Were South Carolina timeshare and membership-resort accommodation exchanges subject to accommodations sales tax?

Plain-English summary

South Carolina Revenue Ruling 98-5 concluded that furnishing South Carolina accommodations through a membership-resort, timeshare, or exchange-company swap was a taxable sale of accommodations. Consideration did not have to be cash: the reciprocal obligation to furnish another stay was an exchange or barter and therefore a sale.

The tax base was the reasonable rental value of the accommodations exchanged, supported by the taxpayer's books and records and typical industry rental rates, plus reservation, upgrade, or other fees charged to the guest. Tax was due in the month the South Carolina accommodations were actually furnished.

Membership plans versus timeshare ownership

The ruling distinguished the underlying plan purchase from an exchanged stay:

• A membership-accommodations purchase, such as buying a package of vacation weeks usable over several years, was subject to accommodations tax as each week was furnished.
• Buying a vacation time-sharing ownership interest was a purchase of real estate and was not itself subject to accommodations sales tax.
• Buying a vacation time-sharing lease plan was covered by a specific exemption cited in the ruling.
• Exchanging a membership week, ownership week, or lease-plan week for a different stay was a separate furnishing of accommodations and was taxable when the stay occurred in South Carolina.

Who remitted the tax

The person or business furnishing the South Carolina stay owed the tax. That could be a membership resort, timeshare resort, exchange company, or individual.

When one South Carolina resort furnished a week and became entitled to a reciprocal week from another resort, each South Carolina stay was taxed when furnished. If the first guest stayed outside South Carolina, the South Carolina resort did not owe tax for that out-of-state stay, but it owed tax later when it furnished the reciprocal South Carolina accommodations.

An exchange company arranging a South Carolina stay was treated like a rental agent or broker and had to remit tax on the South Carolina accommodations it furnished, including the reasonable rental value and the member's reservation fee.

Timing and transition rule

The ruling generally required tax in the month accommodations were furnished, even if payment occurred earlier. Its example prorated a $5,000 ten-week membership contract to $500 per week when each week had equal value.

For accommodation exchanges, the ruling's January 1, 1999 effective date applied only when the exchange was arranged and furnished on or after that date. An exchange arranged before January 1, 1999 was not taxed under this new exchange rule even if the stay occurred later. Other accommodation sales, including membership-plan stays, remained taxable for all open periods under the ruling.

Common questions

Q: Was a no-cash timeshare swap taxable?

A: Yes when South Carolina accommodations were furnished. The reciprocal accommodation was consideration, so the exchange was a sale.

Q: What amount was taxed?

A: The reasonable rental value of the exchanged accommodations plus reservation, upgrade, or similar fees charged to the guest.

Q: Was buying a deeded timeshare interest itself accommodations-taxable?

A: No under the ruling; that purchase was real estate. A later exchange of the owner's week for another South Carolina stay was a separate taxable accommodation transaction.

Q: Did exchanges between two individuals count?

A: Yes. The ruling said an individual furnishing a South Carolina beach home in return for use of another person's out-of-state home owed tax based on the South Carolina home's weekly rental value.

Citations and references

• S.C. Code Ann. § 12-36-920 (sales tax on accommodations and additional guest charges)
• S.C. Code Ann. § 12-36-90 (gross proceeds)
• S.C. Code Ann. § 12-36-100 (sale includes exchange or barter)
• S.C. Code Ann. § 12-36-60 (accommodations included as tangible personal property)
• S.C. Code Ann. § 12-36-510(B) (retail licensing and annual remittance exception)
• SC Revenue Ruling #97-3 (additional guest charges cited in the ruling)

Subject

Exchange Agreements - Membership Accommodations and Timeshare Resorts

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR98-5.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 # 98-5

SUBJECT:

Exchange Agreements - Membership Accommodations and Timeshare
Resorts
(Sales Tax)

EFFECTIVE DATE:

January 1, 1999 for exchanges of accommodations as described in this
Revenue Ruling. However, all other methods of furnishing
accommodations are taxable for all periods open under the statute.
(See Note on Page 13.)

SUPERSEDES:

SC Revenue Ruling #97-22 and all previous documents and any oral
directives in conflict herewith.

