• South Carolina: Department of Revenue Announces Expiration Of Certain Tax Provisions
  • December 29, 2015 | Authors: Chad Arfons; David H. Godenswager; David M. Kall
  • Law Firm: McDonald Hopkins LLC - Cleveland Office
  • A law enacted in 2011, codified under section 12-36-2691 of South Carolina’s code, allowed businesses to disregard the ownership, lease, or utilization of a distribution facility in the state, including those of a third-party or affiliate, when determining whether that firm had sufficient nexus-or physical presence in the state-to be subject to sales and use taxes.

    In Information Letter #15-19, the South Carolina Department of Revenue (SCDOR) announced the expiration of this distribution facility “safe harbor” for nexus purposes. Accordingly, Code Section 12-36-2691 no longer applies on the earlier of either:
    • Jan. 1, 2016;
    • the effective date of any law enacted by Congress that allows a state to require that its sales tax be collected and remitted even if the taxpayer does not have substantial nexus with that state; or
    • when the person fails to meet the following requirements:
      • Placing a distribution facility in service after Dec. 31, 2010, and before Jan. 1, 2013.
      • Making a capital investment of at least $125 million after Dec. 31, 2010, and before Dec. 31, 2013.
      • Creating at least 2,000 full-time jobs, with a comprehensive health plan, for those employees after Dec. 31, 2010, and before Dec. 31, 2013, and then maintaining at least 1,500 full-time jobs and with a comprehensive health plan for those employees until Jan. 1, 2016.
    The result of the expiration of this provision means that owning, leasing, or utilizing a distribution facility, including a distribution facility of a third-party or an affiliate, within South Carolina is considered in determining nexus for South Carolina sales and use tax purposes.

    Separately, in Information Letter #15-18, the SCDOR announced that the time to file an eligibility notice for certain sales and use tax exemptions has expired. This applies to the following exemptions:
    • Computer equipment: When used in connection with a manufacturing facility when both of the following occur:
      • The taxpayer invests at least $750 million in real or personal property or both comprising or located at the facility over a seven-year period.
      • The taxpayer creates at least 3,800 full-time new jobs at the facility during that seven-year period.
    • Construction materials: When used in the construction of a new or expanded single manufacturing or distribution facility (or one that serves both purposes) when both of the following occur:
      • The taxpayer invests at least $750 million in real or personal property or both comprising or located at the facility over a seven-year period.
      • The taxpayer creates at least 3,800 full-time new jobs at the facility during that seven-year period.
    The exemption for construction material used in the construction of a new or expanded single manufacturing or distribution facility with a capital investment of at least $100 million is still available.
    • Fuel used for test flights and certain transportation of aircraft: When the fuel is used for test flights of aircraft by the manufacturer of the aircraft, or used in the transportation of an aircraft prior to its completion from one facility of the manufacturer to another facility of the manufacturer, not including the transportation of major component parts for construction or assembly or transportation of personnel, when both of the following occur:
      • The taxpayer invests at least $750 million in real or personal property or both comprising or located at the facility over a seven-year period.
      • The taxpayer creates at least 3,800 full-time new jobs at the facility during that seven-year period.
    These exemptions continue to be available to eligible taxpayers who notified the SCDOR before Oct. 31, 2015.