Sales tax imposition on retail sales
South Carolina imposes a state sales tax on every person engaged in the business of selling tangible personal property at retail within the state. The base rate under Section 12-36-910(A) is 5% of gross proceeds of sales. Section 12-36-1110 imposes an additional 1% tax on amounts taxable under Chapter 36, with exceptions for accommodations tax and certain items subject to maximum tax caps, bringing the combined state rate to 6% for most retail sales of tangible personal property. The sales tax also applies to specified services including laundry and dry cleaning services, electricity sales, and communications services.
Economic nexus threshold for remote sellers
A remote seller whose gross revenue from sales of tangible personal property, products transferred electronically, and services delivered into South Carolina exceeds $100,000 in the previous calendar year or the current calendar year has economic nexus with the state and must obtain a retail license and remit sales and use tax. The $100,000 threshold includes total gross revenue from all sales delivered into South Carolina, including taxable retail sales, exempt retail sales, and wholesale sales. There is no transaction-count threshold. Remote sellers who establish economic nexus on or after October 1, 2018, must register and begin collecting tax on the first day of the second calendar month after economic nexus is established.
Source: S.C. Code § 12-36-70; SC DOR Policy Manual, Chapter 13 – Nexus
Marketplace facilitator collection obligation
A marketplace facilitator that meets the economic nexus threshold is treated as the retailer and must collect and remit sales and use tax on all retail sales made through its marketplace, including sales of tangible personal property owned by third parties. A marketplace facilitator is any person engaged in the business of facilitating a retail sale of tangible personal property by listing or advertising the products of another person in any marketplace where sales at retail occur and collecting or processing payments from the purchaser, either directly or indirectly. The same $100,000 gross revenue threshold that applies to remote sellers also applies to marketplace facilitators. Third-party sellers whose products are sold exclusively through a collecting marketplace facilitator are not required to obtain a retail license or remit sales tax on those marketplace sales.
Source: S.C. Code § 12-36-71; SC DOR Marketplace Facilitator Guidance
Local sales taxes imposed by counties
South Carolina counties may impose additional local sales and use taxes if approved by voters via referendum. Local sales taxes include the Local Option Sales & Use Tax (S.C. Code § 4-10-10 et seq.), Capital Projects Tax (§ 4-10-300 et seq.), School District Tax (§ 4-10-10), Education Capital Improvement Tax (§ 4-10-420 et seq.), Transportation Tax (§ 4-37-30 et seq.), County Green Space Tax (§ 4-10-1010 et seq.), and Tourism Development Tax (§ 4-10-910, municipal). The Catawba Tribal Sales Tax applies in York County under § 27-16-130(H). These local taxes are imposed in addition to the 6% state rate. Combined state and local rates vary by county.
Source: SC DOR Local Sales Taxes; S.C. Code Title 4, Chapter 10
Resale exemption and certificate requirements
South Carolina exempts sales at wholesale from sales tax under S.C. Code § 12-36-120(1), which defines "wholesale sale" to include sales of tangible personal property to licensed retail merchants, jobbers, dealers, or wholesalers for resale. Sales to end users or consumers are not wholesale sales and do not qualify for the exemption.
Burden-shifting through resale certificates
Section 12-36-950 creates a statutory presumption that all gross proceeds are subject to sales tax until the contrary is established. The burden of proving a sale is not a retail sale ordinarily rests on the seller. However, if the seller receives a resale certificate signed by the purchaser stating that the property is purchased for resale, the liability for the sales tax shifts from the seller to the purchaser. The certificate must include the purchaser's name, address, retail sales tax license number, and any other information the Department of Revenue considers necessary.
Form ST-8A and blanket certificates
The South Carolina Department of Revenue provides Form ST-8A, "Resale Certificate," for purchases of tangible personal property intended for resale. The form is not mandatory — sellers may accept other documentation that includes the required information — but use of the state form ensures compliance with statutory requirements. A single resale certificate may be maintained on file per customer (a "blanket certificate") rather than obtaining a separate certificate for each transaction. However, the seller retains the ongoing responsibility to examine subsequent purchases to determine whether they are for goods to be resold by the purchaser in accordance with the certificate on file.
Good-faith acceptance standard
The seller must accept a resale certificate in good faith to be relieved of liability. Good faith requires the seller to exercise reasonable prudence to determine the facts supporting the validity of the certificate, including honesty of intention and freedom from knowledge of circumstances that should alert the seller to make further inquiry. If facts on the certificate would lead a reasonable person to make further inquiry, the seller has not accepted the certificate in good faith. For example, a resale certificate for weed killer from a funeral home or for toilet bowl cleaner from a state police agency should prompt the seller to question whether the items will actually be resold. If a seller accepts a resale certificate in good faith and the purchaser later consumes the property rather than reselling it, the liability for the tax remains with the purchaser rather than reverting to the seller.