REFERENCES:

S. C. Code Ann. Section 12-36-920 (Supp. 1997)
S. C. Code Ann. Section 12-36-90 (Supp. 1997)
S. C. Code Ann. Section 12-36-100 (Supp. 1997)
S. C. Code Ann. Section 12-36-60 (Supp. 1997)
S. C. Code Ann. Section 12-36-510(B) (Supp. 1997)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (Supp. 1997)
SC Revenue Procedure #97-8

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.

Question:
Are accommodations provided under exchange agreements as described in the “Facts” subject to
the sales tax on accommodations under Code Section 12-36-920?
Conclusion:
Accommodations provided under exchange agreements as described in the “Facts” are subject to
the sales tax on accommodations under Code Section 12-36-920. The basis for the tax is the
rental value of the accommodations exchanged as consideration for the accommodations
furnished plus any other fees (e.g. reservation fees, upgrade fees) that may be charged to the
person to whom the accommodations are furnished. The rental value of the accommodations

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exchanged as consideration for the accommodations furnished must be reasonable and based on
the books and records of the taxpayers as well as the typical industry rental rate for such
accommodations.
For additional guidance, see the examples on pages seven through twelve of this advisory
opinion.
Note: See SC Revenue Ruling # 97-3 for information on the application of the sales tax to
“additional guest charges.”
Facts:
In addition to the homes, condominiums, and hotels that are available for rent in resort areas in
South Carolina, membership accommodations and timeshare units are available.
Membership accommodations allow individuals to purchase several weeks of accommodations
that can be used over a specified number of years. For example, a membership accommodations
business may offer 10 weeks of vacation for $5,000 over a period of five years. The member
pays the $5,000 at the time the contract is signed. The member may then reserve
accommodations at any one of the resorts owned or managed by the membership
accommodations business. The member is not restricted to one unit. Sales of accommodations
through membership plans such as these are and have always been subject to the sales tax on
accommodations.
Vacation time sharing ownership plans allow a person to have an interest in a unit. The person
owning the timeshare interest typically has the right to use the unit for a particular week each
year. The purchase of an interest in a timeshare in this manner is the purchase of real estate not
subject to the sales tax on accommodations. See Code Section 27-32-10(7).
Vacation time sharing lease plans allow a person to use a particular unit. The person entering
into this type of timeshare plan typically has the right to use the unit for a particular week each
year. The purchase of the type of timeshare plan is not subject to the sales tax on
accommodations pursuant to a specific exemption. See Code Sections 27-32-10(8), 27-32-170
and 12-36-2120(31).
Under both the membership accommodations and timeshare plans, the businesses selling such
plans offer exchange agreements to enhance the plan.
Membership accommodations and timeshare resorts enter into exchange agreements with each
other. Essentially, the membership company or the timeshare resort will agree to provide
accommodations to someone who is not a member or owner in their organization or resort if that
person’s membership company or timeshare resort will agree to provide accommodations to
someone who is a member or owner in their organization or resort. For example, a member or
owner in ABC will call ABC to seek reservations at XYZ resort, a resort not under ABC’s
control. ABC will then make the reservation for one week at XYZ for their member or owner.
ABC is now “indebted” to XYZ for one week of accommodations.

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In addition, timeshare companies owning several resort complexes may allow and arrange it so
an owner in one complex may exchange a week with the owner of a week in another complex
owned by the same timeshare company.
Finally, a third party “Exchange Company” will enter into agreements with resorts around the
country or world. The resorts agree to maintain their facilities to certain standards and to sign up
members on behalf of the Exchange Company. This agreement usually requires that the resort
makes it clear to any potential members (purchasers of a membership or timeshare at the resort)
that the exchange program available to them at the resort is conducted by the Exchange
Company and that the owner of the resort has a separate agreement with the Exchange Company
whereby the resort may submit applications for membership in the Exchange Company on behalf
of the purchasers.
If a purchaser at the resort signs up for membership in the Exchange Company, the resort will
submit the purchaser’s membership fee at the time the application is submitted. The member is
then responsible for submitting a renewal fee each year in order to maintain his membership.
Under exchange programs conducted by these Exchange Companies, the member will receive a
book from the Exchange Company outlining the rules and listing the available exchange
accommodations by location (SC, NC, GA, FL, etc). In order to exchange accommodations, the
member will:

