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


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