If a South Carolina retailer adds a separate 'inflation fee,' 'convenience fee,' or 'non-cash adjustment fee' (credit-card surcharge) to a sale, does the sales tax apply to that fee?

Plain-English summary

When prices and card-processing costs jumped, a lot of South Carolina businesses started tacking on a separate line-item fee — an "inflation fee," a "convenience fee," a "non-cash adjustment fee," a credit-card surcharge. SC Revenue Ruling #22-10 answers the obvious question: do you charge sales tax on that fee too? The answer is yes — when the fee is part of a taxable retail sale.

The logic is simple. South Carolina's sales tax is imposed on the "gross proceeds of sales" (§ 12-36-90) and the use tax on the "sales price" (§ 12-36-130). Both are defined as the total value accruing from the sale, with no deduction for the seller's expenses — not the cost of goods, not labor, not service, not interest, not transportation. So the tax base is everything the customer pays in connection with the sale. A fee that a retailer adds to recover its rising costs is just more of that total, and it's taxed the same as the price of the item.

It doesn't matter whether the fee is a flat amount, a percentage, separately stated on the invoice, or labeled to look like a pass-through cost. If it's charged as part of a taxable retail sale of tangible personal property, it's in the tax base.

Worked examples from the ruling:

• A restaurant adds a 10% "inflation fee." A $15 meal plus a $1.50 fee = tax computed on $16.50.
• A thrift store adds a 3% "non-cash adjustment fee" on credit-card sales. A $30 lamp plus a $0.90 fee = tax computed on $30.90.

The exceptions — the fee is not taxed when:

• the underlying sale is exempt (e.g., a sale to the federal government), or
• the transaction is not a taxable sale at all — e.g., a fee added to a nontaxable service like those of a doctor, accountant, or hair stylist.

Mixed baskets: if the fee sits on an order of both taxable and exempt items, tax applies only to the fee portion tied to the taxable items — but only if the seller can reasonably prorate it from its books and records. If the breakdown is unreasonable or unsupported, the entire fee is taxable.

What this means for you

Retailers and restaurants adding a surcharge

If you add an inflation fee, card surcharge, or similar charge to a taxable sale, compute sales tax on the item price plus the fee. Under-collecting because you thought the fee was a separate, tax-free pass-through leaves you liable for the tax. Build the fee into your point-of-sale tax calculation, not on top of the after-tax total.

Service providers

If your core service is not subject to sales tax (professional services like medical, accounting, or personal-care services), a fee added to that nontaxable charge generally isn't taxable either — because there's no taxable sale to attach it to. The fee follows the taxability of the underlying transaction.

Sellers of exempt goods

A fee added to an exempt sale (say, a sale to the federal government) stays exempt. And if you're billing a mixed cart, keep records that let you reasonably split the fee between taxable and exempt items — otherwise the Department will tax the whole fee.

Common questions

Q: I add a credit-card surcharge. Do I charge sales tax on it?
A: Yes, if it's part of a taxable retail sale. A "convenience fee" or "non-cash adjustment fee" is part of the gross proceeds / sales price and is taxed like the item itself.

Q: The fee just covers my own rising costs. Doesn't that make it non-taxable?
A: No. The tax base is the total consideration for the sale, with no deduction for the seller's expenses — inventory, labor, fuel, or card-processing costs. Recovering a cost through a separate fee doesn't take it out of the tax base.

Q: Does it help to put the fee on a separate line, or a separate invoice?
A: No. How you present or invoice the fee doesn't change its taxability if it's part of a taxable retail sale.

Q: My business is a nontaxable service. Is a fee I add taxable?
A: Generally no. If the underlying transaction isn't a taxable sale (e.g., a professional or personal service), there's no taxable sale for the fee to attach to.

Q: What about an order that mixes taxable and exempt items?
A: Tax applies only to the fee portion allocated to the taxable items — but only if you can reasonably prorate it from your records. If not, the entire fee is taxable.

Citations and references

Statutes:

• S.C. Code Ann. § 12-36-910 — imposes the sales tax on retail sales of tangible personal property
• S.C. Code Ann. § 12-36-1310 — imposes the use tax on storage, use, or consumption of TPP purchased at retail
• S.C. Code Ann. § 12-36-90 — defines "gross proceeds of sales" (no deduction for the seller's expenses)
• S.C. Code Ann. § 12-36-130 — defines "sales price"
• S.C. Code Ann. § 12-36-60 — defines "tangible personal property"

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR22-10.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 #22-10
SUBJECT:

Inflation Fees, Convenience Fees, Non-Cash Adjustment Fees, and
Similar Fees
(Sales and Use Taxes)

EFFECTIVE DATE: Applies to all periods open under the statute.
REFERENCES:

S.C. Code Ann. Section 12-36-90 (2014; Supp. 2021)
S.C. Code Ann. Section 12-36-130 (2014: Supp. 2021)
S.C. Code Ann. Section 12-36-910 (2014)
S.C. Code Ann. Section 12-36-1310 (2014)

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
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 Department advisory opinion.