1. Deposit his vacation time (the membership, timeshare, condominium, home, he owns
   or leases) into a pool or “bank” of all accommodations available to members.
2. Request vacation time at a specific resort, usually designating several resorts as first
   choice, second choice, etc. A small fee is required to be paid via a credit card when
   the vacation time is requested.
   If the member’s selection is available, the Exchange Company will confirm the time is available.
   If the selection is not available, the Exchange Company will conduct a computer search of the
   pool or bank for the member’s desired resort area and time and notify the member when a match
   is made.
   The question has arisen as to whether accommodations provided under these exchange
   agreements are subject to the sales tax on accommodations.
   Discussion:
   Code Section 12-36-920 imposes a sales tax upon accommodations and "additional guest
   charges" and reads, in part:
   (A) A sales tax equal to seven percent is imposed on the gross proceeds derived from the
   rental or charges for any rooms, campground spaces, lodgings, or sleeping
   accommodations furnished to transients by any hotel, inn, tourist court, tourist camp,
   motel, campground, residence, or any place in which rooms, lodgings, or sleeping

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accommodations are furnished to transients for a consideration. This tax does not apply
where the facilities consist of less than six sleeping rooms, contained on the same
premises, which is used as the individual's place of abode. The gross proceeds derived
from the lease or rental of sleeping accommodations supplied to the same person for a
period of ninety continuous days are not considered proceeds from transients. The tax
imposed by this subsection (A) does not apply to additional guest charges as defined in
subsection (B) (emphasis added).
(B) A sales tax of five percent is imposed on additional guest charges at any place where
rooms, lodgings, or accommodations are furnished to transients for a consideration,
unless otherwise taxed under this chapter. The term 'additional guest charges' includes,
but is not limited to:
(1) room service;
(2) amenities;
(3) entertainment;
(4) special items in promotional tourist packages;
(5) laundering and dry cleaning services;
(6) in-room movies;
(7) telephone charges;
(8) rentals of meeting rooms; and
(9) other guest services.
Therefore, the “gross proceeds” derived from charges for rooms, lodgings and accommodations
are taxed at 7%. Certain other charges for other services provided at any place furnishing
accommodations are taxed at 5% as an "additional guest charge." For information on the tax on
additional guest charges, see SC Revenue Ruling #97-3.
“Gross proceeds,” as used in the statute, is defined in Code Section 12-36-90 in part as:
... the value proceeding or accruing from the sale, lease, or rental of tangible
personal property (emphasis added).
“Sale” is defined in Code Section 12-36-100 in part as:
... any transfer, exchange, or barter, conditional or otherwise, of tangible personal
property for a consideration including:

(2) a rental, lease, or other form of agreement; ... (emphasis added).
“Tangible personal property” is defined in Code Section 12-36-60 to include the “furnishing of
accommodations.”

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The term “consideration,” while not defined in the sales and use tax code, is defined in American
Heritage Dictionary, Second Edition, as, “[s]omething promised, given, or done that has the
effect of making an agreement a legally enforceable contract.” Furthermore, the following quote
from 68 Am. Jur. 2d, Sales and Use Taxes, Section 67 provides additional guidance:
The sales tax statutes normally define "sale" in terms of a transfer "for a consideration" or
"for a valuable consideration," and thus a consideration is essential to render a sale
taxable under the statute. Accordingly, it is held that a mere transfer of possession of
property is not within the Sales Tax Act definition of "sale" unless it is a transfer for a
consideration.
The required consideration is not limited to a money consideration, and some statutes are
specific about this, stating that the consideration may be a price or rental, in money or by
exchange or barter, or by money or service, or other thing of value. Thus, when a sale is
made of tangible personal property for cash, for cash and other property, or for other
property alone, payment of the sales tax is required.
Based on the above, the furnishing of accommodations, including exchanges and barters, for a
consideration is subject to the 7% sales tax on accommodations. (See again the definition of the
term “sale” which includes an “exchange” of tangible personal property which by definition
includes accommodations.) Therefore, accommodations provided under the exchange
agreements discussed in the facts are subject to the sales tax on accommodations.
In addition, the tax on accommodations is due the month in which the accommodations are
furnished, regardless of when the consideration for such accommodations is paid. For example,
if a person pays in February for a week at a resort during July, then the sales tax on such
accommodations are remitted with the July sales tax return since these accommodations were
“furnished” in July. Also, if a person pays a membership accommodations business $5,000 for
10 weeks of vacation to be used over a period of five years, then the sales tax is due as each
week is used. The membership accommodations business should prorate the $5,000 over the 10
weeks. If each week is of equal value, the sales tax would be remitted based on $500 per week
as each week is furnished.
Finally, it should be noted that the taxation of exchanges of accommodations applies to
exchanges between individuals as well as the exchanges between retailers such as those who
own or manage membership accommodations and timeshare developments and resorts. Code
Section 12-36-510 establishes who must obtain a retail license before engaging in selling
tangible personal property (including accommodations). Subsection (B) of that section provides
certain exceptions and states in part:
(B) A retail license is not required of:

