tax and liquor by the drink excise tax apply to
the gross proceeds of the sale.
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In addition, Code Section 61-6-1130(A) provides that “[a] micro-distillery desiring to offer tastings and sales of
alcoholic liquors to consumers at its licensed premises shall remit taxes to the department for alcoholic liquors sold
and dispensed in an amount equal to taxes paid by wholesalers on alcoholic liquors.” Therefore, while not
addressed in this document, micro-distilleries offering tastings and sales of liquor are subject to the same taxes as
wholesalers under Chapter 33 of Title 12. See Code Sections 12-33-410, 12-33-420, 12-33-425, and 12-33-460.
6
See Code Section 61-6-20(1)(a) and (b) for the definitions of “alcoholic liquors” and “alcoholic liquor by the
drink.” See also Code Section 61-4-10 for a list of beverages declared to be nonalcoholic and nonintoxicating.
7
SC Revenue Ruling #12-3.

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When micro-distilleries provide a free tour with free liquor, the admissions tax does not apply.
However, sales tax applies to the fair market value of each bottle of liquor used for tastings, and
the liquor by the drink excise tax applies to the retail value of each drink provided to customers.
The following examples explain the application of the sales tax, admissions tax, and the liquor
by the drink tax to tours and tastings conducted by micro-distilleries. The application of these
taxes is determined by the specific facts and circumstances. Other facts and circumstances not
addressed in this document must be considered on a case-by-case basis. In addition, there are
certain businesses in South Carolina which sell tour packages where customers tour multiple
micro-distilleries in a day. For purposes of the examples below, the micro-distillery receives
payment either directly from a patron or from a tour business.
Example 1 – Charge for Tour, No Charge for Tasting:
Facts:
A micro-distillery conducts a tour and tasting in accordance with alcoholic beverage laws. The
cost of the tour is $10 and the tasting is provided for no additional charge.
Answer:
Sales Tax: The true object of the transaction is the sale of liquor. The micro-distillery, as the
retailer, is liable for the sales tax on the “gross proceeds of sales” of the liquor. In this example,
the gross proceeds of sales is $10.
Admissions Tax: Since the true object of the transaction is the sale of liquor, the admissions tax
is not applicable.
Liquor by the Drink Tax: The micro-distillery is liable for the liquor by the drink tax on the
“gross proceeds of sales” of the liquor. In this example, the gross proceeds of sales is $10.

Example 2 – No Charge for Tour, Charge for Tasting:
Facts:
A micro-distillery conducts a tour and tasting in accordance with alcoholic beverage laws. The
micro-distillery does not charge for the tour, but charges $5 for the tasting.
Answer:
Sales Tax: The micro-distillery, as the retailer, is liable for the sales tax on the “gross proceeds
of sales” of the liquor. In this example, the gross proceeds of sales is $5.
Admissions Tax: The admissions tax is not applicable.
Liquor by the Drink Tax: The micro-distillery is liable for the liquor by the drink tax on the
“gross proceeds of sales” of the liquor. In this example, the gross proceeds of sales is $5.
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Example 3 – Charge for Tour, Shot Glass Included:
Facts:
A micro-distillery conducts a tour and tasting in accordance with alcoholic beverage laws. The
cost of the tour is $10 and the tasting is provided for no additional charge. The patron may keep
the shot glass used for the tasting.
Answer:
Sales Tax: The true object of the transaction is the sale of liquor. The micro-distillery, as the
retailer, is liable for the sales tax on the “gross proceeds of sales” of the liquor. In this example,
the gross proceeds of sales is $10. The shot glass is considered a container used incident to the
sale and delivery of tangible personal property, and the micro-distillery’s purchase and use of the
shot glass for the tasting are exempt under Code Section 12-36-2120(14). 8
Admissions Tax: Since the true object of the transaction is the sale of liquor, the admissions tax
is not applicable.
Liquor by the Drink Tax: The micro-distillery is liable for the liquor by the drink tax on the
“gross proceeds of sales” of the liquor. In this example, the gross proceeds of sales is $10.

Example 4 – Charge for Tour, Souvenir T-Shirt Included:
Facts:
A micro-distillery conducts a tour and tasting in accordance with alcoholic beverage laws. The
cost of the tour is $15. This $15 includes a t-shirt and a liquor tasting. The retail value of the
tasting is $10, and the retail value of the t-shirt is $5.
Answer:
Sales Tax: The true object of the transaction is the sale of liquor and a t-shirt. The microdistillery, as the retailer, is liable for the sales tax on the “gross proceeds of sales” of the liquor
and the t-shirt. In this example, the gross proceeds of sales is $15.
Admissions Tax: Since the true object of the transaction is the sale of liquor and a t-shirt, the
admissions tax is not applicable.
Liquor by the Drink Tax: The micro-distillery is liable for the liquor by the drink tax on the
“gross proceeds of sales” of the liquor. In this example, the gross proceeds of sales is $10; i.e.,
the retail value of the liquor under Code Section 12-33-245.
8

Code Section 12-36-2120(14) specifically exempts from the sales tax “…containers, used incident to the sale and
delivery of tangible personal property.” However, if the micro-distillery sells a shot glass in its gift shop (or other
retail outlet), it is not being used incident to the sale and delivery of tangible personal property and is subject to the
sales tax.
6

Example 5 – No Charge for Tour and Free Tasting:
Facts:
A micro-distillery conducts a tour and tasting in accordance with alcoholic beverage laws. There
is no charge for the tour or tasting. The retail value of the liquor tasting is $10. The retail price
of a bottle of liquor used in providing free tastings is $75.
Answer:
Sales Tax: The State sales tax applies to the fair market value of tangible personal property
manufactured in South Carolina and used or consumed within South Carolina by the
manufacturer. Code Section 12-36-910(B)(4). The micro-distillery, as the manufacturer of the
liquor, is liable for the sales tax based on the fair market value of a bottle of liquor manufactured
in South Carolina by the micro-distillery and used by the micro-distillery to provide free tastings.
The fair market value is the amount for which a bottle of liquor is sold at retail by the microdistillery. In this example, the fair market value of a bottle of liquor is $75.
Admissions Tax: The admissions tax is not applicable.
Liquor by the Drink Tax: The micro-distillery is liable for the liquor by the drink tax on the
“gross proceeds of sales” of the liquor. In this example, the gross proceeds of sales is $10; i.e.,
the retail value of the liquor under Code Section 12-33-245.

NOTE: Code Section 61-6-1130(A) provides that “[a] micro-distillery desiring to offer
tastings and sales of alcoholic liquors to consumers at its licensed premises shall remit taxes
to the department for alcoholic liquors sold and dispensed in an amount equal to taxes paid
by wholesalers on alcoholic liquors.” Therefore, while not addressed in this document,
micro-distilleries offering tastings and sales of liquor are subject to the same taxes as
wholesalers under Chapter 33 of Title 12. See Code Sections 12-33-410, 12-33-420, 12-33425, and 12-33-460.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Hartley Powell
W. Hartley Powell, Director
April 9
, 2019
Columbia, South Carolina

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