Did South Carolina Revenue Ruling 92-15 treat state agencies, counties, municipalities, and other political subdivisions as generally subject to sales and use tax?

Plain-English summary

South Carolina Revenue Ruling 92-15 said the state and its political subdivisions were generally subject to sales and use tax as both sellers and purchasers.

The historical definition of “person” expressly included the state, state agencies, instrumentalities, authorities, political subdivisions, and municipalities. Government status alone therefore did not remove a transaction from tax.

Government sales

Retail sales by state agencies, counties, municipalities, and other political subdivisions were taxable unless a specific exemption applied.

The ruling's examples included:

• concession and gift-shop sales at parks and recreation centers;
• souvenir sales by colleges and universities;
• copies of records such as returns, deeds, transcripts, and driving records;
• database access;
• computer software;
• agency manuals and periodicals; and
• campground accommodations.

A state agency selling property to private persons for use or consumption was treated as a retailer and required to be licensed under the historical sales-and-use-tax law.

Government purchases and use

Sales to, and purchases by, state and local government bodies were also taxable unless exempt. Use tax applied when the government stored, used, or consumed retail property bought from an out-of-state retailer.

Examples included office supplies, furniture, computers, printers, software, and database-access services used in government operations.

The ruling's historical definition of tangible personal property also included specified taxable services and intangibles such as communications, laundry and dry cleaning, accommodations, and electricity.

Transfers at cost between governments

Regulation 117-174.95 provided a narrower exception. A state agency was not treated as making a retail sale when it transferred property to another state agency, county, or municipality if:

• the consideration only reimbursed the transferring agency's costs and expenses; and
• the transferring agency had paid tax on its original purchase.

Transfers outside those conditions remained subject to the ordinary analysis.

Specific exemptions still applied

The ruling cited historical exemptions for constitutionally protected transactions, certain educational and public-library publications, specified General Services resales after tax on the original purchase, and qualifying military memorials. It emphasized that other statutory exemptions could also apply.

What this means for you

Government procurement teams

Do not assume a purchase is exempt solely because the buyer is a public body. Identify the exact statutory or regulatory exemption and preserve supporting facts.

Agencies selling to the public

Government retail activity could require collection and retailer licensing under this ruling.

Intergovernmental transfers

Document the original tax payment and show that the receiving government reimbursed only costs and expenses.

Current transactions

Verify current government exemptions and regulations. This page reports the 1992 ruling, not present law.

Common questions

Q: Were state and local governments automatically exempt?
A: No. The ruling expressly included them within the definition of taxable persons.

Q: Were sales by a government agency taxable?
A: Generally yes, unless a specific exemption or the qualifying at-cost transfer rule applied.

Q: Were government purchases taxable?
A: Generally yes under the historical ruling, subject to specific exemptions.

Q: When did the interagency transfer rule apply?
A: When a state agency transferred property to another agency, county, or municipality solely for cost reimbursement after paying tax on the original purchase.

Q: Did the ruling cover services?
A: Yes. It identified specified communications, laundry, accommodations, electricity, database access, and other then-taxable services.

Citations and references

• S.C. Code Ann. §§ 12-36-910 and 12-36-1310 — historical sales and use tax
• S.C. Code Ann. § 12-36-30 — person includes state and political subdivisions
• S.C. Code Ann. § 12-36-60 — historical tangible personal property and taxable services
• S.C. Code Ann. §§ 12-36-2120 and 12-36-2130 — historical exemptions
• S.C. Regulation 117-174.95 — qualifying state-agency transfers at cost
• S.C. Regulations 117-174.92 through 117-174.100 — additional government transaction regulations cited by the ruling

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR92-15.pdf

Original ruling text

SC REVENUE RULING #92-15

SUBJECT:

State Government and its Political Subdivisions
(Sales and Use Tax)

TAX MANAGER:

John P. McCormack

EFFECTIVE DATE:

Applies to all periods open under the statute.

REFERENCE:

S.C. Code Ann. Section 12-36-910 (Supp. 1991)
S.C. Code Ann. Section 12-36-1310 (Supp. 1991)
S.C. Code Ann. Section 12-36-30 (Supp. 1991)
S.C. Code Ann. Section 12-36-60 (Supp. 1991)
S.C. Code Ann. Section 12-36-2120 (Supp. 1991)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (Supp. 1991)
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:
Is the State, or any of its political subdivisions, subject to sales and use taxes?
Facts:
The State of South Carolina and its various political subdivisions, in performing their
governmental functions, sell tangible personal property and services to individuals, businesses and
other governmental agencies.
Examples of such sales by the State and its political subdivisions include:

1. Concession and gift shop sales at parks, recreation centers, etc.
2. Sales of souvenirs by universities and colleges.

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3. Sales of copies of records, such as tax returns, deeds, college transcripts and driving
records.