(3) persons furnishing accommodations to transients for one week or less in any calendar
quarter; however, accommodations taxes must be remitted annually, on forms prescribed
by the commission, by April 15 of the following year. This item (3) of this subsection

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does not apply to rental agencies or persons having more than one rental unit; ...
Therefore, while some persons are not required to obtain a retail license, all persons
(individuals, partnerships, LLC’s, corporations, etc.) must remit the sales tax on
accommodations with respect to all accommodations furnished for cash, property, other
accommodations, or any other consideration. (See Code Section 12-36-30 for the
definition of “person” which includes individuals, partnerships, LLC’s, corporations, etc.
)
The following examples should provide some guidance in this matter. Please note that these
examples have been simplified in order to best explain the application of the tax. Some
exchange agreements and programs are complex; however, the principles for applying the tax
remain the same as set forth in these examples. Finally, please note that the names used in the
following examples are fictitious.
Membership Accommodations:
Example #1 - Exchange Between a South Carolina Membership Resort and an Out-of-State
Membership Resort
A joins a membership accommodations plan and pays $2,000 for four weeks of accommodations
over four years at the various resorts of SC Resorts Membership Company (“SC Resorts”).
During the first three years, A uses one week of accommodations a year at various South
Carolina resorts of SC Resorts. As such, SC Resorts has remitted sales tax on $500 worth of
accommodations furnished to A during each of the first three years since it considers each week
furnished to be of equal value. In the fourth year, A decides to vacation in Florida at a resort not
owned or managed by SC Resorts. A contacts SC Resorts who makes reservations for A at
Florida Resorts Membership Company (“Florida Resorts”). (SC Resorts and Florida Resorts
have an exchange agreement with each other.) A vacations at Florida Resorts for the last week
available under his contract. Florida Resorts allows A to vacation at its resort since an exchange
agreement exists between SC Resorts and Florida Resorts. SC Resorts is now obligated to
provide accommodations to a member of Florida Resorts.
As such, SC Resorts is not obligated to remit the sales tax with respect to the accommodations
furnished A since the accommodations were not furnished by SC Resorts and were furnished in
Florida. However, SC Resorts will be required to remit sales tax on the accommodations
furnished to the member of Florida Resorts in the month and year such accommodations are
actually furnished since the previous exchange and the obligation to reciprocate under the
exchange agreement constitutes a “sale” under the law. The basis for the sales tax on the
accommodations furnished to the member of Florida Resorts (when furnished) would be the
weekly rental value of the accommodations exchanged as consideration for the accommodations
furnished. If the accommodations exchanged are of equal value, this should be $500.
Example #2 - Exchange Between Two South Carolina Membership Resorts
A joins a membership accommodations plan and pays $2,000 for four weeks of accommodations
over four years at the various resorts of SC Resorts Membership Company (“SC Resorts”).
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During the first three years, A uses one week of accommodations a year at various South
Carolina resorts of SC Resorts. As such, SC Resorts has remitted sales tax on $500 worth of
accommodations furnished to A during each of the first three years since it considers each week
furnished to be of equal value. In the fourth year, A decides to vacation at a resort not owned or
managed by SC Resorts but located in South Carolina. A contacts SC Resorts who makes
reservations for A at Palmetto Resorts Membership Company (“Palmetto Resorts”). (SC Resorts
and Palmetto Resorts have an exchange agreement with each other.) A vacations at Palmetto
Resorts for the last week available under his contract. Palmetto Resorts allows A to vacation at
its resort since an exchange agreement exists between SC Resorts and Palmetto Resorts. SC
Resorts is now obligated to provide accommodations to a member of Palmetto Resorts.
As such, Palmetto Resorts is obligated to remit the sales tax with respect to the accommodations
