South Carolina – Taxability of Sales to Federal Employees, Diplomats, and Nonprofit Employees

SALT Report 2384 – The South Carolina Department of Revenue updated their guidance regarding the application of sales tax to purchases made by exempt government agencies and businesses. South Carolina does not impose tax directly on the federal government, however questions regarding the imposition of sales tax often arise when a government employee is making work related purchases.

Similarly, there is often confusion regarding the taxability of property, accommodations, food, and gas when they are purchased by a foreign diplomat stationed in the United States, by a state employee, or by a non-profit employee. The Department’s advisory addresses the taxability of these sales.

Federal Government

The taxability of a transaction involving the federal government depends on whether the sale is made to the federal employee or the federal government. For example, a sale to a federal government employee who is conducting official business is exempt if the government is billed directly. The employee must use a government issued credit card that is billed directly to the government, or pay with a federal government check.

Foreign Diplomats

Pursuant to Code Section 12-36-2120(1), sales to foreign diplomats are exempt from tax according to the type of exemption card and the level of exemption authorized by the Department of State’s Office of Foreign Mission. The Office of Foreign Mission issues “Diplomatic Tax Exemption Cards” to eligible foreign diplomatic and consular missions and in most cases to their personnel and family members.

The diplomatic tax exemption cards will be imprinted with one of four animal images; an owl, buffalo, eagle, or deer. Cards that have the owl image provide a full exemption on all purchases, whereas the buffalo image limits the amount of exemption and the type of items exempted.

The personal tax exemption card can be used to make exempt personal purchases by the individual named and pictured on the card. There are no restrictions on the type of payment required when using the card. However, the card cannot be used to make exempt purchases via the Internet or mail-order catalog.

Sales to State Employees or Nonprofit Organization Employee

Generally, sales and use taxes and the accommodations tax will apply to all purchases made by state or local government employees and employees of colleges and universities.

Sales made to employees of nonprofit organizations are subject to sales tax unless an exemption applies to the specific purchase.

Sales made to an employee of a charitable hospital that predominately serves children and provides care free of charge are exempt if the hospital is billed directly for the transaction.

General Service Administration SmartPay Cards

There are four General Services Administration SmartPay cards that federal employees can use when conducting official business. Purchases made with the fleet or purchase charge cards are centrally billed and are therefore exempt. Purchases made with a travel charge card are exempt only if the sixth digit on the card is a 0, 6, 7, 8, or 9.

Fleet and other purchase type transactions made with an integrated charge card are centrally billed and exempt from sales and use taxes. Travel transactions made with the integrated charge card are exempt only if the sixth digit is a 6, 7, 8, or 9.

Additionally, the Department does not require that a tax exempt form, such as the ST-8, Exemption Certificate – Single Sale Only, be provided to the retailer if the sale is not taxable. However, retailers should document the tax exemption information on the invoice or transaction receipt.

For Further Information

South Carolina Department of Revenue – Revenue Ruling 13-2