Did a late South Carolina withholding-tax deposit trigger interest before the quarterly return due date under RR 95-17?

Plain-English summary

South Carolina Revenue Ruling 95-17 distinguished a late withholding deposit from tax still unpaid when the quarterly return was due.

A withholding agent periodically deposited employee withholding using Form WH-1601 and later reconciled the quarter on Form WH-1605. If a deposit was late but all tax was paid by the quarterly return due date, the ruling did not impose interest under Section 12-54-25.

If tax remained unpaid when the quarterly return was due, interest ran from that return due date until payment. The ruling did not calculate interest from the earlier missed deposit date.

Separate penalties could still apply. The Department could impose a discretionary penalty from $10 to $1,000 for failure to deposit timely. If the quarterly return or its required payment was late, the historical failure-to-file and failure-to-pay penalties in Section 12-54-40(b)(1) and (2) also applied.

Common questions

Q: Did every late deposit produce interest? No. RR 95-17 applied interest only when tax remained unpaid after the quarterly return due date.

Q: Could a late deposit still be penalized before that date? Yes. The Department could impose the separate $10-to-$1,000 deposit penalty described in the ruling.

Q: What if the quarterly return was filed late? The ruling said failure-to-file and failure-to-pay penalties applied when the return and required payment were not timely.

Q: Did RR 95-17 replace earlier guidance? Yes. It superseded SC Technical Advice Memorandum 93-1 and conflicting earlier directives.

Q: Are Forms WH-1601 and WH-1605 current? This page establishes only the forms and process described in 1995. Current instructions should be checked.

Citations and references

• S.C. Code Ann. § 12-9-390 (deposit requirement discussed)
• S.C. Code Ann. § 12-54-25 (interest on unpaid tax)
• S.C. Code Ann. § 12-54-40(b)(1), (2), and (7) (historical penalties)
• IRC §§ 6621 and 6622 (interest-rate method referenced)

Subject

Form WH-1601 - Deposit Coupon Interest on Late Deposits

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR95-17.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 #95-17

SUBJECT:

Form WH-1601 - Deposit Coupon
Interest on Late Deposits
(Withholding)

EFFECTIVE DATE:

November 13, 1995

SUPERSEDES:

SC Technical Advice Memorandum #93-1 and all previous documents
and any oral directives in conflict herewith.

REFERENCE:

S.C. Code Ann. Section 12-54-25 (Act No. 160)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (Supp. 1994)
SC 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 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.

Question:
If a withholding agent fails to timely deposit withholding taxes in accordance with Code Section
12-9-390, is the withholding agent liable for interest under Code Section 12-54-25 or penalties
under Code Section 12-54-40(b)?
Conclusion:
If a withholding agent fails to timely deposit withholding taxes in accordance with Code Section
12-9-390, the withholding agent is not liable for interest under Code Section 12-54-25 unless the
taxes are not paid by the due date of the quarterly return. On all withholding taxes not paid by
the due date of the quarterly return, interest will be applied from the due date of the quarterly
return until such taxes are paid.
However, the Department may, at its discretion, impose a penalty on the withholding agent of
not less than ten dollars ($10) nor more than one thousand dollars ($1,000) under Code Section
12-54-40(b)(7) for failure to deposit if the deposits are not timely made. Also, penalties for
failure to pay and failure to file will be assessed under Code Section 12-54-40(b)(1) & (2) if the
quarterly returns are not timely filed with any requisite payment.

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Facts:
Withholding agents must periodically deposit, using a deposit coupon (Form WH-1601),
withholding taxes they have withheld into approved financial institutions. The money is then
forwarded to the State. At the end of the calendar quarter, withholding agents will file a return,
Form WH-1605. On this return the agent reports the taxes withheld and the amount of deposits
made during the quarter. Any difference between these two amounts is either additional tax due
by the withholding agent (paid with the Form WH-1605) or a refund or a credit to the
withholding agent.
A question has arisen concerning the application of interest to late deposits.
Discussion:
Code Section 12-54-25 imposes interest on unpaid taxes, and reads:
(A) If any tax is not paid when due, interest is due on the unpaid portion from the
time the tax was due until paid in its entirety.

(D) Except as preempted or superseded by federal law or inter-governmental
compact . . . , the rate of interest on underpayments and overpayments is
established by the department in the same manner and at the same time as the
underpayment rate provided in Internal Revenue Code Sections 6621 and 6622.
Code Section 12-54-40 provides for various penalties and states in part:
(b) There must be added to and become a part of the tax imposed by the tax or
revenue laws, and collection as such:
(1) In the case of failure to file a return on or before the date
prescribed by law, . . . there must be added to the amount required
to be shown as tax on the return, a penalty of five percent of the
amount of the tax if the failure is for not more than one month,
with an additional five percent for each additional month or
fraction of the month during which the failure continues, not
exceeding twenty-five percent in the aggregate. . .
(2)(a) In case of failure to pay the amount shown as tax on any
return on or before the date prescribed by law . . . there must be
added to the tax due a penalty of one-half of one percent of the
amount of the tax if the failure is for not more than one month,
with an additional one-half of one percent for each additional
month or fraction of the month, during which the failure continues,
not exceeding twenty-five percent in the aggregate.

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(7) A failure to deposit or pay any taxes deducted and withheld
pursuant to Sections 12-9-310 to 12-9-370 subjects the
withholding agent to a penalty of not less than ten dollars nor more
than one thousand dollars.
Based on the foregoing, with respect to withholding tax deposits, the Department will only apply
interest if the withholding agent fails to timely remit all withholding taxes by the due date of the
quarterly return. Interest will be applied on any withholding taxes not paid by the due date of the
quarterly return from the due date of the return until such taxes are paid.
However, the Department may, at its discretion, impose a penalty on the withholding agent of
not less than ten dollars ($10) nor more than one thousand dollars ($1,000) under Code Section
12-54-40(b)(7) Also, penalties for failure to pay and failure to file will be assessed if the
quarterly returns are not timely filed with any requisite payment.
For questions concerning withholding deposits, contact Muriel Leonhardt at (803) 737-4804 or
Jean Croft at (803) 737-5007.
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Burnet R. Maybank III
Burnet R. Maybank, III, Director
Columbia, South Carolina
November 12
, 1995

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