The Policy Division of the South Carolina Department of Revenue has issued a final revenue ruling, SC Revenue Ruling #18-14, addressing retailers without a physical presence in South Carolina. The ruling comes on the heels of the United States Supreme Court decision in South Dakota v. Wayfair, Inc., 585 U.S. ___, 138 S. Ct. 2080 (2018), which found that retailers without a physical presence in a state can be required to collect and remit sales and use tax. The Department of Revenue has also posted a series of frequently asked questions to its website.
Prior to issuing SC Revenue Ruling #18-4, DOR issued three draft revenue rulings that addressed: (1) remote sellers; (2) online marketplaces; and (3) marketplace sellers. DOR has determined that only one consolidated ruling will be issued, and that is SC Revenue Ruling #18-4. The consolidated ruling does not address many issues that were addressed in the online marketplace and marketplace seller draft revenue rulings.
SC Revenue Ruling #18-4 states South Carolina will require "remote sellers" who have "economic nexus" to collect and remit South Carolina sales and use tax on a prospective basis beginning November 1, 2018 (as opposed to October 1, 2018 as initially proposed in the draft rulings).
A "remote seller" is a retailer with no physical presence in South Carolina (e.g., online, catalog, or mail order retailer). In addition, a remote seller includes any related entity assisting the remote seller in sales, storage, distribution, payment collection, or in any other manner with respect to the remote seller.
A remote seller has "economic nexus" with South Carolina if its "gross revenue" from sales of all tangible personal property into South Carolina exceeds $100,000 in the previous calendar year or the current calendar year (as opposed to a $250,000 threshold as initially proposed in the draft rulings).
"Gross revenue from all sales of tangible personal property" includes sales of taxable and exempt property, and wholesale sales. Notably, gross revenue from all sales of tangible personal property includes sales made via a marketplace. The draft ruling would have excluded gross proceeds of sales of tangible personal property owned by a remote seller, but sold by another person (i.e. sales made on an online marketplace), but the final ruling now includes those sales when determining whether economic nexus is present.
Going forward, remote sellers who establish economic nexus with South Carolina on or after October 1, 2018, are responsible for remitting the sales and use tax for all taxable sales made into South Carolina beginning the first day of the second calendar month after economic nexus is established.
Example: A remote seller establishes economic nexus in South Carolina on October 10, 2018 (i.e., it exceeds $100,000 in gross revenue from sales delivered to South Carolina). The remote seller must obtain a retail license by December 1, 2018 and collect and remit the sales and use tax for all taxable sales made into South Carolina on and after December 1, 2018.
Remote sellers should now determine whether they have economic nexus with South Carolina. This will require remote sellers to look at sales of tangible personal property made in 2017, and also sales from January 1, 2018 through September 30, 2018, to determine if sales exceed $100,000. If economic nexus is present, the remote seller must register for a retail license on or before November 1, 2018 and begin collecting and paying sales tax beginning November 1, 2018 (monthly returns are due the 20th day of the month following the month of the sales). A remote seller who presently does not have economic nexus must monitor current year sales to determine if (and when) they exceed $100,000, and register and begin collecting sales tax by the first day of the second calendar month after sales exceed $100,000 during a calendar year.
SCDOR takes the position that sales made via a marketplace are sales by the marketplace and states the marketplace is required to collect and remit sales and use tax on sales made through the marketplace. Remote sellers who make sales through an online marketplace should be aware that SCDOR is in litigation with Amazon. SCDOR has taken the position that Amazon is required to collect sales and use tax on marketplace sales, however, SCDOR may ultimately pursue remote sellers for sales tax in the event Amazon prevails in the litigation. SCDOR advises that remote sellers should consider registering for and collecting sales tax now to minimize their exposure in the event Amazon prevails in the litigation and SCDOR then decides to pursue the remote sellers for unpaid sales tax.
PartnerJeff focuses his practice on helping clients utilize tax exemptions and tax incentives. A substantial portion of Jeff's practice relates to tax-exempt bonds, including issues related to governmental bonds, private activity ...