Out-of-state certificates and wholesaler exemption numbers
South Carolina accepts another state's resale certificate and number in lieu of a South Carolina retail license number. A wholesaler exemption number may also be used instead of a retail license number; a South Carolina wholesale exemption certificate will have "SC Code Section 12-36-120(1)" printed by the serial number. Use tax registration numbers are not retail license numbers and do not qualify for purposes of a resale certificate.
Retention and audit requirements
The seller must maintain a copy of the resale certificate to substantiate the exemption during an audit. The certificate is not valid if it does not meet the statutory requirements, and the seller remains liable for the tax if the certificate is defective. South Carolina law requires businesses to retain exemption certificates and supporting documentation for at least three years. During an audit, the seller must produce certificates proving that purchases were legitimately exempt; missing documentation means those purchases become taxable retroactively.
Source: S.C. Code § 12-36-120; S.C. Code § 12-36-950; SC DOR Resale Certificate Guidance; Form ST-8A
Manufacturing machinery exemption
South Carolina exempts from sales and use tax machines used in manufacturing, processing, agricultural packaging, recycling, compounding, mining, or quarrying tangible personal property for sale under S.C. Code § 12-36-2120(17). The exemption also covers replacement parts and attachments to such machines, provided the parts, attachments, or replacements are integral and necessary to the operation of the machines and customarily so used.
"Integral and necessary" test
A machine qualifies for the exemption if it is integral and necessary to the manufacturing process and the product being manufactured is manufactured for sale. This standard replaced the prior "used directly" test following the 2003 decision in Springs Industries, Inc. v. SCDOR (99-ALJ-17-0153-CC). The court held that the exemption no longer applies strictly to machinery on the production line but now includes conveyances, quality control machines, and other equipment used as a function of the manufacturing process on an ongoing and continuous basis. The determination hinges on whether a machine is integral and necessary to the manufacturing process, not whether it is integral and necessary to the manufacturer's general operations—machines used for warehouse, distribution, or administrative purposes do not qualify.
Under S.C. Code Regs. 117-302.5, a machine qualifies as integral and necessary if it:
- Is used at a manufacturing facility;
- Performs an essential and indispensable function in the manufacturing process; and
- Is used on an ongoing and continuous basis during manufacturing.
What constitutes manufacturing
Manufacturing begins when raw materials are introduced to the first processing stage or machine. Material handling machinery used to transport in-process material from one process stage to another is exempt. The last machine to come within the exemption is that machine which discharges the finished product from the last machine used in the process.
Warehouse machinery used only for warehouse purposes—loading, unloading, storing, transporting raw materials, or moving finished products—is subject to tax unless separately exempt under the material handling systems exemption of S.C. Code § 12-36-2120(51).
Dual-use machinery and substantial-use standard
The statute requires "substantial," but not "exclusive," use of a machine in manufacturing for the exemption to apply. If material handling machinery is customarily used for a dual purpose (partly exempt and partly taxable) and is not otherwise exempt under § 12-36-2120(51), the machinery may be purchased tax-free under the machine exemption provided the exempt use represents a substantial portion of its use.
S.C. Code Regs. 117-302.5(b) defines "substantial" to mean the machinery or equipment must be used more than one-third of the time performing a manufacturing task. For example, a forklift used substantially to move materials from one stage of the production process to another (exempt) and also to load trucks (nonexempt) qualifies for the machine exemption.
Electricity used in manufacturing
S.C. Code § 12-36-2120(19) separately exempts electricity used by manufacturers, processors, miners, quarriers, or cotton gins to manufacture, mine, or quarry tangible personal property for sale. This exemption applies to electricity to provide lighting necessary for the operation of exempt machines and to electricity used to control plant atmosphere (temperature and/or moisture content) in the quality control of tangible personal property being manufactured or processed for sale.
The electricity exemption does not apply to sales of electricity used in administrative offices, supervisory offices, parking lots, storage warehouses, maintenance shops, safety control, comfort air conditioning, elevators used in carrying personnel, housekeeping equipment, machines used in manufacturing tangible personal property not for sale, cafeterias, canteens, first aid rooms, supply rooms, water coolers, drink boxes, unit heaters, and general lighting.
Exclusions and limitations
The machine exemption explicitly excludes automobiles and trucks under S.C. Code § 12-36-2120(17). Materials or equipment that might constitute a machine when not used for manufacturing, processing, compounding, mining, or quarrying tangible personal property for sale are not exempted.
The product being manufactured must be manufactured "for sale." Revenue Ruling #91-13 clarifies that the statute limits the exemption to machines used in manufacturing tangible personal property for sale and does not extend to machines a manufacturer uses to produce tools and supplies for its own use.
Certificate form and claiming the exemption
Manufacturers claim the exemption by providing vendors with Form ST-8, "South Carolina Exemption Certificate." The sixth checkbox from the top on the form is designated for "Machinery used in manufacturing." Both pages of Form ST-8 should be provided to vendors when purchasing exempt items.
Source: S.C. Code § 12-36-2120(17); S.C. Code § 12-36-2120(19); S.C. Code Regs. 117-302.5; SC DOR Chapter 14 – Manufacturers, Processors, and Compounders; SC Revenue Ruling #91-13