Under South Carolina's 1989 sales-and-use-tax provisions, were facsimile, database-access, electronic-mail, credit-reporting, and voice-messaging services taxable communications?

Plain-English summary

Yes. South Carolina Revenue Ruling 89-14 concluded that the five communication services listed in its Exhibit A were subject to sales and use tax under section 12-35-1150 as that provision was applied in 1989:

• facsimile transmissions;
• database-access transmissions;
• electronic mail;
• credit reporting transmitted electronically; and
• voice messaging.

The ruling read the tax broadly. It said the taxable charge included not only the act of sending a voice or message, but also the information or message itself. In the Commission's view, the message and its transmission were integral and indivisible parts of a communication.

The exhibit was not exhaustive. The ruling also said section 12-35-1150 could apply to technologies that did not exist when the statute was enacted.

Why the listed services were taxable

Section 12-35-1150 imposed tax on gross proceeds from charges for the ways or means of transmitting voice or messages, including charges for equipment furnished by the provider.

Section 12-35-140 treated specifically taxed services and intangibles, including communications, as tangible personal property for purposes of the chapter. The retailer definition also included persons furnishing ways or means of transmitting voice or messages for consideration.

Reading those provisions together, the Commission treated the sale of communication as taxable. It rejected the idea that the transmitted information could be separated from the transmission as merely incidental.

What Exhibit A covered

Facsimile

The ruling described facsimile as transmitting exact copies of written, printed, or pictorial material over telephone lines or optical-fiber cables.

Database access

Database-access transmission covered computer database information and programs sent through a modem and telephone lines, whether sent automatically or after a subscriber accessed a computer. Charges could be based on transmission time.

Electronic mail

Electronic mail involved messages sent from computer to computer over telephone lines through an intermediate host computer that received, held, and forwarded them.

Credit reporting

The ruling included credit data transmitted through electronic means, computers, communication networks, terminals, and printers.

Voice messaging

Voice messaging involved recording messages in a central computer database and making them available when the intended person or business accessed the system.

Information charges and transmission charges

The ruling relied on a June 6, 1989 Commission decision involving stock quotes and other financial information sent over leased telephone lines. It quoted that decision for the proposition that communication included both the message and the transmission.

The ruling therefore summarized section 12-35-1150 as taxing both charges for sending a message and charges for the information itself. One could not be separated from the other.

New technology could still fall within the statute

The Commission cited a 1982 Attorney General opinion concerning cable television and a statutory rule that words in the present tense also apply to the future.

It concluded that the broad communications language could reach technologies not in existence when section 12-35-1150 was enacted. It invited a written determination under Revenue Procedure 87-3 for services not listed in Exhibit A.

The ruling noted a statutory exemption

Section 12-35-550(10), as quoted in the ruling, exempted toll charges for voice transmissions between telephone exchanges, telegraph messages, and specified carrier-access and customer-access-line charges established by federal or state regulators.

RR 89-14 nevertheless concluded that every service specifically listed in Exhibit A fell within section 12-35-1150 and was taxable.

What this means for you

Communication and information-service providers

Under this historical ruling, describing a charge as payment for information rather than transmission did not remove it from tax when the information and transmission together formed the communication service.

Technology businesses

The Commission did not limit the statute to technologies known when it was enacted. A service absent from Exhibit A could still be taxable, and the ruling directed uncertain providers to request a written determination.

Accountants and tax professionals

The ruling's analysis depended on 1989 statutory language and an express statutory exemption. Current statutes, exemptions, classifications, rates, and later guidance must be verified before applying its reasoning today.

Common questions

Q: Did RR 89-14 treat facsimile service as taxable?

A: Yes. Facsimile was one of the five taxable services listed in Exhibit A.

Q: Was a database provider taxed only for transmission, not for the information?

A: No. The ruling treated the information or message and its transmission as integral and indivisible parts of the communication.

Q: Were electronic mail and voice messaging included?

A: Yes. Both were listed in Exhibit A and included in the ruling's taxable conclusion.

Q: Was Exhibit A a complete list of taxable communications?

A: No. The ruling expressly said it was not all-inclusive and that other existing or future services might be taxable.

Q: Did the ruling say every communications charge was taxable without exception?

A: No. It quoted a statutory exemption for specified toll, telegraph, carrier-access, and customer-access-line charges. Its conclusion was that the services listed in Exhibit A were taxable.

Q: Is RR 89-14 necessarily current law?

A: No. It is guidance from July 1989 applying the statutes quoted in the ruling. Current law and later guidance must be checked.

