Were household goods in a South Carolina timeshare or vacation home exempt from property tax under RR 95-1?

Plain-English summary

South Carolina Revenue Ruling 95-1 distinguished a home from a business when deciding whether household goods and furniture in a timeshare unit or vacation home were subject to personal property tax.

The ruling said household goods in an individually owned second home or a vacation-timeshare ownership unit were exempt when the dwelling was never rented or otherwise used for business. Occasional rental did not automatically destroy the exemption. The Department used the federal residence tests in IRC Sections 163 and 280A: personal use generally had to exceed the greater of 14 days or 10% of fair-rental days, and a dwelling rented for fewer than 15 days received the special treatment described in the ruling.

The result changed when the dwelling was operated as a business. Household goods were taxable when rental or other business use prevented the dwelling from qualifying as a residence, including when deductible rental expenses could exceed rental income. A company vacation home used for client entertainment and business meetings was also taxable. By contrast, a partnership used merely as a shared family-vacation arrangement could receive the same personal-use treatment as individuals.

For a timeshare, the Department tested use at the unit level, considering all owners' use rather than each owner's week separately. It separately concluded that household goods in a vacation-timeshare lease plan, where the purchaser held only a right to use rather than an ownership interest, were taxable.

Common questions

Q: Were furnishings in a vacation home that was never rented taxable? No. RR 95-1 treated household goods and furniture in a personally used second home as exempt.

Q: Did occasional rental make the furnishings taxable? Not automatically. The ruling applied its residence and business-use tests, including the cited federal personal-use thresholds.

Q: What if one timeshare owner rented a week but another used a week personally? The ruling tested the entire unit's combined use, not each owner's interest separately.

Q: Did ownership and lease-plan timeshares receive the same treatment? No. The ruling said property in a qualifying ownership unit could be exempt, while property in a vacation-timeshare lease plan was taxable.

Q: Who handled tax owed on furnishings in a timeshare unit? The ruling said the seller or association was responsible for collecting and remitting personal property taxes owed on the household goods and furniture.

Citations and references

• S.C. Code Ann. §§ 12-37-210 and 12-37-220(A)(5) (general taxability and household-goods exemption)
• S.C. Code Ann. §§ 27-32-10, 27-32-95, and 27-32-240 (timeshare definitions, assessments, and collection)
• IRC §§ 163(h) and 280A (residence and rental-use tests adopted in the ruling's analysis)
• S.C. Regulation 117-110 and S.C. Code Ann. § 12-37-930 (valuation provisions discussed)

Subject

Taxation of Personal Property Located in a Timeshare Unit or Other Vacation Home

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR95-1.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P. O. Box 125, Columbia, South Carolina 29214

SC REVENUE RULING #95-1 (TAX)
SUBJECT:

Taxation of Personal Property Located in a Timeshare Unit or Other
Vacation Home
(Property 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. §12-37-210 (Supp. 1993)
S.C. Code Ann. §12-37-220 (Supp. 1993)
S.C. Code Ann. §27-32-10, et. seq. (Rev. 1991)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (Supp. 1993)
S.C. Revenue Procedure #94-1

SCOPE:

A Revenue Ruling is the Department of Revenue's official advisory
opinion of how laws administered by the Department are to be
applied to a specific issue or a specific set of facts, and is provided as
guidance for all persons or a particular group. It is valid and remains
in effect until superseded or modified by a change in the statute or
regulations or a subsequent court decision, Revenue Ruling or
Revenue Procedure.

There are many questions concerning the taxation of the personal property located within
vacation dwellings, including timeshare units. This document will address the forms of timeshare
ownership, the taxation of personal property situated within such units, and the taxation of
personal property located in other types of vacation homes.
STATUTORY PROVISIONS
S.C. Code §27-32-10 defines several terms related to timeshare units, including the two types of
timeshare plans:
(8) "Vacation time sharing ownership plan" means any arrangement, plan or similar
devise, whether by tenancy in common, sale, deed or by other means, which is subject to
supplemental agreement or contract for use of the time share unit, whereby the purchaser
receives an undivided ownership interest in and the right to use accommodations or
facilities, or both, for a specific period of time during any given year, but not necessarily
for consecutive years, which extends for a period of more than one year.