4. Charges for accessing a computer database.
5. Sales of computer software.
6. Sales of manuals and periodicals, such as a manual of an agency's rules and regulations.
7. Charges for accommodations at campgrounds.
   Also, the State and its political subdivisions purchase supplies, equipment and services necessary
   to carry out their governmental functions. Examples of such purchases include office supplies,
   furniture, computers, printers, software, and access to computer database services.
   Discussion:
   Code Section 12-36-910 imposes a "sales tax, equal to five percent of the gross proceeds of sales,
   ... upon every person engaged or continuing within this State in the business of selling tangible
   personal property at retail."
   Code Section 12-36-1310 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". The tax is imposed at a rate of five percent of the sales price of the property. The use tax is
   the liability of the person storing, using, and consuming the property in South Carolina.
   Code Section 12-36-30 defines the term "person" to include "any individual, firm, partnership,
   association, corporation, receiver, trustee, any group or association acting as a unit, the State, any
   state agency, any instrumentality, authority, political subdivision, or municipality." (Emphasis
   added.)
   The term "tangible personal property" has been defined in Code Section 12-36-60 to mean:
   personal property which may be seen, weighed, measured, felt, touched, or which is in any
   other manner perceptible to the senses. It also includes services and intangibles, including
   communications, laundry and related services, furnishing of accommodations, and sales of
   electricity, the sale or use of which is subject to tax under this chapter and does not include
   stocks, notes, bonds, mortgages, or other evidences of debt.
   In summary, the sales tax is imposed upon any person, including the State and any one of its
   political subdivisions, who sells tangible personal property at retail. The use tax is imposed upon
   any person, including the State and its political subdivisions, storing, using or consuming tangible
   personal property that has been purchased at retail from an out of state retailer.
   Now, we must review the statutory exemptions to determine if any specifically apply to sales or
   purchases by the State or its political subdivisions.

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Code Sections 12-36-2120 and 12-36-2130 provide exemptions from the sales and use tax with
respect to the following:
(1) tangible personal property or receipts of any business which the State is prohibited
from taxing by the Constitution or laws of the United States of America or by the
Constitution or laws of this State;

(3) textbooks, magazines, and periodicals used as a part of a course of study in primary
and secondary schools and institutions of higher learning, and all books, magazines, and
periodicals sold to publicly supported state, county, or regional libraries which are open
to the public without charge;

(30) office supplies, or other commodities, and other services resold by the Division of
General Services of the State Budget and Control Board to departments and agencies of
the state government, if the tax was paid on the divisions original purchase;

(46) War memorials or monuments honoring units or contingents of the Armed Forces of
the United States or of the National Guard, including United States military vessels,
which memorials or monuments are affixed to public property.
While there may be other exemptions under Code Sections 12-36-2120 and 12-36-2130 that could
apply, the four cited above are often applicable to transactions that involve the State or its political
subdivisions.
Therefore, the sales and use tax cannot be imposed upon transactions for which the General
Assembly has enacted an exemption, whether the exemption is found in the sales and use tax code
or elsewhere in South Carolina code of laws.
Finally, Regulation 117-174.95 concerns transfers of tangible personal property between State
agencies and between State agencies and the counties and municipalities, and reads:
An agency of the State of South Carolina is not deemed to be engaged in the business of
selling tangible personal property at retail when transferring tangible personal property to
another agency of the State or to a county or to a municipality if the consideration for the
transfer only reimburses the transferring agency for its costs and expenses in conveying
the property; provided the transferring agency has paid tax on the initial purchase of the
tangible personal property.
Where, however, a State agency sells tangible personal property to persons other than
another State agency, county, or municipality for use or consumption, such sales shall be
considered retail sales subject to the tax. The agency is required to be licensed as a retailer
under the terms and provisions of the sales and use tax act.
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For additional regulations regarding sales to or purchases by the State or its political subdivisions,
see Regulations 117-174.92, 117-174.93, 117-174.94, 117-174.96, 117-174.97, 117-174.98, and
117-174.100.
Conclusions:

1. Sales of tangible personal property by the State, counties, municipalities and other political
   subdivisions of the State are subject to the sales tax, unless such sales fall within the provisions of
   Regulation 117-174.95 (transfers by State agencies to other agencies, counties or municipalities at
   cost) or are otherwise exempt. (See Code Sections 12-36-2120 and 12-36-2130 for the
   exemptions.)
2. Sales to, or purchases by, the State, counties, municipalities, and other local political
   subdivisions of tangible personal property are subject to the sales and use tax, unless such sales fall
   within the provisions of Regulation 117- 174.95 (transfers by State agencies to other agencies,
   counties or municipalities at cost) or are otherwise exempt. (See Code Sections 12-36-2120 and
   12-36-2130 for the exemptions.)
   Note: As stated in the Discussion, "tangible personal property" includes laundry and dry cleaning
   services, electricity, certain communications services (local telephone service, faxing services,
   database access services, paging services, 900/976 telephone services), accommodation services
   and certain other services that are subject to the sales and use taxes under Chapter 36 of Title 12
   and the rules and regulations of the SC Tax Commission. Therefore, transactions with the State or
   its political subdivision involving these services are subject to the sales and use tax, unless such
   sales fall within the provisions of Regulation 117-174.95 (transfers by State agencies to other
   agencies, counties or municipalities at cost) or are otherwise exempt.

SOUTH CAROLINA TAX COMMISSION

s/A. Crawford Clarkson Jr.
A. Crawford Clarkson, Jr., Chairman

s/T. R. McConnell
T. R. McConnell, Commissioner

s/James M. Waddell Jr.
James M. Waddell, Jr., Commissioner
Columbia, South Carolina
1992
December 9

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