South Carolina ~ Sales and Use Tax: Nexus Safe Harbor Enacted; Warranty Contracts Exempt

A bill that establishes that the ownership or use of a distribution facility is not considered evidence of a person’s physical presence within South Carolina to impose nexus for sales and use tax purposes has become law without Governor Haley’s signature. A business is required to meet the following conditions in order to receive the exemption:

— place the distribution facility in service after December 31, 2010, and before January 1, 2013;

— make, or cause to be made through a third party, a capital investment of at least $125 million after December 31, 2010, and before December 31, 2013;

— create at least 2,000 full-time jobs, including a comprehensive health plan for those employees, after December 31, 2010, and before December 31, 2013; and

— after meeting the initial job requirements, maintain at least 1,500 full-time jobs until January 1, 2016.

The nexus safe harbor expires January 1, 2016, or when the business fails to meet the requirements noted above, whichever occurs earlier.

A retailer also needs to notify a purchaser in a confirmation email that the purchaser may owe use tax on the total sales price of the transaction and include a link within the email to the South Carolina Department of Revenue website. The statement within the confirmation email must indicate that the purchaser may remit use tax to the department via its website or on the purchaser’s income tax returns. Also, by February 1 of every year, the retailer is required to provide to each purchaser to whom goods were delivered in South Carolina a statement of the total sales made to the purchaser during the preceding calendar year. The statement must not contain information that would indicate the type or name of the product purchased. The retailer must further notify the purchaser on invoices or other similar documents that use tax is imposed on its sales of tangible personal property stored, used, or consumed in South Carolina. Notification must also be provided on a retailers’s Internet website and catalog.

The bill further phases out the application of sales and use tax to durable medical equipment as follows:

— from July 1, 2011, the rate is 3.5%;

— from July 1, 2012, the rate is 1.75%; and

— from January 1, 2013, the sales tax on such equipment is eliminated.

Beginning September 1, 2011, the sale or renewal of a warranty, service, or maintenance contract for tangible personal property, whether purchased alone or in conjunction with tangible personal property, is exempt from sales and use tax.

Subscribers can view the legislation.

S.B. 36, Laws 2011, effective June 8, 2011, and as otherwise noted

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

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