Which South Carolina Department of Revenue regulations did the General Assembly approve in early 2008 (per SC IL #08-3)?

Plain-English summary

This Information Letter reports the Department of Revenue regulations the General Assembly approved on January 29, 2008. Under South Carolina's process, a promulgated regulation becomes official once it is published in the State Register — here, on February 22, 2008. The letter attaches each regulation as published.

Two regulations are covered:

• Regulation 117-1720.1 — Property Taxation and Fees in Lieu of Property Taxes (Property Tax): repealed. This regulation had addressed the respective responsibilities of the Department of Revenue and the Comptroller General for property taxation and fees in lieu of property taxes.
• Regulation 117-318.8 — Returned Merchandise and Restocking Fees (Sales and Use Tax): adopted. Its provisions concerning sales and use tax and restocking fees do not take effect until October 1, 2008.

What this means for you

For most taxpayers this is a notice item — a pointer to two newly official regulations. Retailers should note the new restocking-fee rule (Regulation 117-318.8), which governs the sales and use tax treatment of returned merchandise and restocking charges and took effect October 1, 2008. Read the attached regulation text for the operative rules, and confirm the current version, since regulations change over time.

Common questions

Q: What regulations does this letter cover?
A: The repeal of property-tax Regulation 117-1720.1 and the adoption of sales-and-use-tax Regulation 117-318.8 on returned merchandise and restocking fees.

Q: When did they become effective?
A: They became official upon publication in the State Register on February 22, 2008, except that Regulation 117-318.8's restocking-fee provisions took effect October 1, 2008.

Subject

Regulations Approved by the General Assembly

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/IL08-3.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P.O. Box 125, Columbia, South Carolina 29214
Web Address: www.sctax.org

SC INFORMATION LETTER #08-3

SUBJECT:

Regulations Approved by the General Assembly

DATE:

February 25, 2008

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2000)
S.C. Code Ann. Section 1-23-10(4) (2000)
SC Revenue Procedure #05-2

SCOPE:

An Information Letter is a written statement issued to the public to
announce general information useful in complying with the laws
administered by the Department. An Information Letter has no
precedential value.

The following regulation proposals were approved by the General Assembly on January
29, 2008 and became official regulations upon publication in the State Register on
February 22, 2008. However, the provisions of Regulation 117-318.8 concerning the
sales and use tax and restocking fees will not become effective until October 1, 2008.
Each regulation is attached as published in the State Register.
Regulation No.

Subject

Document

117-1720.1

DOR v. Comptroller General
Responsibilities (Repealed)
(Property Tax)

3109

2

117-318.8

Returned Merchandise and
Restocking Fees
(Sales and Use Tax)

3110

4

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Page No.

Document No. 3109
DEPARTMENT OF REVENUE
CHAPTER 117
Statutory Authority: 1976 Code Section 12-4-320
117-1720.1. Property Taxation and Fees in Lieu of Property Taxes
Synopsis:
The South Carolina Department of Revenue is considering repealing SC Regulation 1171720.1 concerning the responsibilities of the Department of Revenue and the Comptroller
General with respect to property taxation and fees in lieu of property taxes. Generally
speaking, the Department of Revenue (DOR) has jurisdiction over the duties involved
with the proper assessment of property for tax purposes and the proper calculation of
property taxes, while the Comptroller General supervised the collection of taxes and
penalties, and administered the Homestead Tax Exemption Program, including the
exemption from school operations found in Section 12-37-251, except for those functions
specifically reserved to the DOR. There were "gray" areas as to when the assessment of
property for tax purposes and the proper calculation of property taxes ends (DOR) and
the collection jurisdiction (Comptroller General) began. These areas which were not
clearly assigned by the statutes were divided by agreement between the two agencies.
This regulation formalized this agreement.
The responsibilities of the Comptroller General discussed in this regulation have now
been moved to the Department of Revenue pursuant to Act 386, Section 55, of 2006.
Therefore, SC Regulation 117-1720.1 is no longer needed.
Instructions: Repeal SC Regulation 117-1720.1 concerning the responsibilities of the
Department of Revenue and the Comptroller General with respect to property taxation
and fees in lieu of property taxes.
Text:
117-1720.1. Reserved.
Fiscal Impact Statement:
There will be no impact on state or local political subdivisions expenditures in complying
with this proposed legislation.
Statement of Rationale:
The purpose of this proposal is to repeal SC Regulation 117-1720.1 concerning the
responsibilities of the Department of Revenue and the Comptroller General with respect
to property taxation and fees in lieu of property taxes. Since the responsibilities of the
Comptroller General discussed in this regulation have now been moved to the
Department of Revenue pursuant to Act 386, Section 55, of 2006, SC Regulation 1171720.1 is no longer needed.
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The proposal to repeal this regulation is needed to reduce any taxpayer confusion that
may result from having a regulation that no longer reflects how these tax issues are
handled and is therefore no longer needed. The proposal to repeal this regulation is also
reasonable in that it is the department’s responsibility to maintain regulations that are upto date.