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(9) "Vacation time sharing lease plan" means any arrangement, plan or similar devise,
whether by membership agreement, lease, rental agreement, license, use agreement, security
or other means, whereby the purchaser receives a right to use accommodations or facilities,
or both, but does not receive an undivided fee simple interest in the property, for a specific
period of time during any given year, but not necessarily for consecutive years, and which
extends for a period of more than one year.
(10) "Vacation time sharing plan" means either a vacation time sharing ownership plan or a
vacation time sharing lease plan as defined herein.
(11) "Time sharing unit" means the actual accommodations and related facilities which are
the subject of the vacation time sharing ownership plan or lease plan.
Hence, a vacation time sharing plan may refer to a plan in which one holds an ownership interest in
the unit or to a plan in which one holds a right to use such a unit.
S.C. Code of Laws §12-37-210 states that all real and personal property in this State is subject to
taxation. Section 3 of Article X of the South Carolina Constitution provides for exemptions from ad
valorem taxation, including the exemption codified in S.C. Code of Laws §12-37-220(A)(5) which
provides an exemption from ad valorem taxation for
all household goods and furniture used in the home of the owner of such goods and furniture,
such to include built-in equipment such as ranges, dishwashers and disposals, but this
exemption shall not apply to household goods used in hotels, rooming houses, apartments or
other places of business.
Thus, in order for household goods and furniture to be exempt, they must be used in the home of the
owner of such goods. Hence, in order to determine if the personal property within a timeshare unit or
other vacation home is subject to taxation, we must consider if such unit or house constitutes a home
as required by Section 12-37-220(A)(5).
South Carolina property tax statutes do not define "home"; hence, we must look elsewhere to
determine what constitutes a home for property tax purposes. Opinion of the Attorney General No.
249 (1982 Op Atty Gen No. 82-29, p. 33) held that the term "home" included second homes such as
lake or beach houses or condominiums. The Opinion further held that household goods and furniture
located in second homes are not subject to property tax. However, if the vacation home is rented or
leased to third parties, the personal property located therein may be subject to tax depending upon
whether such rental or leasing is considered a business. The Opinion held that the "operation of a
business" or "doing business" denotes a continuing enterprise, and an occasional or incidental
transaction would not come within the meaning of these phrases. Merely the sporadic or occasional
renting of a vacation home will not subject the household goods and furniture to taxation. For
example, if a vacation home is never rented during the taxable year, the personal property located
therein would not be subject to property tax. This same result would occur if the home is rented only
occasionally during the taxable year. In order for household goods and furniture to be taxable, the
leasing of the home or unit must be a business.

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Thus, the Constitution, statute, and Attorney General's Opinion indicate the proper inquiry is
whether the goods are used in a home as opposed to a business; not whether they are used in the
owner's legal residence as opposed to a temporary or part-time one.
It has been suggested that property cannot be a home if the owner cannot freely use it each and every
day. However, this interpretation is not supported by the language of the Constitution or the statute.
If the Legislature intended that property used for residential purposes and never rented out or
otherwise used in a business, should be taxed at a 10.5% assessment ratio, it would have indicated
this, rather than only stating it could not be used in a business. This suggested interpretation has also
been refuted by:
♦

the Attorney General's ruling discussed above,

♦

longstanding administrative policy,

♦

the use of the term "home" for South Carolina income tax purposes and the
use, in turn, of South Carolina income tax concepts to determine property
taxes, and,

♦

our belief based upon viewing the property tax as a whole that the
Legislature neither:
-

intended to tax a person who could only afford to own a portion of a
vacation home more heavily than a person who can afford an entire
vacation home, nor,

-

intended to tax a person who owned a share in a vacation home more
heavily than a person in the business of renting.