furnished A since the accommodations were furnished by Palmetto Resorts in South Carolina
and the obligation to exchange under the exchange agreement constitutes a “sale” under the law.
SC Resorts will be required to remit sales tax on the accommodations furnished to the member
of Palmetto Resorts in the month and year such accommodations are actually furnished since the
previous exchange and the obligation to reciprocate under the exchange agreement constitutes a
“sale” under the law. The basis for the sales tax on the accommodations furnished by Palmetto
Resorts and SC Resorts (when furnished) would be the weekly rental value of the
accommodations exchanged as consideration for the accommodations furnished. If the
accommodations exchanged are of equal value, this should be $500.
Timeshare Resorts:
Example #1 - Exchange Between South Carolina Timeshare Resort and an Out-of-State
Timeshare Resort
A purchases a timeshare week for $4,000 at a condominium/timeshare complex of SC
Timeshares Company (“SC Timeshares”). This allows A to stay in Unit 312 during the first
week in July every year as long as he owns his timeshare and remits his annual regime fees.
Under South Carolina law, this purchase by A is a purchase of realty since it is the purchase of a
vacation time sharing ownership plan. Therefore, the $4,000 is not subject to the sales tax on
accommodations.
In addition, A has the right to exchange his week for another week at another complex or resort
that has entered into an exchange agreement with SC Timeshares. For one year, 199X, A
decides to vacation in Florida at a resort not owned or managed by SC Timeshares. A contacts
SC Timeshares who makes reservations for A at Florida Timeshare Company (“Florida
Timeshares”). (SC Timeshares and Florida Timeshares have an exchange agreement with each
other.) A vacations at Florida Timeshares for one week in July, 199X. Florida Timeshares allows
A to vacation at its resort since an exchange agreement exists between SC Timeshares and
Florida Timeshares. SC Timeshares is now obligated to provide accommodations to a timeshare
owner of Florida Timeshares.
As such, SC Timeshares is not obligated to remit the sales tax with respect to the
accommodations furnished A since the accommodations were not furnished by SC Timeshares
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and were furnished in Florida. However, SC Timeshares will be required to remit sales tax on the
accommodations furnished to the timeshare owner of Florida Timeshares in the month and year
such accommodations are actually furnished since the exchange is for accommodations and does
not constitute realty under the law and the previous exchange and the obligation to reciprocate
under the exchange agreement constitutes a “sale” under the law. The basis for the sales tax on
the accommodations furnished to the timeshare owner of Florida Timeshares (when furnished)
by SC Timeshares would be the weekly rental value of the accommodations exchanged as
consideration for the accommodations furnished.
Example #2 - Exchange Between Two South Carolina Timeshare Resorts
A purchases a timeshare week for $4,000 at a condominium/timeshare complex of SC
Timeshares Company (“SC Timeshares”). This allows A to stay in Unit 312 during the first
week in July every year as long as he owns his timeshare and remits his annual regime fees.
Under South Carolina law, this purchase by A is a purchase of realty since it is the purchase of a
vacation time sharing ownership plan. Therefore, the $4,000 is not subject to the sales tax on
accommodations.
In addition, A has the right to exchange his week for another week at another complex or resort
that has entered into an exchange agreement with SC Timeshares. For one year, 199X, A decides
to vacation at a resort not owned or managed by SC Timeshares but located in South Carolina. A
contacts SC Timeshares who makes reservations for A at Palmetto Timeshare Company
(“Palmetto Timeshares”). (SC Timeshares and Palmetto Timeshares have an exchange
agreement with each other.) A vacations at Palmetto Timeshares for one week in July, 199X.
Palmetto Timeshares allows A to vacation at its resort since an exchange agreement exists
between SC Timeshares and Palmetto Timeshares. SC Timeshares is now obligated to provide
accommodations to a timeshare owner of Palmetto Timeshares.
As such, Palmetto Timeshare is obligated to remit the sales tax with respect to the
accommodations furnished A since the accommodations were furnished by Palmetto Timeshares
