Close to a year and a half after hearing oral arguments in Bodman v. South Carolina, the South Carolina Supreme Court has upheld the “seven caps” and “eighty seven exemptions” found under the State’s sales tax. (Op. No. 27248 filed May 8, 2013).
The plaintiff in the case sought to invalidate the sales tax exemption scheme as a whole, arguing that the sheer number of exemptions and caps has rendered the sales tax statute arbitrary and thus unconstitutional. The Court determined that Bodman’s challenge, like a similar challenge ten years earlier in Ed Robinson Laundry & Dry Cleaning, Inc. v. South Carolina Department of Revenue, 256 S.C. 120, 588 S.E.2d 97 (2003), dealt only with the size and volume of the exemptions, and not with the actual content of the exemptions. Because Bodman expressly declined to offer proof as to the basis underlying any classifications created by these exemptions, the Court was precluded from determining whether the classifications violated equal protection.
However, despite the clear win for the State, the Court, in both the majority and concurring opinions, left open the specter of subsequent challenges by emphasizing that nothing in the opinion would preclude a challenge to a specific exemption or cap based on the content of the exemption or cap itself. More specifically, citing the South Carolina Taxation Realignment Commission (TRAC) Report in her concurrence, Chief Justice Jean Toal cited the $300 sales tax cap on motor vehicles as an “arbitrary and capricious exception to the sales tax” that has “outlived its intended purpose of making South Carolina competitive with neighboring states with regard to the motor vehicle market.” However, due to the nature of Bodman’s argument, the Court was unable to exercise an individual review of each exemption.
Editor note: Nexsen Pruet filed an amicus (friend of the court) brief on behalf of the South Carolina Manufacturers Alliance. Additionally, Burnie Maybank, who was Chairman of the TRAC, is a Member (partner) of the firm. Maybank, Rick Reames III and Jim Rourke make up Nexsen Pruet's State and Local Taxation (SALT) team in Columbia.