When did South Carolina Revenue Ruling 99-3 exempt a farm trailer from sales and use tax?

Plain-English summary

South Carolina Revenue Ruling #99-3 drew a use-based line for the farm-machinery exemption.

A flatbed or stock trailer was exempt when it was used solely—or, in mixed use, substantially rather than merely incidentally—in planting, cultivating, or harvesting farm crops sold in their original state of production or preparation for sale. The ruling treated harvesting as ending when the crop reached temporary or permanent storage, while also including specified preparation for storage or sale.

A trailer did not qualify when used only to haul tractors or harvesting equipment, haul cattle, or move crops from storage to a buyer or market. Cattle were farm products but not "farm crops" under the cited exemption. Automobiles and trucks were expressly outside the exemption.

The ruling also addressed registered trailers sold to nonresidents. If no farm exemption applied, South Carolina imposed the lesser of the purchaser's home-state sales tax equivalent or the South Carolina tax. The seller had to obtain and retain the required notarized statement, and no tax was due if the buyer would receive no home-state credit for South Carolina tax.

What this means for you

Farmers and agricultural businesses

The trailer's actual use controlled. Hauling crops during the harvesting process could qualify; hauling already stored crops to market did not. Mixed-use equipment needed substantial exempt use.

Trailer dealers

The ruling said the Department's agricultural exemption certificate shifted tax liability from the seller to the purchaser. For nonresident sales, it directed sellers to use the Department's then-current interstate survey and retain the required purchaser statement.

Accountants and tax professionals

Separate the agricultural-use analysis from the nonresident-sale calculation. A trailer that failed the farm-machinery exemption could still receive the special nonresident rate calculation if the statutory conditions were met.

Common questions

Q: Is every trailer bought by a farmer exempt?
A: No. The ruling required qualifying use in planting, cultivating, or harvesting crops for sale. Ownership by a farmer alone was not enough.

Q: Is a trailer used only to haul cattle exempt under this crop-machinery provision?
A: No. The ruling said cattle are not farm crops for this exemption.

Q: What if the trailer has both qualifying and nonqualifying uses?
A: It qualified only if the planting, cultivating, or harvesting use was substantial and not merely incidental.

Q: Does hauling crops to market count as harvesting?
A: Not after the crops have reached storage. The ruling treated hauling crops from a storage area to a buyer or market as nonexempt use.

Q: Can a nonresident buyer simply pay no South Carolina tax?
A: Not automatically. If no exemption applied, the ruling used the lesser of the home-state equivalent or South Carolina tax and required specified documentation; it stated that no South Carolina tax was due if the buyer received no home-state credit for it.

Citations and references

• S.C. Code Ann. § 12-36-2120(16) — farm machinery, parts, and attachments exemption
• S.C. Code Ann. § 12-36-930 — trailers and specified vehicles sold to nonresidents
• S.C. Regulation 117-174.243 — definitions of planting, cultivating, and harvesting
• S.C. Regulation 117-174.21 — farm wagons
• Hercules Contractors and Engineers, Inc. v. South Carolina Tax Commission, 280 S.C. 426, 313 S.E.2d 300 (1984) — substantial-use standard cited by the ruling
• SC Information Letter #98-17 and Forms ST-8F/ST-385 — historical survey and forms identified in the ruling

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR99-3.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 #99-3

SUBJECT:

Farm Trailers
(Tax)

EFFECTIVE DATE:

Applies to all periods open under the statute.

SUPERSEDES:

All previous documents and any oral directives in conflict herewith.

REFERENCES:

S. C. Code Ann. Section 12-36-2120(16) (Supp. 1998)
S. C. Code Ann. Section 12-36-930 (Supp. 1998)
SC Regulation 117-174.243
SC Regulation 117-174.21

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (Supp. 1998)
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.

Questions:

1. How does the sales and use tax apply to the sale or purchase of a flatbed trailer for use by a
   farmer in hauling farm crops (i.e., hay, corn, peaches), tractors, or harvesting equipment on his
   farm, to the buyer, or to market or a stock trailer for use by a farmer in hauling farm crops (i.e.,
   hay, corn, peaches) or cattle on his farm, to the buyer, or to market?
2. If the sale of a trailer, semitrailer, or pole trailer to a nonresident does not qualify for the
   sales and use tax exemption under Code Section 12-36-2120(16), then how is the sales and use
   tax determined?
   Conclusion:
3. The sale or purchase of a flatbed trailer or a stock trailer for use in hauling farm crops (i.e.,
   hay, corn, peaches) is exempt under Code Section 12-36-2120(16) if the flatbed trailer or stock
   trailer will be used solely in the “planting, cultivating, or harvesting” of such farm crops for sale
   in their “original state of production or preparation for sale.” See SC Regulation 117-174.243 for
   definitions of the terms “planting,” “cultivating,” and “harvesting.” (This exemption does not
   apply to automobiles and trucks.)