Each of these reasons will be discussed in more detail below.
Attorney General's Opinion. The Attorney General's Opinion No. 249 implies that a dwelling can be
considered a home even if the owner does not have unlimited access to the dwelling every day of the
year or if he does not live at the dwelling for the entire year. If a vacation home is rented out
occasionally during the year, the owner will not have unlimited access to the home during the time it
is rented. However, the Attorney General's Opinion states that merely the occasional renting of a
vacation home does not render it taxable for property tax purposes. Thus, unlimited access to a
dwelling every day of the year is not a necessary condition for a vacation home to be considered a
home for property tax purposes.
Administrative Policy. It has been longstanding administrative policy of the Department of Revenue
to only tax the personal property of second homes if such homes are rented or otherwise used for
business purposes. Also, until recently, to our knowledge no county taxing authority has disagreed
with this position. Administrative interpretations of statutes by the agency charged with their
administration and not expressly changed by the legislative body are entitled to great weight.
Marchant v. Hamilton, 279 S.C. 497, 309 S.E.2d 781 (1983). When the construction or
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administrative interpretation of a statute has been applied for a number of years and has not been
changed by the legislature, there is created a strong presumption that such interpretation or
construction is correct. Ryder Truck Lines, Inc. v. South Carolina Tax Commission, 248 S.C. 148,
149 S.E.2d 435; Etiwan Fertilizer Company v. South Carolina Tax Commission, 217 S.C. 354, 60
S.E.2d 682.
Income Tax Statutes. To determine if a timeshare interest or vacation home is a "home" for property
tax purposes, it is useful to look to South Carolina income tax statutes where this issue has been
considered in detail. Because of the interrelationship of the property and income taxes, it has been an
accepted practice of the Department to look to income tax statutes for definitions of words or
phrases which are not defined in property tax statutes. This is especially appropriate in issues dealing
with the taxation of tangible personal property because S.C. Reg. 117-110 defines the fair market
value of merchants' furniture, fixtures and equipment for property tax purposes as the depreciated
value as shown by the merchants for income tax purposes. Likewise, the value of manufacturers'
machinery and equipment for property tax purposes is determined by the gross capitalized cost as
shown on the taxpayer's income tax records (SC Code Section 12-37-930). The Department has also
used income tax statutes to define what constitutes inventory for property tax purposes and to
determine who is considered the owner of leased property for deciding who is liable for the property
taxes thereon. (See SC Revenue Ruling 91-7 and SC Revenue Ruling 93-11).
Also, using income tax rules to determine if an activity constitutes a business for property tax
purposes provides taxpayers with a uniform set of rules whereby the property will be treated in the
same manner for both property and income tax purposes, i.e., as business or personal property, thus
eliminating any confusion which may result from treating the same property differently for different
taxes. The income tax rules are also familiar to many taxpayers and virtually all tax advisors and
return preparers, and hence, are easy for them to apply. Since South Carolina conformed to the
federal income tax law in 1985, we look to the Internal Revenue Code ("IRC") to determine if a
vacation home or timeshare unit is a home or business.
The rules for determining whether an activity involving the use of a dwelling unit is a residence
(home) are found in IRC Section 163 1 . IRC Section 163(h)(3) allows a deduction for qualified
residence interest which is defined as any interest paid or accrued on acquisition or home equity
indebtedness with respect to any qualified residence of the taxpayer. A qualified residence means the
principal residence of the taxpayer and one other residence of the taxpayer which is selected by the
taxpayer for purposes of deducting the interest paid or accrued thereon and which is used by the
taxpayer as a residence within the meaning of IRC Section 280A(d)(1). Therefore, if a dwelling is
considered a residence within the meaning of Section 280A(d)(1) with modifications prescribed by
Section 163(h), it will be a home for property tax purposes and its household goods and furniture
will not be subject to property taxes.
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IRC Section 163 is concerned with what is a residence and provides a tax benefit, i.e. an interest deduction, if
a dwelling qualifies as a qualified residence, and thus, contains tighter standards than those set forth in
sections which are concerned with what is a business and provide for a tax detriment, such as IRC Section
280A. Hence, our determination of whether a dwelling qualifies as a home, thus exempting the personal
property therein from property taxation (a tax benefit), will rely on the standards set forth in IRC Section 163
with references to IRC Section 280A where IRC Section 163 adopts tests from IRC Section 280A.

