South Carolina Economic Development Incentives: Sales and Use Tax Exclusions and Exemptions

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Sales Tax: In South Carolina, a 6% sales tax is imposed upon every person engaged within this State in the business of selling tangible personal property and other types of goods and services sold at retail.  Voters in various South Carolina counties have approved an additional 1 – 2.5% additional tax assessment (“Local Option Sales Tax”) where the additional proceeds are applied by the county for infrastructure improvements or rollback of property taxes. This can bring the South Carolina sales tax to 8.5% in areas of the state.

Use Tax: South Carolina also imposes a complimentary 6% use tax on the sales price of tangible personal property purchased at retail for storage, use or other consumption in South Carolina, regardless of whether the seller is engaged in a business in South Carolina. Unlike the sales tax, the purchaser is liable for the use tax on sales completed by an out-of-state seller to a South Carolina purchaser who stores, uses or consumes tangible personal property in this state. South Carolina purchasers may be relieved of the use tax liability if the purchaser obtains a receipt from the retailer (1) maintaining a place of business in South Carolina or (2) authorized by the Department of Revenue to collect the use tax. .

Sales and Use Tax Exemption Incentives: South Carolina provides a variety of tax exclusions or exemptions for businesses making a capital investment by constructing manufacturing or distribution facilities in South Carolina, and may be eligible for the following exclusions or exemptions from tax:

  1. Sale of property to a manufacturer or compounder as an ingredient or component part of the tangible personal property or product manufactured or compounded for sale.
  2. Sale of property “used directly” in manufacturing, compounding, or processing tangible personal property into products for sale.
  3. Sale of coal, coke, or other fuels sold to manufacturers and electric power companies for the generation of heat or power used in manufacturing tangible personal property for sale or generating electric power or energy for use.
  4. Wrapping paper, containers, etc., used incident to the sale and delivery of tangible personal property.
  5. Machines used in manufacturing, processing, recycling, or compounding tangible personal property for sale. This exemption also includes pollution control and abatement machines.
  6. Electricity use by manufacturers to manufacture tangible personal property for sale. For purposes of this item, “manufacturer” or “manufacturing” includes the activities of processors.
  7. Tangible personal property delivered out of state by South Carolina retailers.
  8. Material handling systems and equipment used in the operation of a distribution facility or a manufacturing facility of a company that invests at least $35 million in the state over a five year period.
  9. Machines used in research and development.
  10. Construction material used in the construction of a single manufacturing or distribution facility, or one that serves both purposes, where the company invests at least $100 million at the single site in the state over an 18 month period.

There are many more exclusions and exemptions applicable to manufacturers and other types of businesses investing in South Carolina..

South Carolina also provides incentive payments to retailers of ethanol-based and bio-diesel fuel purchases and producers of electricity and methane gas generated from a biomass resource.

Wholesale Sale Exemption: Sales by manufacturers of tangible personal property are not taxable if the inventory or raw materials are sold for resale to create the final goods or product. This is considered a “wholesale” sale which is exempt from tax in South Carolina. The definition of wholesale sale exempt from tax also includes sales of (a) tangible personal property which consists of ingredient or component parts to manufacturers, (b) tangible personal property used directly in manufacturing, and (c) materials or containers.

Intangible and Services: Generally, intangibles and services are generally not taxable in South Carolina. South Carolina does permit the taxation of certain services, however, such as laundry services, transmission of voice or messaging communications, electricity sales, and lodging or sleeping accommodations.

Direct Pay and Exemption Certificates: The Department of Revenue can issue certificates authorizing certain businesses to purchase items tax free. DOR may issue a certification to permit a manufacturer to purchase tax free machinery and equipment to be used in manufacturing personal property for sale. These certificates are issued by DOR. An application for a direct pay or exemption certificate is made using Form ST-10, and the direct pay or exemption certificate is issued on Form ST-9.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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