Citations and references

• S.C. Code Ann. section 12-35-1150 (1976) — tax on charges for ways or means of transmitting voice or messages
• S.C. Code Ann. section 12-35-140 (1976) — specifically taxed services and intangibles, including communications
• S.C. Code section 12-35-90(7) — retailer definition quoted in the ruling
• S.C. Code section 12-35-550(10) — communications-charge exemption quoted in the ruling
• S.C. Code section 2-7-30 — present-tense words apply to the future, as quoted in the ruling
• S.C. Code section 12-3-170 and SC Revenue Procedure 87-3 — authority cited for the Revenue Ruling
• Hughes v. Edwards, 265 S.C. 529, 220 S.E.2d 231 (1975); Investors Premium Corp. v. South Carolina Tax Commission, 260 S.C. 13, 193 S.E.2d 642 (1973); Mitchell v. Mitchell, 266 S.C. 196, 222 S.E.2d 217 (1976); and Green v. Zimmerman, 269 S.C. 535, 238 S.E.2d 232 (1977) — ordinary meaning and literal application of unambiguous statutes
• 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, 102 S.E.2d 424 (1958); and Etiwan Fertilizer Co. v. South Carolina Tax Commission, 217 S.C. 354, 60 S.E.2d 682 (1950) — dictionary use in statutory interpretation
• 1982 Op. Att'y Gen. No. 82-41 — cable-television opinion cited for applying broad statutory language to later technology

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR89-14.pdf

Original ruling text

SC REVENUE RULING #89-14
SUBJECT:

Communications
(Sales and Use Tax)

EFFECTIVE DATE:

Applies to all periods open under statute.

SUPERSEDES:

All previous documents and any oral directives in conflict herewith.

REFERENCE:

S.C. Code Ann. Section 12-35-1150 (1976)
S.C. Code Ann. Section 12-35-140 (1976)

AUTHORITY:

S.C. Code Ann. Section 12-3-170 (1976)
SC Revenue Procedure #87-3

SCOPE:

A Revenue Ruling is the commission's official interpretation of how
tax law is to be applied to a specific set of facts. A Revenue Ruling is
public information and remains a permanent document until
superseded by a Regulation or is rescinded by a subsequent Revenue
Ruling.

Question:
Are the communication services, listed in Exhibit "A", subject to the sales and use tax, pursuant
to Code Section 12-35-1150?
Facts:
Modern technology has developed many forms and methods of communications, including
telephone, telegraph, facsimile transmissions, database access, electronic mail, etc.
Code Section 12-35-1150 provides a special tax imposition which reads:
Notwithstanding any other provision of law, the gross proceeds accruing or proceeding
from the charges for the ways or means for the transmission of the voice or of messages,
including the charges for use of equipment furnished by the seller or supplier of the ways or
means for the transmission of the voice or of messages, are subject to the license, sales or
use tax, as provided by this chapter.
The term "tangible personal property", as used in Chapter 35 is defined at Code Section 12-35140, in part, as "personal property which may be seen, weighed, measured, felt or touched or

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which is in any other manner perceptible to the senses,..." The last paragraph of that Section
reads:
For the purposes of this Chapter the term 'tangible personal property' shall be
interchangeable with and apply with equal force and effect to services, accommodations and
intangibles including communications, as are specifically provided for in this chapter.
(emphasis added)
In addition, the term "retailer" as defined at Code Section 12-35-90(7) includes "...every person
engaged in the business of selling or furnishing the ways or means for the transmission of the
voice or of messages between persons in this State for a consideration."
Code Section 12-35-550(10) provides the only exemption for the charges taxed at Section 12-351150 . That section exempts "[t]he gross proceeds from the toll charges for the transmission of
voice or messages between telephone exchanges and telegraph messages, and carrier access
charges and customers access line charges established by the Federal Communications
Commission or the South Carolina Public Service Commission."
Discussion:
One of the primary rules of statutory construction is that words used in a statute should be taken
in their ordinary and popular meaning, unless there is something in the statute which requires a
different interpretation. Hughes v. Edwards, 265 S.C. 529, 220 S.E. 2d 231(1975); Investors
Premium Corp. v. South Carolina Tax Commission, 260 S.C. 13, 193 SE 2d 642(1973). Also,
where the terms of a statute are clear and unambiguous and leave no room for construction, they
must be applied according to their literal meaning. Mitchell v. Mitchell 266 S.C. 196, 222 S.E.
2d 217 (1976); Green v. Zimmerman, 269 S.C. 535, 238 S.E. 2d 232 (1977).
The Code does not provide definitions for various terms or phrases found in Section 12-35-1150;
therefore, it is necessary to determine their "ordinary and popular meaning."
It is an accepted practice in South Carolina to resort to the dictionary to determine the literal
meaning of words used in statutes. For cases where this has been done, 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, 102 S.E. 2d 424 (1958); Etiwan Fertilizer co. v. South Carolina Tax
Commission, 217 S.C. 354, 60 S.E. 2d 682 (1950).
The Second College Edition of the American Heritage Dictionary provides the following
definitions:
"Notwithstanding"

• In spite of

"Gross"
"Proceeds"

• Exclusive of deductions; total
• The amount of money derived from a commercial or fundraising venture; yield

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"Way"

• A manner of doing something

"Means"

• A method, course of action, or instrument by which an act can
  be accomplished or some end achieved.

