JDSupra Business Advisor
3/23/2017 by Andrew Saleeby | McNair Law Firm, P.A.
The South Carolina Department of Revenue (the “Department”) issued guidance earlier this month, in South Carolina Revenue Ruling 17-2, to update a comprehensive discussion concerning how communication services are taxed. Up until this point, taxpayers have relied on piecemeal interpretations from the Department through advisory opinions, audits, or informal advice. Although the recent guidance is meant to be comprehensive, the Department has noted that as communication technology expands, it will review new communication services on a case-by-case basis.
Generally speaking, sales and use tax is applied to the gross proceeds of sales made by persons engaged in or carrying on the business of selling tangible personal property at retail. The South Carolina legislature defines “tangible personal property” to include “services and intangibles, including communications . . ..”
In addition to the general application of South Carolina sales and use tax referenced above, the tax is applied to, among other things, the “gross proceeds accruing or proceeding from the charges for the ways or means for the transmission of the voice or messages, including the charges for use of equipment furnished by the seller or supplier of the ways or means for the transmission of the voice or messages.” On the other hand, if services are bundled together and sold as a package – i.e. not itemized – consisting of services and/or property treated differently for sales and use tax, the full sales price is subject to tax unless the service provider can prove what portion of the sale is not subject to tax, as identified in its financial records kept in the regular course of business.