Which extra automobile-rental charges did RR 93-1 include in taxable gross proceeds?

Plain-English summary

South Carolina Revenue Ruling 93-1 included every listed automobile-rental add-on in taxable gross proceeds.

The covered charges were prepaid or return-based fuel charges, collision-damage waivers, personal-accident coverage, extended bodily-injury and property-damage protection, personal-effects coverage, and combined accident/effects coverage.

The Commission reasoned that the rental company would not receive any of those fees without renting the car. Optional status and separate statement on the customer's bill did not sever the charges from the taxable rental transaction.

Common questions

Q: Were separately stated fuel charges taxable? Yes, under both fuel-charge methods described.

Q: Was an optional collision-damage waiver taxable? Yes.

Q: Were optional accident and personal-property protections taxable? Yes.

Citations and references

• S.C. Code Ann. § 12-36-910 (historical sales tax)
• S.C. Code Ann. § 12-36-90 (historical gross-proceeds definition)
• Meyers Arnold v. South Carolina Tax Commission, 285 S.C. 303, 328 S.E.2d 920 (Ct. App. 1985)
• South Carolina Commission Decision S-D-174 (property-damage-waiver fee discussed in the ruling)

Subject

Charges By Automobile Rental Operation

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR93-1.pdf

Original ruling text

SC REVENUE RULING #93-1

SUBJECT:

Charges By Automobile Rental Operation
(Sales Tax)

TAX MANAGER:

John P. McCormack

EFFECTIVE DATE: July 1, 1993
REFERENCE:

S.C. Code Ann. Section 12-36-910 (Supp. 1991)
S.C. Code Ann. Section 12-36-90 (Supp. 1991)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (Supp. 1991)

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information and remains a permanent document until superseded by a
Regulation or is rescinded by a subsequent Revenue Ruling.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 certain charges by an automobile rental company, as listed in the facts, includable in "gross
proceeds of sales" and therefore subject to the sales tax?
Facts:
An automobile rental company ("company") is engaged, in South Carolina, in the business of renting
automobiles on a short term basis. In addition to its basic rental charge, the company charges the
customer a "fueling charge". Also, if the customer chooses certain other services, additional charges
are made. The following is a brief description and/or example of the charges in question:
Fueling Charges - The fueling charge is a mandatory charge; however, the company
determines the fueling charge under one of two methods.
Method #1 - The customer may elect to either:
(a) pay a separately stated non-refundable charge for the gas provided with the car, with no
credit given for the return of any unused gas; or,

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(b) not pay the fuel charge at the time of the initial rental and pay a separately stated fuel
charge only for gas used, if the car is returned with less than a full tank. The customer has
the option of returning the car with a full tank and avoiding the fueling charge.
Method #2 - The customer must pay (an election is not allowed) a separately stated nonrefundable charge for the gas provided with the car, with no credit given for the return of
any unused gas.
Collision Damage Waiver (Optional) - The customer pays a fee for a release of financial
responsibility to the company for any damages occurring to the car during use. For example, if
the customer is involved in an accident, the customer will not be responsible to the company
for repair costs if he or she purchased the collision damage waiver. The fee is separately stated
from the rental price.
Personal Accident Coverage (Optional) - The customer pays a fee in order to be provided up to
$50,000 in coverage for any automobile related death or dismemberment which may occur to
the customer or any passenger in the rental car.
Extended Protection (Optional) - The customer pays an additional fee in order to be provided
up to $1,000,000 for claims that may be made against the customer or other authorized drivers
of the car for automobile related bodily injury, death, and property damage. Uninsured
motorist benefits up to $1,000,000 are also included in this protection package. The uninsured
motorist benefits are paid if the insured is injured and the uninsured motorist is at fault.
Personal Effects Coverage (Optional) - The customer pays a fee to be protected against the
loss, theft, or damage to the customer's personal property which is in the car during the rental
period.
Personal Accident and Effects Coverage (Optional) - The customer pays a fee for a
combination of the Personal Accident Coverage and the Personal Effects Coverage discussed
above.
As with the fueling charge, all the other charges discussed above, except the collision damage
waiver fee, are separately stated on the bill to the customer.
Discussion:
Code Section 12-36-910 imposes "a sales tax, equal to five percent of gross proceeds of sales, upon
every person engaged ... within this State in the business of selling tangible personal property at
retail."
Code Section 12-36-90 reads, in part:
Gross proceeds of sales, or any similar term, means the value proceeding or accruing from the
sale, lease, or rental of tangible personal property.

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(1) The term includes:

(b) the proceeds from the sale of tangible personal property without any
deduction for:
(i)

the cost of goods sold;

(ii)

the cost of materials, labor, or service;

(iii) interest paid;
(iv) losses;
(v)

transportation costs;

(vi) manufacturers or importers excise taxes imposed by the United States; or
(vii) any other expenses.
In Meyers Arnold v. South Carolina Tax Commission, 285 S.C. 303, 328 S.E. 2d. 920 (1985), the
Court of Appeals, in interpreting the definition of "gross proceeds of sales" with respect to lay away
fees paid in conjunction with lay away sales, held:
Section 12-35-30 [now Section 12-36-90] defines gross proceeds of sales as "the
value proceeding or accruing from the sale of tangible personal property ... without
any deduction for service costs." But for the lay away sales, Meyers Arnold would
not receive the lay away fees. The fees are obviously rendered in making lay away
sales.
For these reasons, this court holds the lay away fees are part of the gross proceeds of
sales and subject to the sales tax.
In addition, the Commission, in Decision S-D-174, held a property damage waiver fee charged by a
person engaged in the business of renting tangible personal property was subject to the sales tax.
The Commission, in citing Meyers Arnold v. South Carolina Tax Commission, supra, stated:
Just as in Meyers Arnold, supra, the service fee here is taxable. But for the lease of
tangible personal property, the taxpayer would not have received the fee. The fee is
obviously charged for the additional service of providing a lease of property free
from liability for damage. In the absence of such service, the lessee, under the
taxpayer's lease agreements, would be "liable for any loss, theft, damage or
destruction of leased property." We find and conclude the fee for the property
damage waiver is part of gross proceeds of sale subject to tax.

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In summary, the sales tax is imposed upon every person engaged in South Carolina in the business
of selling tangible personal property at retail. The tax is based upon the gross proceeds of sales of
the business, which is the value proceeding from the sale without any deductions for service costs
and other expenses. Therefore, "[b]ut for [the rental of the car], the taxpayer would not have
received the [fees for the various charges connected with the rental car, as described in the facts.]"
[See also Regency Towers Association, Inc. v. South Carolina Tax Commission, Horry County
Court of Common Pleas, Case No. 88-CP-26-1109 (1989) (maid service at a hotel) and Commission
Decisions #90-38 and #91-64 (engraving charges as part of the sale of trophies).]
Conclusion:
The charges by an automobile rental company, as described in the facts, are all includable in "gross
proceeds of sales" and therefore subject to the sales tax. These charges are:

1. Fueling Charges.
2. Charges for Collision Damage Waiver.
3. Personal Accident Coverage.
4. Extended Protection.
5. Personal Effects Coverage.
6. Personal Accident and Effects Coverage.

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
January 14
, 1993

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