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IRC Section 280A generally disallows deductions with respect to the use of a dwelling unit which is
used by an individual (including a partnership, trust, or estate) or S corporation during the taxable
year as a residence. IRC Section 280A(d)(1) states that a taxpayer uses a dwelling unit during the
taxable year as a residence if he uses such unit for personal purposes for a number of days which
exceeds the greater of 14 days or 10 percent of the number of days during such year for which such
unit is rented at a fair rental. Section 280A(g) provides that if a dwelling unit is used during the
taxable year by the taxpayer as a residence, and such dwelling unit is actually rented for less than 15
days during the taxable year, then no deductions (which would otherwise be allowed because of the
rental use of the dwelling unit) are allowed, and the income derived from such use is not included in
the gross income of the taxpayer.
S.C. Code Section 27-32-240, which deals with the property taxation of timeshare units, provides
that for property tax purposes, a unit must be valued as if it were owned by a single owner.
Therefore, in determining personal and business use for the purpose of personal property taxation,
we will consider the unit as a whole. This treatment is consistent with the rules found in IRC Section
280A. Prop. Reg. 1.280A-3(f) relates this rule to timesharing arrangements and applies it based on
the number of days that the unit is actually rented during the entire taxable year. Hence, if a unit is
rented for less than 15 days to persons other than those having an interest in the unit, no deductions
are allowed because of the rental use and no amount is included in gross income from such use. If
any person who has an interest in the timeshare unit uses the unit for personal purposes during the
taxable year, any rental expenses incurred by anyone holding an interest in the unit must be allocated
based on the number of days during the taxable year that the unit is rented at a fair rental and the
number of days during the year that the unit is used for any purpose (Prop. Reg. §1.280A-3(f)(5)).
Hence, the determination whether the timeshare unit is used as a residence is made at the unit level,
i.e., considering the usage of all the persons having an interest in the unit.
Notwithstanding Section 280A(d)(1), if the taxpayer does not rent out a dwelling unit at any time
during a taxable year, such unit is treated as a residence for such taxable year (IRC Section
163(h)(4)(A)(iii)). However, a residence is deemed to be rented during any period that the taxpayer
holds the residence out for rental or resale, or repairs or renovates the residence with the intention of
holding it out for rental or resale (Reg. 1.163-10T(p)(3)(iii)). Reg. §1.163-10T(p)(6) provides that
property that is otherwise a qualified residence will not fail to qualify as such solely because the
taxpayer's interest in or right to use the property is restricted by an arrangement whereby two or
more persons with interests in the property agree to exercise control over the property for different
periods during the taxable year (i.e., a timesharing arrangement).
Legislative Intent. We believe, based upon viewing the property tax as a whole, that the Legislature
did not intend to place a heavier tax burden on those who must combine their funds with others in
order to purchase a vacation home than on those who can buy an entire vacation home from personal
resources. Hence, the type of ownership of the vacation home or timeshare unit is not controlling as
to the taxation of the personal property therein but whether such dwelling is used for business or
personal purposes.
If the income tax rules discussed above are not applied and personal property in a vacation home not
used for business purposes is taxed, it would be taxed more heavily than personal property located
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within a vacation home which is considered a business for income tax purposes. This result would
place a heavier property tax burden on those who use their vacation home solely for personal use
than on those who use it for business purposes. S.C. Reg. 117-110 states that:
The fair market value of merchants' furniture, fixtures and equipment shall be the
depreciated value as shown by the merchants' records for income tax purposes . . .
If the vacation home is not a business for income tax purposes, the taxpayer is not allowed to
depreciate the personal property. S.C. Code Section 12-37-930 states that all property shall be
valued for taxation at the price which the property would bring given a willing buyer and willing
seller, i.e., fair market value. Experience has shown that the fair market value of personal property is
generally higher than the value that would be reported if the property was depreciated using income
tax depreciation rules. Hence, the property would be valued at a higher amount on the taxpayer's
personal property tax return than comparable property which is located within a vacation home
which is considered a business. Section 1 of Article X of the South Carolina Constitution provides
that assessment of all property must be equal and uniform. Personal property which is not allowed to
be depreciated for income tax purposes is subjected to a higher property tax than personal property
which is depreciated. This results in an assessment which appears to be unequal and not uniform and
hence, unconstitutional. As between two possible interpretations of a statute, one which would
render the statute unconstitutional and another which would not, the courts will favor the latter.
Bradley v. Hullander, 277 S.C. 327, 287 S.E.2d 140 (1982).
Therefore, a timeshare unit is not a business, and its personal property will not be subject to tax if a
taxpayer is allowed a deduction under IRC Section 163 for interest paid on the acquisition of a
dwelling unit which qualifies as a residence, or would be allowed a deduction except for the fact that
it is not mortgaged or it was not selected as the second home. The time limits on renting must be met
for the unit itself, not based on the usage of each person having an interest in the unit.