in South Carolina, the exchange is for accommodations and does not constitute realty under the
law, and the obligation to exchange under the exchange agreement constitutes a “sale” under the
law. SC Timeshares will be required to remit sales tax on the accommodations furnished to the
member of Palmetto Timeshares in the month and year such accommodations are actually
furnished since the exchange is for accommodations and does not constitute realty under the law
and the previous exchange and the obligation to reciprocate under the exchange agreement
constitutes a “sale” under the law. The basis for the sales tax on the accommodations furnished
to the timeshare owners by Palmetto Timeshares and SC Timeshares (when furnished) would be
the weekly rental value of the accommodations exchanged as consideration for the
accommodations furnished.
Example #3 - Exchange Within the Same Timeshare Company
A purchases a timeshare week for $4,000 at a condominium/timeshare complex of SC
Timeshares Company (“SC Timeshares”). This allows A to stay in Unit 312 in a Myrtle Beach
complex during the first week in July every year as long as he owns his timeshare and remits his
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annual regime fees. Under South Carolina law, this purchase by A is a purchase of realty since it
is the purchase of a vacation time sharing ownership plan. Therefore, the $4,000 is not subject to
the sales tax on accommodations.
However, as part of the purchase, A now has the right to exchange his week for another week at
another complex or resort owned by SC Timeshares or at another complex or resort not owned or
managed by SC Timeshares but that has entered into an exchange agreement with SC
Timeshares. For one year, 199X, A decides to vacation at a another resort owned or managed by
SC Timeshares and located in Charleston, South Carolina. A contacts SC Timeshares who makes
reservations for A at the Charleston complex. A vacations at the Charleston complex for one
week in July, 199X. SC Timeshares allows A to vacation at its Charleston complex since A, in
the exchange agreement, agrees to allow the owner of the Charleston unit, B, to stay at his unit
of the Myrtle Beach complex.
As such, SC Timeshare is obligated to remit the sales tax with respect to the accommodations
furnished A since the accommodations were furnished by SC Timeshares in South Carolina, the
exchange is for accommodations and does not constitute realty under the law, and the obligation
to exchange under the exchange agreement constitutes a “sale” under the law. SC Timeshares
will be required to remit sales tax on the accommodations furnished to B in the month and year
such accommodations are actually furnished since the exchange is for accommodations and does
not constitute realty under the law and the obligation to reciprocate under the exchange
agreement constitutes a “sale” under the law. The basis for the sales tax on the accommodations
furnished by SC Timeshares to A and B (when furnished) would be the weekly rental value of
the accommodations exchanged as consideration for the accommodations furnished.
Exchanges through an Exchange Company:
A purchases a timeshare week for $4,000 at a condominium/timeshare complex of SC
Timeshares Company (“SC Timeshares”). This allows A to stay in Unit 312 in a Myrtle Beach
complex during the first week in July every year as long as he owns his timeshare and remits his
annual regime fees. Under South Carolina law, this purchase by A is a purchase of realty since it
is the purchase of a vacation time sharing ownership plan. Therefore, the $4,000 is not subject to
the sales tax on accommodations.
SC Timeshares has entered into agreement with XYZ Exchange Company (“XYZ Exchange”).
Under this agreement, SC Timeshares agrees to maintain their facilities to certain standards and
to sign up members on behalf of the XYZ Exchange. This agreement requires SC Timeshares to
make it clear to any potential members (purchasers of a timeshare unit at SC Timeshares) that
the exchange program available to them is conducted by XYZ Exchange and that SC Timeshares
has a separate agreement with XYZ Exchange whereby SC Timeshares submits applications for
membership in XYZ Exchange on behalf of the purchaser of the timeshare unit at SC
Timeshares.
If a purchaser signs up for membership in XYZ Exchange, SC Timeshares will submit the one
year membership fee received from A to XYZ Exchange on behalf of A. A is then responsible
for submitting a renewal fee each year thereafter.

