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Sales Tax Obligations of Sellers in South Carolina

April 13, 2006

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South Carolina imposes various requirements on sellers doing business in the state. We recommend that you go through the items below to help you with the most frequently asked questions concerning sellers and sales and use tax issues.

Procedure for accepting resale certificates. Generally, as a seller you have the burden of showing that a sale is not a taxable retail sale. However, if you receive a resale certificate signed by the purchaser stating that the property is purchased for resale, the liability for the sales tax shifts from you to the purchaser.

Procedure for accepting blanket certificates. In South Carolina it's not necessary that a resale certificate be obtained for each purchase. Only one resale certificate must be maintained per customer. However, as the seller you still have the responsibility of reexamining subsequent purchases to determine if they are for goods to be resold by the purchaser in accordance with the resale certificate that is on file.

Sales and use tax liability for out-of-state mail order and catalogue retailers. South Carolina has a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if you have physical presence within South Carolina. To determine if you have physical presence, ask yourself the following:

• Do I have retail facilities, a warehouse, or any office space in South Carolina? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
• Do my employees or I enter South Carolina for purposes of taking and transmitting orders from South Carolina? If your employee or independent contractor goes into South Carolina to take or transmit orders, your business may have physical presence in South Carolina. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
• Do my delivery vehicles frequently enter South Carolina for purposes of delivering property? Frequent deliveries in South Carolina by your trucks will give you physical presence in South Carolina.

Sales tax "bracket system." The following bracket system may be followed by sellers in computing the sales tax. One additional cent tax is imposed for each 20 cents or major fraction thereof in excess of a dollar.

Absorbing the tax — using a "no sales tax" advertising strategy to drum up business. In South Carolina it is against the law to refund or offer to refund all or any part of the amount collected, or to absorb the amount of use tax required to be added to the sales price and collected from the purchaser. As a seller, it is also against the law for you to advertise directly or indirectly that you will absorb the use tax that is required to be added to the sales price. South Carolina does not specifically address whether a retailer can use the no advertising strategy on sales tax. South Carolina rules do state that the retailer may add the sales tax to the sales price, but the failure to add the tax to the sales price and collect from the purchaser does not relieve the retailer of liability from the tax.

Claiming refund for excess tax payments. A taxpayer may apply to the South Carolina Department of Revenue and Taxation for the refund of sales or use tax. The application must be made in writing within three years from the date the tax was due.

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