Can a South Carolina county use its Capital Project Sales Tax money to pay off bonds and reimburse its general fund for a project it started before voters approved the tax?

Plain-English summary

The Capital Project Sales Tax (CPST) is a local-option sales and use tax of up to 1% that a South Carolina county can impose — by enacting an ordinance and then winning a voter referendum — to pay for specific capital projects (roads, bridges, courthouses, jails, libraries, recreational and cultural facilities, water/sewer, flood control, beach renourishment, and the like) for a limited amount of time [Capital Project Sales Tax Act, § 4-10-300 et seq.; §§ 4-10-310, -330].

Revenue Ruling #25-7 answers a public-finance timing question: a county often starts (and pays for) a project before the CPST referendum passes. To fund that early work, it might issue general-obligation (GO) bonds or advance money from its general fund, planning to pay itself back once the CPST is approved. Can CPST revenue be used to cover those pre-referendum costs — and must a county instead limit CPST spending only to costs or bonds arising after the vote?

The Department's answer: the Act does not prohibit a county from using CPST revenue to —

1. defray debt on general-obligation bonds used to fund an approved project before the referendum passed;
2. reimburse its own general fund for payments made before the CPST was approved (or before bonds were issued under an approved CPST); or
3. pay project costs, or debt on bonds issued under the CPST, incurred after the CPST was approved.

So a county is not confined to post-referendum costs. But two guardrails apply. First, the county must comply with every provision of the Act, including specifying in the ordinance the purpose/projects, whether it intends to issue bonds (and the maximum amount, and whether CPST revenue is pledged to them), the maximum project cost funded by CPST, and, if there are multiple purposes, their priority [§ 4-10-330]. Second, because the Department both collects the CPST "in the same manner" as other sales and use taxes [§ 4-10-350] and has a statutory duty to ensure the county's expenditures comply with the Act (Richland Co. v. Dep't of Revenue), the Department recommends that any county planning to pay off prior debt or reimburse its general fund say so in the project description in both the ordinance and the referendum.

The ruling expressly does not address the separate County Bond Act (§ 4-15-10 et seq.) requirements for actually issuing GO bonds — a county should look to that Act for bond-issuance rules. It also notes a county cannot issue bonds authorized solely under the CPST Act without first holding the required referendum.

What this means for you

County councils, administrators, and finance officers

If your county fronts a capital project — via GO bonds or a general-fund advance — before the CPST vote, you can generally use CPST revenue to repay that debt or reimburse the fund once the tax passes. The practical takeaways: draft the ordinance and referendum carefully to include the required details and to disclose any plan to retire prior debt or reimburse the general fund, and remember the Department will be checking that your CPST spending matches the Act and what voters approved.

Bond counsel and public-finance advisors

The ruling confirms CPST revenue can service pre-referendum GO bond debt for an approved project and can reimburse a general-fund advance, but it deliberately leaves County Bond Act mechanics to that statute and stresses that CPST-only bonds require a prior referendum. The Department's "recommend disclosure in the ordinance and referendum" language is best read as a compliance safeguard given its oversight role under Richland County.

Businesses and shoppers in a CPST county

For you, the CPST is simply an extra local sales-and-use-tax component (up to 1%) added at checkout in a county that has adopted it. This ruling doesn't change what's taxable or the rate you pay — it's about how the county may spend the money it collects. The Department administers and collects the CPST along with the state and other local taxes.

Common questions

Q: What is the Capital Project Sales Tax?
A: A local-option sales and use tax of up to 1% that a South Carolina county can impose by ordinance plus voter referendum to fund specific capital projects for a limited time.

Q: Can a county pay off bonds it issued before the CPST referendum with CPST money?
A: Yes, if the bonds were general-obligation bonds used to fund an approved project. The Act does not prohibit using CPST revenue to defray that debt.

Q: Can a county reimburse its general fund for money it spent before the tax passed?
A: Yes. The Act does not prohibit using CPST revenue to reimburse the general fund for pre-approval payments, subject to compliance with the Act.

Q: Does the county have to limit CPST spending to costs incurred after the vote?
A: No. The Act does not require that. A county may use CPST revenue for qualifying pre-referendum debt and reimbursements as well as post-approval costs, as long as it complies with the Act.

Q: Does this ruling cover how the bonds themselves get issued?
A: No. It addresses only the CPST. The County Bond Act (§ 4-15-10 et seq.) governs issuing general-obligation bonds.

Citations and references

Statutes:

• S.C. Code Ann. § 4-10-300 et seq. — Capital Project Sales Tax Act
• S.C. Code Ann. § 4-10-310 — county may impose the CPST (up to 1%) by ordinance and referendum
• S.C. Code Ann. § 4-10-330 — permitted projects and required contents of the ordinance
• S.C. Code Ann. § 4-10-350 — Department collects the CPST in the same manner as other sales and use taxes
• S.C. Code Ann. § 12-36-2660 — Department's authority to administer and enforce the Sales and Use Tax Code
• S.C. Code Ann. § 4-15-10 et seq. — County Bond Act (general obligation bonds)

Case discussed in prose (not linked): Richland Co. v. Dep't of Revenue, 422 S.C. 292, 811 S.E.2d 758 (the Department's oversight and enforcement responsibilities for local option sales tax).

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR25-7.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 #25-7
SUBJECT:

Paying Project Debt using a Capital Project Sales Tax
(Local Option Sales Tax)

REFERENCES:

Capital Project Sales Tax Act, S.C. Code Ann. § 4-10-300, et seq.

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.