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Document No. 3110
DEPARTMENT OF REVENUE
CHAPTER 117
Statutory Authority: 1976 Code Section 12-4-320
117-318.8. Returned Merchandise and Restocking Fees
Synopsis:
The South Carolina Department of Revenue is considering adding SC Regulation 117318.8 concerning the application of the sales and use tax with respect to returned
merchandise and restocking fees. The Department has followed a 1967 Commission
Decision concerning returned merchandise and restocking fees, but believes it is an
incorrect interpretation of the statute and is considering adding a regulation to provide
that the sales price of property returned by a customer is not subject to the tax only if the
“full sales price” is refunded in cash or by credit.
Instructions: Add SC Regulation 117-318.8 concerning the application of the sales and
use tax with respect to returned merchandise and restocking fees.
Text:
117-318.8. Returned Merchandise and Restocking Fees (Effective October 1, 2008)
The sales tax is imposed upon a retailer's "gross proceeds of sales" which is defined at
Code Section 12-36-90. Code Section 12-36-90(2)(b) specifically states that “gross
proceeds of sales” does not include “the sales price of property returned by customers
when the full sales price is refunded in cash or by credit.”
The use tax is based upon the "sales price" of tangible personal property and the term
"sales price" is defined at Code Section 12-36-130. Code Section 12-36-130(2)(b)
specifically states that “sales price” does not include “an amount charged for property,
which is returned by the purchaser, and the full amount is refunded in cash or by credit.”
Therefore, the price (“gross proceeds” or “sales price”) charged for property which is
returned to the retailer by the purchaser is not subject to the sales tax or the use tax
provided the full price is refunded to the purchaser in cash or by credit. If a purchaser
returns merchandise to the retailer and receives a refund or credit that is less than the
price originally paid because the retailer retains a portion of the price paid as a
“restocking” or “handling” fee or for any other reason, then the original price is subject to
the tax.
Fiscal Impact Statement:
There will be no impact on state or local political subdivisions expenditures in complying
with this proposed legislation. There will be a minimal increase to general fund
collections.

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Statement of Rationale:
The purpose of this proposal is to add SC Regulation 117-318.8 concerning the
application of the sales and use tax with respect to returned merchandise and restocking
fees. Presently, Code Section 12-36-90 defines the term “gross proceeds of sales,” the
measure or basis for the sales tax, in part as “... the value proceeding or accruing from the
sale, lease, or rental of tangible personal property... without any deduction for... the cost
of materials, labor, or service... [or] any other expenses ...” Further, the definition
specifically states that the term “gross proceeds of sales” does not include “the sales price
of property returned by customers when the full sales price is refunded in cash or by
credit.” However, a 1967 Commission Decision states that the sales price of property
returned by a customer is not subject to the tax even if a restocking fee is charged and the
“full sales price” is not refunded in cash or by credit.” The Department has followed this
Commission Decision, but believes it is an incorrect interpretation of the statute and is
considering adding a regulation to provide that the sales price of property returned by a
customer is not subject to the tax only if the “full sales price” is refunded in cash or by
credit. The proposal to add this regulation is needed to reduce any taxpayer confusion
that may result from having a published regulation that is in conflict with the law. The
proposal to amend this regulation is also reasonable in that it is the department’s
responsibility to maintain regulations that are up-to date and consistent with the law. The
regulation would be effective on October 1, 2008.

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