QUESTION
Is a separately stated “inflation fee,” “convenience fee,” “non-cash adjustment fee,” or similar
type of fee charged by a retailer as part of the retail sale of tangible personal property to a
customer, as described in the facts, includable in “gross proceeds of sales” or “sales price” and
subject to the sales and use tax?
FACTS
As a result of recent inflationary times, some retailers are adding a separate fee to a customer’s
invoice or receipt in order to recover some or all of their increased operating costs (e.g., higher
inventory costs, labor costs, fuel costs, rental costs, etc.). This fee may be referred to as an
inflation fee or a similar term. Other retailers are adding a separate fee to recover their credit card
processing costs. This fee may be referred to as convenience fee, non-cash adjustment fee, or
similar term. These fees may be a flat fee, a fee based on a percentage of the sales price of the
product, or based on some other calculation.
Questions have arisen as to the applicability of sales and use taxes to these various fees.

LAW AND ANALYSIS
Code Section 12-36-910(A) imposes a sales tax upon every person engaged or continuing within
this State in the business of selling tangible personal property1 at retail. Code Section 12-361310(A) imposes a use tax 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,
regardless of whether the retailer is or is not engaged in business in this State.
The sales tax is imposed on the “gross proceeds of sales” as defined in Code Section 12-36-90.
The use tax is imposed on the “sales price” as defined in Code Section 12-36-130. They are
essentially both defined as the total proceeds or “value proceeding or accruing from the sale,
lease, or rental of tangible personal property,” without deductions for expenses. Expenses that
are not deducted include: the cost of goods sold; the cost of materials, labor, or service; interest;
losses; transportation; or manufacturers or importers excise taxes imposed by the United States.
Based upon the above, the “measure” of the sales and use tax is the total proceeds of a sale (i.e.,
it is the sum total of all consideration received in conjunction with the sale of tangible personal
property, without any deductions, unless specifically provided). 2
CONCLUSION
A separately stated “inflation fee,” “convenience fee,” “non-cash adjustment fee,” or similar type
of fee charged by a retailer as part of the retail sale of tangible personal property to a customer,
as described in the facts, is includable in “gross proceeds of sales” or “sales price” and subject to
the sales and use tax, unless the retail sale of the tangible personal property is otherwise exempt
from the sales and use tax (e.g., a sale to the federal government) or the retail transaction is not
subject to sales and use tax (e.g., a nontaxable service, such as services provided by doctors,
accountants, hair stylists).
EXAMPLES
Example 1 – Restaurant Charges an “Inflation Fee” to Offset Rising Costs:
Because of the increased inventory and operating costs, Restaurant X is temporarily adding a
10% “inflation fee” to each order. Customer A purchases a BBQ meal and sweet tea at
Restaurant X for $15. The customer is charged a $1.50 inflation fee.
Since the inflation fee is part of the “gross proceeds of sales” of the meal, the basis or measure
upon which the sales tax (state and applicable local tax) is calculated is $16.50. As such,
Restaurant X must remit sales and use tax based on the entire amount paid by Customer A
($16.50 in this example).

The term “tangible personal property” for sales and use tax purposes is defined in Code Section 12-36-60 and
includes items such as communications and laundry services not typically thought of as tangible personal property.
2
Code Section 12-36-90, defining “gross proceeds,” and Code Section 12-36-130, defining “sales price,” provide
certain exclusions.
1

2

Example 2 – Retail Thrift Store Charges a “Non-Cash Adjustment Fee” to Recover Credit
Card Processing Charges:
To recover credit card processing fees, Retailer Y adds a 3% “non-cash adjustment fee” to each
retail sale of tangible personal property where the customer is paying by credit card. Customer B
purchases a lamp at Retailer Y’s store for $30. The customer is charged a $0.90 non-cash
adjustment fee.
Since the non-cash adjustment fee is part of the “gross proceeds of sales” of the lamp, the basis
or measure upon which the sales tax (state and applicable local tax) is calculated is $30.90. As
such, Retailer Y must remit sales and use tax based on the entire amount paid by Customer B
($30.90 in this example).
Note: If an “inflation fee,” “convenience fee,” “non-cash adjustment fee,” or similar type of
fee is imposed on the retail sale of multiple products when the items sold include both
exempt and taxable items, then the sales and use tax is only due on that portion of the fee
related to the taxable items, provided the seller can reasonably prorate the fee between the
taxable items and nontaxable items sold based on his books and records. If the “inflation
fee,” “convenience fee,” “non-cash adjustment fee,” or similar type of fee breakdown,
however, is unreasonable or unsupported by the records of the seller, then the entire fee is
subject to the sales and use tax.
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/W. Hartley Powell
W. Hartley Powell, Director
October 20
, 2022
Columbia, South Carolina

3