QUESTIONS AND ANSWERS
The following questions and answers will address various types of timeshare and vacation home
ownership and usage and the effects these will have on the taxability of the personal property located
therein.
1.

Q. Are household goods and furniture located in a vacation home or timesharing unit which
is owned by an individual and is never rented to a third party or otherwise used for business
purposes subject to taxation?
A. The personal property held in second homes, including timeshare units, which are never
rented or otherwise used for business purposes is not subject to personal property tax.
However, personal property located in a timesharing unit which is leased under a
vacation time sharing lease plan as defined in S.C. Code Section 27-32-10 is subject to
ad valorem taxation.
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2.

Q. Are household goods and furniture located in a vacation home or timeshare unit which is
owned by an individual and is rented occasionally to third parties subject to taxation?
A. The occasional renting of a vacation home or timeshare unit will not subject the personal
property located therein to taxation (Opinion of the Attorney General No. 249). As discussed
above, IRC 163(h)(3) allows a deduction for interest paid on the acquisition of a taxpayer's
principal residence or one other residence selected by the taxpayer which meets the
requirements of IRC 280A. IRC 280A provides that a dwelling unit qualifies as a residence
if it is used for personal purposes for more than the greater of 14 days or 10% of the number
of days the home is rented in a taxable year. Hence, if a vacation home or timeshare unit is
used for personal use more than 14 days or 10% of the number of days the home is rented
during a taxable year, the personal property located therein will not be subject to taxation.
However, if the vacation home or timeshare unit is used for business purposes (i.e., expenses
related to the business use of a vacation home or timeshare unit are deductible even though
expenses exceed the income from the unit), then the household goods and furniture within
such home or unit are subject to tax. Whether deductions would be allowed to be deducted
greater than income is determined by applying IRC Sections 280A. Hence, if for income tax
purposes, a taxpayer deducts expenses related to the rental of a vacation home in excess of
income generated therefrom, the vacation home does not meet the requirements of IRC
Section 163, and the personal property located therein would be taxable.

3.

Q. Smith & Jones is a law firm organized as a partnership which owns a vacation home at
the beach that is used by the partnership to entertain clients and is also used by the partners
for family vacations. Is the personal property located within the vacation home taxable?
A. S.C. Code Section 12-37-220A(5) states that household goods and furniture "used in
hotels, rooming houses, apartments or other places of business" do not qualify for
exemption from ad valorem taxation. (See Opinion of the Attorney General No. 249
discussed above.) Opinion of the Attorney General No. 4548 dated December 16, 1976
(pages 418-420, 1975-1976) held that a lodge and cottage owned by a manufacturing
company and used for the entertaining of employees and customers, the holding of business
meetings, etc. was used in the conduct of the business. Therefore, household goods and
furniture located in the vacation home are subject to property taxation.

