Which restaurant purchases did South Carolina Revenue Ruling 92-3 treat as tax-free resale or packaging items, and which as taxable supplies?

Plain-English summary

South Carolina Revenue Ruling 92-3 distinguished restaurant items resold with food from supplies consumed in operating the business. Food and beverage ingredients were not taxable purchases, and containers, bags, wrapping, plates, cups, lids, and similar materials were exempt when used incident to selling and delivering food or drinks.

Napkins, straws, utensils, toothpicks, trays, placemats, towels, cleaning supplies, cooking equipment, furniture, uniforms, and office supplies were taxable. Foil, bags, tissue, and waxed paper depended on use: delivery packaging was exempt, but storage or other use was taxable.

Common questions

Q: Were disposable utensils tax-free packaging? No.

Q: Were takeout containers exempt? Yes when used incident to sale and delivery.

Citations and references

• S.C. Code Ann. §§ 12-36-110 and 12-36-120 (1991 Supp.)
• S.C. Code Ann. § 12-36-2120(14) (1991 Supp.)
• Regulation 117-174.79

Subject

Purchases by Restaurants

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR92-3.pdf

Original ruling text

SC REVENUE RULING 92-3

SUBJECT:

Purchases by Restaurants
(Sales and Use Tax)

TAX ANALYST:

Steve Hallman

EFFECTIVE DATE:

Applies to all periods open under the statute.

SUPERCEDES:

All previous documents and any oral directives in conflict herewith.

REFERENCE:

S.C. Code Ann. Section 12-36-110 (Supp. 1991)
S.C. Code Ann. Section 12-36-120 (Supp. 1991)
S.C. Code Ann. Section 12-36-910(A) (Supp. 1991)
S.C. Code Ann. Section 12-36-1310(A) (Supp.1991)
S.C. Code Ann. Section 12-36-2120(14) (Supp. 1991)
Regulation 117-174.79

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information and remains a permanent document until superceded by a
Regulation or is rescinded by a subsequent Revenue Ruling.

Question:
What guidelines can the Commission provide that will assist restaurants in determining their
sales and use tax liability on purchases of tangible personal property?
Facts:
Advice has been requested by restaurants with regard to their sales and use tax liability on
purchases of tangible personal property. In addition to selling food and beverage products, many
restaurants provide their customers with napkins, straws, utensils, condiments (salt, pepper,
ketchup, etc.) and other ancillary items, which facilitate the consumption of the food or beverage
products. Most restaurants make these items readily accessible to their customers for self service
(e.g. placing individual serving size packages of condiments or plastic utensils on counters for
use with the food products at the customer's discretion) and others attempt to regulate or limit the

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quantity of such items available to customers by providing them only upon request or including
them in the food or beverage package transferred to the customer. Also, restaurants use a variety
of containers, packaging materials, and supplies in their business of selling food and beverage
products.
Discussion:
Pursuant to Code Section 12-36-910(A):
A sales tax, equal to five percent of the gross proceeds of sales, is imposed upon every
person engaged or continuing within this State in the business of selling tangible personal
property at retail. (Emphasis added)
In accordance with Code Section 12-36-1310(A):
A use tax is imposed 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,
at the rate of five percent of the sales price of the property, regardless of whether the
retailer is or is not engaged in business in this State. (Emphasis added)
The terms "sale at retail" and "retail sale" are defined at Code Section 12-36-110, in part, as "all
sales of tangible personal property except those defined as wholesale sales". Further, the terms
are defined to include (with certain exceptions) the withdrawal, use, or consumption of tangible
personal property by anyone who purchases it at wholesale.
Code Section 12-36-120 provides, in pertinent part:
"Wholesale sale" and "sale at wholesale" mean a sale of:
(1)

tangible personal property to licensed retail merchants, jobbers, dealers, or
wholesalers for resale, and do not include sales to users or consumers;

(4)

materials, containers, cores, labels, sacks, or bags, used incident to the sale and
delivery of tangible personal property.

Code Section 12-36-2120(14) exempts from the sales and use taxes sales or purchases of:
wrapping paper, wrapping twine, paper bags, and containers, used incident to the sale and
delivery of tangible personal property.
In summary, in order for either the sales or use tax to apply, there must be a retail sale of tangible
personal property. Sales of tangible personal property to users or consumers are retail sales
subject to tax. Sales of tangible personal property to licensed retailers for resale and sales of
materials, containers, sacks or bags used incident to the sale and delivery of tangible personal

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property are not taxable. In considering this issue, it must be determined whether tangible
personal property is used or consumed by restaurants, purchased for resale, or used incident to
the sale and delivery of the restaurants' food and beverage products.
Regulation 117-174.79, provides guidance and reads:
Licensed retailers purchase free of sales or use taxes wrapping paper, wrapping twine,
paper bags and containers for use incident to the delivery of tangible personal property
sold by them. They also purchase tax-free materials used in packaging personal property
sold by them. They also purchase tax-free materials used in packaging tangible personal
property for shipment or sale.
The list below while illustrative of items falling within the Rule announced above is not
exhaustive:
Souffle cups, butter chips, paper cups, paper plates, boxes and crates and glazed tissue
used to package articles of food.
It will be seen that items such as straws, napkins, wooden or paper spoons and forks do
not meet the requirements outlined above and, hence, must bear the tax. Such items are
rather in the nature of supplies used or consumed by the retailer in the operation of his or
its business.
In summary, purchases of tangible personal property for resale and purchases of materials,
containers, cores, labels, sacks, or bags used incident to the sale and delivery of tangible personal
property are not subject to the sales or use taxes. Purchases of straws, napkins, and utensils are
made at retail and are, therefore, subject to the tax.
Conclusion:
The Commission provides the following guidelines with respect to the sales and use taxes on
purchases by restaurants ("NT" - Not Taxable, "T" - Taxable):
Aluminum Foil
Beverage Ingredients
Bibs
Cleaning Supplies
Coasters
Coffee Stirers
Cooking Equipment
Cooking Utensils
Condiments
Paper Buckets or Pails
Paper or Plastic Bags
Place Mats
Plates (disposable or reusable)

*
NT
T
T
T
T
T
T
NT
*
*
T
NT

Cups & Lids
Drinking Glasses
Food Containers & Wraps
Food Products & Ingredients
Forks, Knives & Spoons
Furniture & Fixtures
Guest Checks
Napkins
Office Supplies
Table Covers
Tissue Paper
Toothpicks
Towels (paper or cloth)

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NT
NT
*
NT
T
T
T
T
T
T
*
T
T

Serving Utensils
Skewers
Steak Markers

T
T
T

Tray Liners
Trays
Uniforms
Waxed Paper

T
T
T
*

• • Materials and containers used incident to the sale and delivery of food and drink products are
    not taxable; however, materials and containers used for other purposes are taxable (e.g.
    storage containers).
    NOTE: Other items are to be considered on a case-by-case basis.

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
May 26
, 1992

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