INTRODUCTION:
The Capital Project Sales Tax Act (“Act”) authorizes counties to impose a local option sales and
use tax, the Capital Project Sales Tax (“CPST”), to fund specific capital projects within the county.
This ruling addresses whether a county may use CPST revenue to reimburse expenses incurred
prior to the approval of a CPST referendum; specifically general obligation bond debt and
advanced payments from the county’s general fund, and whether a county may limit the use of
revenue generated from a CPST to project costs incurred, or bonds, issued following the
referendum.
LAW AND ANALYSIS:
The Act allows a county to impose a sales and use tax not to exceed 1% if the county’s governing
body enacts an ordinance and the voters approve the ordinance in a referendum. S.C. Code Ann.
§ 4-10-310. The CPST must be for a specific purpose and for a limited amount of time. Id. A
county may use CPST revenue to pay for projects authorized by the ordinance or to defray debt on
bonds issued pursuant to the Act. S.C. Code Ann. §§ 4-10-310 and 330. A county may use a CPST
to fund the following types of projects:
(a) highways, roads, streets, bridges, and public parking garages and related
facilities;
(b) courthouses, administration buildings, civic centers, hospitals, emergency
medical facilities, police stations, fire stations, jails, correctional facilities,
1

detention facilities, libraries, coliseums, educational facilities under the direction of
an area commission for technical education, or any combination of these projects;
(c) cultural, recreational, or historic facilities, or any combination of these facilities;
(d) water, sewer, or water and sewer projects;
(e) flood control projects and storm water management facilities;
(f) beach access and beach renourishment;
(g) dredging, dewatering, and constructing spoil sites, disposing of spoil materials,
and other matters directly related to the act of dredging;
(h) jointly operated projects of the county, a municipality, special purpose district,
and school district, or any combination of those entities, for the projects delineated
in subitems (a) through (g) of this item;
(i) any combination of the projects described in subitems (a) through (h) of this
item;
S.C. Code Ann. § 4-10-330(A)(1).
The South Carolina Department of Revenue (the “Department”) is tasked with administering and
collecting the CPST “in the same manner that other sales and use taxes are collected.” S.C. Code
Ann. § 4-10-350. The Department has full authority to administer and enforce the provisions of
the Sales and Use Tax Code. S.C. Code Ann. § 12-36-2660. The Department has “extensive
administrative, oversight, and enforcement responsibilities” related to local option sales tax.
Richland Co. v. Dep’t of Revenue, 422 S.C. 292, 306, 811 S.E.2d 758, 766. Accordingly, in
addition to the Department’s responsibility to collect revenue generated by a CPST, the
Department has a statutory duty to ensure that a county’s expenditures of CPST revenue comply
with the Act.
In some cases, a county may begin work on a project prior to a referendum passing a CPST. To
fund the project, the county may issue general obligation bonds or advance payments from its
general fund, to be reimbursed by the later approved CPST. A county may also fund the project
only for project costs incurred after a CPST is passed.
The Act does not prohibit the use of CPST revenue to pay debt on general obligation bonds 1, to
reimburse the general fund, or defray debt on bonds issued following the approval of the CPST.
1

General obligation bonds may be issued by counties pursuant to The County Bond Act, codified
in S.C. Code Ann. § 4-15-10, et seq. Because the Department does not administer or enforce the
provisions of The County Bond Act, and for purposes of simplifying the discussion herein, this
ruling will not discuss the requirements for a county to issue general obligations. Counties should
refer directly to The County Bond Act for any guidance regarding general obligation bonds.
2

However, a county must specify in the ordinance certain details regarding the CPST, including:

1. The purpose for which the county intends to use the CPST revenue, including the projects
   to be funded 2;
2. Whether the county intends to issue bonds to provide for the payment of any costs of the
   projects, the maximum amount of bonds to be issued, whether the county intends to pledge
   the CPST revenue to the payment of the bonds and, if other sources of revenue are to be
   used for the projects, details of these other sources 3;
3. The maximum cost of the project or facilities, or portion of facilities, to be funded from
   CPST revenue 4; and
4. If a county seeks to impose a CPST for more than one purpose, the priority in which it
   intends to use the CPST in the ordinance. 5
   In addition to these statutorily mandated details, the Department recommends that any county
   wishing to use CPST revenue to pay off prior debt service or reimburse the general fund, as
   described herein, also include that information in the project description in the ordinance and in
   the referendum.
   CONCLUSION:
   The Act does not prohibit a county from using revenue generated by a CPST to defray debt on
   general obligation bonds used to fund an approved project prior to a referendum passing a CPST.
   Nor does the Act prohibit a county from using CPST revenue to reimburse its general fund for
   payments made prior to an approved CPST or prior to issuing bonds pursuant to an approved
   CPST. Lastly, the Act does not prohibit a county from utilizing CPST revenue to pay for costs, or
   for debt on bonds issued pursuant to the CPST, incurred after the approval of the CPST. However,
   a county must comply with all provisions of the Act as set forth herein.
   SOUTH CAROLINA DEPARTMENT OF REVENUE

s/W. Hartley Powell
W. Hartley Powell, Director
October 15
, 2025
Columbia, South Carolina
2

S.C. Code Ann. § 4-10-330(A)(1).

3

A county cannot issue bonds which are authorized solely under the Act without first seeking the
required referendum. S.C. Code Ann. § 4-10-330(A)(3)(a). The bonds discussed in this ruling as
the bonds issued prior to the required CPST referendum are general obligation bonds issued under
The County Bond Act.
4

S.C. Code Ann. § 4-10-330(A)(3)(b).

5

S.C. Code Ann. § 4-10-330(B).
3