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4.

Q. Mr. Black and Mr. White are neighbors who form a partnership to purchase a cabin in the
mountains for their families to use for vacationing. They have also considered leasing the
cabin to other neighbors for a limited period of time. Are the household goods and furniture
within the cabin taxable?
A. Partnerships are normally businesses, but in South Carolina the partnership form is also
frequently used as a time and expense sharing arrangement for ownership of a vacation home
by a group of individuals. The rules concerning the determination of whether a vacation
home or timeshare unit qualifies as a residence apply to partnerships as well as to
individuals. Therefore, if a vacation home is never leased to other persons or used in a
business in some other manner, the household goods and furniture within such dwellings are
not taxable. However, if the leasing, rental or other business use of the vacation home or
timeshare unit is an activity entered into for profit such that it does not qualify as a "qualified
residence" under Section 163, the household goods and furniture located within the vacation
home are subject to tax.

5.

Q. Two neighbors decide to form a partnership and purchase a timesharing unit. One
neighbor uses the unit strictly for family vacations while the other routinely rents his usage
to a third party. Is the personal property located in the unit taxable?
A. The determination of whether a timesharing unit is used for business or personal purposes
is made at the unit, not the individual, level. Therefore, if the usage of the timeshare unit by
all of the owners qualifies it as a business, the household goods and furniture located within
the unit are subject to property taxation.

6.

Q. Are household goods and furniture located in vacation homes or timeshare units which
are held by a trust or an estate subject to property tax?
A. If a timeshare unit or vacation home owned by an estate or trust is being used as a time
sharing arrangement among the beneficiaries, and it meets the requirements discussed above
concerning the determination of whether a dwelling unit qualifies as a residence, the
household goods and furniture located within the dwelling unit are not subject to property
tax.

7.

Q. Who must pay the property tax on household goods and furniture located in vacation
homes or timeshare units?
A. S.C. Code Section 27-32-240 provides for the property taxation of time share units and
states, in part:

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(1) For purposes of property taxation, each time share unit, operating under a "vacation time
sharing ownership plan" as defined in item (8) of §27-32-10, must be valued in the same
manner as if the unit were owned by a single owner. The total cumulative purchase price
paid by the time share owners for a unit may not be utilized by the tax assessor's office as a
factor in determining the assessed value of the unit. A unit operating under a "vacation time
sharing lease plan" as defined in item (9) of §27-32-10, may, however, be assessed the same
as other income producing and investment property.
S.C. Code Section 27-32-95 provides, in part:
It shall be a violation of this chapter for a seller of vacation time sharing ownership
plans to fail to:
(3) . . . deposit with an escrow agent, annually, sufficient funds for the payment of all
taxes and assessments levied against the accommodations and facilities. In the
alternative, provide for the assessment against the purchaser by an association or
duly appointed agent for the owners of such escrow funds for all costs including
taxes, assessments, maintenance, repairs and management fees.
Therefore, it is the responsibility of the seller or the association to collect and remit personal
property taxes owed with respect to the household goods and furniture located in timeshare
units.
For questions concerning the taxation of personal property located in a timeshare unit or other
vacation home contact Kin Purvis of the Property Tax Division at (803) 737-4468 or Jean Croft at
(803) 737-5007.
SOUTH CAROLINA DEPARTMENT OF REVENUE
s/A. Crawford Clarkson, Jr.
A. Crawford Clarkson, Jr., Chairman
s/James M. Waddell, Jr.
James M. Waddell, Jr., Commissioner

Columbia, South Carolina
, 1995
January 3

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