"Transmission"

• The act or process of transmitting; The state of being
  transmitted; Something transmitted, as a voice or message
  “Transmit" Electronics: To send (a signal) as by wire or radio

Substituting the above definitions for terms found in Section 12-35-1150, the literal meaning
becomes - In spite of any other provisions of law, the total amount of money derived, exclusive
of deductions, from a commercial venture and accruing or proceeding from charges for the
manner, method or instruments for sending a signal of the voice or of messages is subject to the
license, sales or use taxes.
The definition of tangible personal property, as defined in Code Section 12-35-140, includes
services and intangibles "specifically provided for" in Chapter 35. A service or intangible
"specifically provided for" in that section is "communications." The Second College Edition of
the American Heritage Dictionary defines "communication", in part, as "[t]he exchange of
thoughts, messages or information, as by speech, signals or writing". "Communications" is
defined, in part, as, "a means of communicating esp.: a system of sending and receiving
messages, such as mail, telephone and television".
Furthermore, the Commission, in a Decision dated June 6, 1989 concerning a company which
transmitted stock quotes and other financial information via leased telephone lines, held that the
charges accruing from the providing of information were subject to the tax.
The Commission held that:
[I]t is established that intangibles "including communications" are within the meaning
of tangible personal property where as here another provision of the sales tax law,
Section 12-35-1150, taxes such communication. The question of what is being sold is
answered by reading Sections 12-35-140 and 12-35-1150 together. Those statutes
identify the sale of communication as being taxable. Since words in a tax statute are to
be understood in their ordinary and popular meaning, it is appropriate to determine the
general usage of the word "communication." Beach v. Livingston, 248 S.C. 135, 149
S.E.2d 328 (1966). Communication has been generally defined as the act of
communicating, transmission, the exchange of thoughts, messages or the like, as by
speech, signals or writing. Thus, the act of transmitting messages cannot be incidental
to the information transmitted where by definition communication includes both the
transmission and the message. The message and the transmission are integral and
indivisible parts of communication and hence neither is incidental to the other. Since
extensive use of the ways and means of transmitting communication is sold by [XYZ]
the value proceeding from the sale of such is within the meaning of gross proceeds and
is subject to tax.

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In summary, charges taxable under Code Section 12-35-1150 include, not only the charge for
sending a message, but, also charges for the information (message) itself. One cannot be
separated from the other.
Furthermore, in 1982 Op. Att'y Gen. No. 82-41, which concluded that charges for cable
television services are taxable, it was stated:
...,the question becomes one of statutory construction. Where a statute is expressed in
broad and general terms and words of present or future tense are used, it will be
applied, not only to situations existing and known at the time of the enactment, but
also prospectively to things and conditions that come into existence thereafter.
82 CJS, Statutes, [Section]319
In addition, [section] 2-7-30 provides further guidance as to the construction of statutes. It states
'words importing present tense shall apply to the future also'. Hence, the South Carolina Code of
Laws specifically calls for such prospective or expansive treatment where applicable.
In other words, the language of Code Section 12-35-1150 is such that it may be applied to
technologies not in existence at the time the Section was enacted.
Conclusion:
The communication services, listed in Exhibit "A", are within the provisions of Code Section 1235-1150 and, therefore, subject to the sales and use tax.
However, it should be noted that Exhibit "A" is not all inclusive and that other services, whether
existing presently or in the future, may be subject to the tax.
NOTE: If there is a question as to the taxability, under Code Section 12-35-1150, of services not
listed in Exhibit "A", a written determination can be requested, pursuant to Revenue
Procedure #87-3.

SOUTH CAROLINA TAX COMMISSION

s/S. Hunter Howard Jr.
S. Hunter Howard, Jr., Chairman

s/A. Crawford Clarkson Jr.
A. Crawford Clarkson, Jr., Commissioner
Columbia, South Carolina
July
, 1989

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Exhibit "A"

Communication Services
Facsimile:
Process of transmitting exact copies of written, printed and pictorial material over
telephone lines (or optical fiber cables). Images are converted by photoelectric cells,
which read the amount of light reflected from or transmitted through a document, into
electric signals, which are sent through the transmission network. Signals are picked up
by a facsimile receiver, which reproduces the original document by the reverse process.
Database Access Transmission:
Transmission of computer database information and programs by and through a modem
and telephone lines, whether automatically transmitted or transmitted as a result of a
subscriber accessing a computer. Charges may be based on the amount of time the
transmission is utilized.
Electronic Mail:
Messages that are transmitted from computer to computer over telephone lines under the
direction of an intermediate service. This service is a "host" computer that receives
messages, holds them and sends them to the proper destination. Users need a
microcomputer, or any computer, a modem, a printer, a telephone line and an electronic
mail service.
Credit Reporting:
Transmission of credit data using electronic means and/or computers, communication
networks, CRT's and printers.
Voice Messaging:
Process of recording messages for a particular person or firm into a central computer
database and activating the message to that person or firm when the computer is accessed
for the messages.

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