South Carolina – State Issues Guidance for Material Handling Equipment Exemption

SALT Report 2529 – The South Carolina Department of Revenue issued guidance regarding the sales and use tax exemption for material handling systems and equipment. SC code section 12-36-2120(51) provides an exemption from sales and use tax for, “material handling systems and material handling equipment used in the operation of a distribution facility or a manufacturing facility including, but not limited to, racks used in the operation of a distribution facility or a manufacturing facility and either used or not used to support a facility structure or part of it.”

The exemption is available to the taxpayer on or after the first day of the calendar month following the date the taxpayer notified the Department of its intent to invest $35 million in the state and to use the exemption. For example, if the taxpayer notifies the Department on October 15th of its intent to invest $35 million and to use the exemption, the taxpayer may use the exemption for qualified purchases on or after November 1st. Any purchases made prior to November 1st would not be eligible for the exemption.

The following are examples of material handling systems and material handling equipment that qualify for the exemption when used in the operation of a manufacturing facility or a distribution facility:

  • Automated storage and retrieval systems,
  • Carts
  • Conveyors
  • Cranes
  • Dollies
  • Forklifts
  • Hand trucks
  • Hoppers
  • Piping
  • Pumps
  • Racks
  • Shelving
  • Stackers
  • Tanks

If the taxpayer meets all of the requirements for the exemption, the exemption may be applied to all of the taxpayer’s manufacturing and distribution facilities within the state for as long as the taxpayer is operating the facilities in South Carolina. However, if a qualified taxpayer sells its facility, the new owner must meet the investment requirements on its own.

Finally, a taxpayer must be able to substantiate that they have met the $35 million investment requirement. For example, real estate closing documents, building contracts, and purchase invoices with evidence of payment may be used to verify the requirement has been met.

For Further Information

South Carolina Department of Revenue – Revenue Ruling 13-3