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A can now exchange his unit for any unit in the pool or bank of accommodations “deposited” by
other members. A decides to vacation in Hilton Head, SC and:

1. Deposits a week of his vacation time (his timeshare unit and week at SC Timeshares)
   into a pool or “bank” of all accommodations available to members, and
2. Requests a week of vacation time at a specific resort on Hilton Head Island. A small
   fee is required to be paid by A via a credit card when the vacation time is requested.
   A’s selection is available and XYZ Exchange confirms the reservation.
   As such, XYZ Exchange is obligated to remit the sales tax 1 with respect to the accommodations
   furnished A since the accommodations were furnished by XYZ Exchange in South Carolina
   (Hilton Head Island), the exchange is for accommodations and does not constitute realty under
   the law, and the obligation to exchange under the exchange agreement constitutes a “sale” under
   the law. XYZ Exchange will also be required to remit sales tax on the accommodations furnished
   to the person using A’s timeshare unit at SC Timeshares in Myrtle Beach, SC in the month and
   year such accommodations are actually furnished. The basis for the sales tax on each
   accommodations furnished in South Carolina would be the weekly rental value of the
   accommodations exchanged as consideration for the accommodations furnished plus the small
   reservation fee paid by the member at the time the reservation request was made .
   Please Note the Following:
   (1) Application to All Exchanges: The principles established above also apply to exchanges
   between a timeshare resort and a membership resort. In other words, the same principles
   apply if a membership resort exchanges accommodations with a timeshare resort as well as
   exchanges between two membership resorts or two timeshare resorts as described in the
   examples. They also apply to all exchanges through an Exchange Company in which
   accommodations are furnished in South Carolina, whether the member of the Exchange
   Company owns vacation time at a timeshare resort or a membership resort, or owns a
   condominium or home, that he can place into the exchange pool or bank.
   Finally, while they are not the subject of this revenue ruling, it should be noted that
   exchanges of accommodations between two individuals are also subject to the sales tax on
   accommodations when such accommodations are furnished in South Carolina. In other
   words, if Mr. Smith allows Mr. Jones to stay one week at his home on the beach in Garden
   City, SC if Mr. Jones allows him to stay one week at his home in Florida, then Mr. Smith is
   liable for the sales tax on accommodations for the accommodations furnished in South
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All real estate agents, brokers and listing services furnishing accommodations to transients are
retailers; and therefore, are required to be licensed and must remit the sales tax on such
accommodations. The exchange company in this example is no different than the real estate
companies along the coast that rent for money condominiums and homes owned by others.

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Carolina to Mr. Jones. The basis for the sales tax on the accommodations furnished in
South Carolina would be the weekly rental value of the accommodations furnished.
(2) Vacation Time Sharing Lease Plans: The principles above also apply to exchanges
involving “vacation time sharing lease plans” defined in Code Section 27-32-10(8). While
the purchase of a “vacation time sharing lease plan” is specifically exempted from the sales
tax under Code Sections 26-32-170 and 12-36-2120(31), the exchange of accommodations at
a unit under such a plan for accommodations at another unit under a vacation time
sharing ownership plan, a vacation time sharing lease plan, or a membership plan is
subject to the sales tax on accommodations since such an exchange is not the sale of a
“vacation time sharing lease plan.” Such an exchange is the sale of accommodations for a
specific time period. It is no different than the sale by a vacation time sharing lease plan
resort of one week of accommodations for a specific unit because the person who typically
leases that unit for that week could not use it. Neither the exchange nor the sale of such
accommodations at a vacation time sharing lease plan resort qualify for the exemptions
under Code Sections 26-32-170 and 12-36-2120(31). Only the sale of the full plan qualifies
for the exemptions.
(3) Effective Date of this Document: As noted on page one of this document, the effective
date of this advisory opinion is January 1, 1999. The effective date only applies to
exchanges of accommodations that are arranged and furnished on or after January 1, 1999.
Exchanges arranged prior to January 1, 1999, but not furnished until after December 31,
1998, are not subject to the sales tax on accommodations. It does not apply to the purchase
of accommodations through membership plans or any other method. For example,
purchases of accommodations through membership plans are taxable for all periods open
under the statute. It is no different than making advanced reservations at a hotel. The tax
on such accommodations is due the month in which the accommodations are furnished,
regardless of when the consideration for such accommodations is paid.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Burnet R. Maybank III
Burnet R. Maybank, III, Director

Columbia, South Carolina
February 24
, 1998

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