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The sale or purchase of a flatbed trailer or a stock trailer is not exempt under Code Section 1236-2120(16) if the flatbed trailer or stock trailer will be used solely for a purpose other than the
“planting, cultivating, or harvesting” of farm crops (i.e., hay, corn, peaches) for sale in their
“original state of production or preparation for sale.” For example, the sale or purchase of a
flatbed or stock trailer for use solely in:
(a)

hauling tractors, harvesting equipment, or cattle; or

(b) hauling farm crops (i.e., hay, corn, peaches) from a storage area to market or to a
buyer
is not exempt from the sales and use tax under Code Section 12-36-2120(16).
If a flatbed trailer or a stock trailer is used for both exempt and nonexempt purposes, then the
sale or purchase of the trailer is exempt from the sales and use tax if it is used substantially (not
merely incidentally) in the “planting, cultivating, or harvesting” of farm crops (i.e., hay, corn,
peaches) for sale in their “original state of production or preparation for sale.”
Note 1: While not an issue in this advisory opinion, it should be noted that the exemption also
applies to “bulk coolers (farm dairy tanks) used in the production and preservation of milk on
dairy farms, and [to] machines used in the production of poultry and poultry products on poultry
farms, when such products are sold in the original state of production or preparation for sale.”
Note 2: The Department of Revenue provides an “Agricultural Exemption Certificate,” Form
ST-8F, that can be used by purchasers to certify to the seller that the trailer will be used in the
“planting, cultivating, or harvesting” of farm crops (i.e., hay, corn, peaches) for sale in their
“original state of production or preparation for sale.” The use of this form shifts the liability for
the tax from the seller to the purchaser.

2. The tax due on the sale of a trailer, semitrailer, or pole trailer (of a type required to be
   registered and licensed) to a nonresident, unless exempt under Code Section 12-36-2120(16) is
   the lesser of the “amount equal to the sales tax, which would be imposed in the purchaser’s state
   of residence or the tax that would be due under [the South Carolina Sales and Use Tax law.]”
   The department periodically surveys other states to determine the “amount equal to the sales tax,
   which would be imposed in the purchaser’s state of residence.” The results of the most recent
   survey have been published by the department in SC Information Letter #98-17. In addition, the
   department has developed a form (Form ST-385) that may be used by retailers in obtaining, as
   required under Code Section 12-36-930, the purchaser’s “notarized statement of ... intent to
   license the vehicle, within ten days, in [his] state of residence.” 1
   1

It should be noted that some trailers and semitrailers, while of a type to be registered and licensed in
South Carolina, are not required to be registered and licensed in the purchaser’s state of residence. The
provisions of Code Section 12-36-930 are still applicable to such trailers and semitrailers; however, the
notarized statement required by the statute should be modified to state that, while the trailer or semitrailer
is not required to be licensed to the purchaser’s state of residence , the situs of the trailer or semitrailer
will be the purchaser’s state of residence and not in South Carolina.

2

Therefore, retailers should use the most recent published survey to determine the tax due on the
sale of a trailer, semitrailer or pole trailer (of a type required to be registered and licensed) to a
resident of another state. However, if a customer states that the sale of the trailer, semitrailer or
pole trailer in question is exempt in his state, then the retailer may do one of the following to
determine if the sale should be exempt from the tax under Code Section 12-36-930:

1. Request from the customer a copy of the exemption statute in his state of residence
   that indicates that the sale is exempt or a copy of an exemption certificate or some other
   evidence from his state of residence that indicates that the sale is exempt.
2. Contact the applicable state agency (Revenue Department or Department of Motor
   Vehicles) in the customer’s state of residence to determine if the sale is exempt and
   request that they verify in writing whether the sale is exempt. Retain the name and
   telephone number of the person who provided you the information for your records.
3. Contact the Office Services Division of the South Carolina Department of Revenue at
   (803) 898-5788. In order to receive a prompt reply, the complete facts of the transaction
   and statutory authority from the nonresident’s state and the name and phone number of
   the applicable state agency in the nonresident’s state should be provided when calling the
   department at the above number.
   Facts:
   The first issue concerns the taxability of certain trailers used by farmers. The trailers in
   questions are:
   Flatbed Trailers used by the farmer to haul farm crops (i.e., hay, corn, peaches) and to
   haul tractors and harvesting equipment, and,
   Stock Trailers used to haul farm crops (i.e. hay, corn, peaches) and cattle.
   The second issue concerns the sale of these same trailers to residents of other states that will
   immediately transport the trailer to their state of residence.
   Discussion:
   Farm Machinery: Code Section 12-36-2120(16) exempts from the sales and use tax:
   farm machinery and their replacement parts and attachments, used in planting,
   cultivating, or harvesting farm crops, . . . when such products are sold in the
   original state of production or preparation for sale. This exemption does not
   include automobiles or trucks.
   SC Regulation 117-174.243 defines the terms “planting,” “cultivating,” or “harvesting” as used
   in the above exemption statute, and reads in part:

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In order to qualify for the exemption, the item must first constitute a machine;
secondly, it must be animal or motor drawn or operated; and thirdly, it must be
used in the planting, cultivating or harvesting of farm crops.
The word “planting” is construed to include all necessary steps in the preparation
of the soil prior to and including the actual planting or sowing of the seed.
“Cultivation” is construed to include loosening of the soil around growing plants,
control of moisture content of the soil, weed and pest control.
“Harvesting” is deemed to commence with the gathering of the crop and to be
complete when the crop is placed in a temporary or permanent storage area.
Provided, however, that the term shall also include the further preparation for
storage or sale of certain crops such as curing tobacco, grains, peanuts, and the
grading and packaging of peaches, cucumbers, tomatoes, etc.
SC Regulation 117-174.21 reads:
Farm wagons sold to farmers for use in planting, cultivating, and harvesting of
farm crops are exempt from the sales and use tax under provisions of [Section 1236-2120(16)], Code of Laws, [Supp. 1997].
Based on the above, the sale or purchase of a flatbed trailer or a stock trailer is exempt under
Code Section 12-36-2120(16) if the flatbed trailer or stock trailer will be used in the “planting,
cultivating, or harvesting” of farm crops (i.e., hay, corn, peaches) for sale in their “original state
of production or preparation for sale.” If the flatbed trailer or stock trailer is not used, or is only
incidentally used, in the “planting, cultivating, or harvesting” of farm crops (i.e., hay, corn,
peaches) for sale in their “original state of production or preparation for sale,” then the
exemption is not applicable. For example, a trailer used to haul cattle does not come within the
exemption. While cattle are products of the farm, they are not farm crops and therefore the
exemption under Code Section 12-36-2120(16) is not applicable.
Finally, it should be noted that, in accordance with the South Carolina Supreme Court in
Hercules Contractors and Engineers, Inc. v. South Carolina Tax Commission, 280 S.C. 426, 313
S.E. 2d 300 (1984), a machine must be substantially used for the exempt purpose in order to
qualify for the exemption. As such, if a flatbed trailer or a stock trailer is used for both exempt
and nonexempt purposes, then the sale or purchase of the trailer is exempt from the sales and use
tax if it is used substantially (not merely incidentally) in the “planting, cultivating, or harvesting”
of farm crops (i.e., hay, corn, peaches) for sale in their “original state of production or
preparation for sale.”
Note: While not an issue in this advisory opinion, it should be noted that the exemption also
applies to “bulk coolers (farm dairy tanks) used in the production and preservation of milk on
dairy farms, and [to] machines used in the production of poultry and poultry products on poultry
farms, when such products are sold in the original state of production or preparation for sale.”

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Sales to Nonresidents: Code Section 12-36-930 reads:
(A) The tax imposed by this article on sales of motor vehicles, as defined in
Section 56-1-10, trailers, semitrailers, or pole trailers of a type to be registered
and licensed, to a resident of another state, is the lesser of:
(1) an amount equal to the sales tax, which would be imposed in the
purchaser’s state of residence, or
(2) the tax that would be due under this chapter.
(B) At the time of the sale, the seller shall:
(1) obtain from the purchaser a notarized statement of the purchasers (sic)
intent to license the vehicle, within ten days, in the purchasers (sic) state
of residence; and
(2) retain a signed copy of the notarized statement. The purchaser shall
give a copy to the sales tax agency of the purchasers (sic) state of
residence.
(C) No tax is due if a nonresident will not receive credit in his state of residence
for sales tax paid to this State under this section.
As a result of this code section, the department periodically surveys other states to determine the
“amount equal to the sales tax, which would be imposed in the purchaser’s state of residence.”
The most recent Information Letter published concerning this matter is SC Information Letter

98-17. In addition, the department has developed a form (Form ST-385) that may be used by

retailers in obtaining the purchaser’s “notarized statement of ... intent to license the vehicle,
within ten days, in [his] state of residence.” 2
In determining the tax due on the sale of a trailer, semitrailer or pole trailer (of a type required to
be registered and licensed) to a resident of another state, retailers should use the most recent
published Information Letter on this subject. However, if a customer states that the sale of the
trailer, semitrailer or pole trailer in question is exempt in his state and this exemption in not
reflected in the above information letter (SC Information Letter #98-17), then the retailer should
do one of the following to determine if the sale should be exempt from the tax under Code
Section 12-36-930:

1. Request from the customer a copy of the exemption statute in his state of residence
   that indicates that the sale is exempt or a copy of an exemption certificate or some other
   evidence from his state of residence that indicates that the sale is exempt.
   2

See footnote #1.

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2. Contact the applicable state agency (Revenue Department or Department of Motor
Vehicles) in the customer’s state of residence to determine if the sale is exempt and
request that they verify in writing whether the sale is exempt. Retain the name and
telephone number of the person who provided you the information for your records.

3. Contact the Office Services Division of the South Carolina Department of Revenue at
   (803) 898-5788. In order to receive a prompt reply, the complete facts of the transaction
   and statutory authority from the nonresident’s state and the name and phone number of
   the applicable state agency in the nonresident’s state should be provided when calling the
   department at the above number.

SOUTH CAROLINA DEPARTMENT OF REVENUE

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

Columbia, South Carolina
, 1999
January 11

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