Who owed South Carolina's historical soft-drink license tax when an out-of-state distributor supplied in-state retailers?

Plain-English summary

South Carolina Private Letter Ruling 89-2 concluded that the person first receiving or manufacturing soft drinks in South Carolina owed the state's historical soft-drink license tax.

ABC Distribution operated a Georgia distribution center that supplied soft-drink products to South Carolina retailers. The ruling read the historical statutes together: one provision taxed persons conducting intrastate soft-drink business, while another specifically taxed the manufacturer, wholesaler, distributor, or retailer that first received untaxed products for sale or disposition in South Carolina.

For this distribution pattern, the South Carolina retailer was the in-state first recipient and therefore the taxpayer. The ruling distinguished that liability from collection. An out-of-state distributor could obtain the appropriate South Carolina license and serve as the collection agent, but the statute did not make that distributor liable for the underlying tax merely because it collected it.

If the distributor acted as collection agent, the amount it was required to collect became a debt it owed to the state. That collection obligation did not shift the underlying tax liability away from the first South Carolina recipient or manufacturer.

Common questions

Q: Who owed the historical tax when a Georgia distributor supplied a South Carolina retailer? The South Carolina retailer that first received the untaxed soft drinks in the state.

Q: Could the out-of-state distributor collect the tax? Yes. It could obtain a distributor's or wholesale dealer's license and act as the collection agent.

Q: Did becoming the collection agent make the distributor the taxpayer? No. The ruling said the agent was not liable for the tax itself, although tax it was required to collect became a debt to the state.

Q: Did the rule apply only to retailers? No. The conclusion covered whichever manufacturer, wholesaler, distributor, or retailer first received or manufactured the soft drinks in South Carolina.

Q: Can another distributor rely on PLR 89-2? No. The ruling says it applies only to the specific facts or circumstances in the request and has no precedential value.

Citations and references

• S.C. Code Ann. § 12-21-1710(b)-(c) (1987 distributor licensing and reporting provisions)
• S.C. Code Ann. § 12-21-1730 (1987 soft-drink license tax)
• S.C. Code Ann. § 12-21-2120 (1987 tax on the first recipient of untaxed products)
• S.C. Code Ann. § 12-21-3010 (tax debt and lien provision quoted in the ruling)
• S.C. Code Ann. § 12-3-170 and SC Revenue Procedure 87-3 (authority identified in the ruling)

Subject

Liability for the Soft Drink Tax

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/PLR89-2.pdf

Original ruling text

SC PRIVATE LETTER RULING #89-2

TO:

ABC Distribution

SUBJECT:

Liability for the Soft Drink Tax

REFERENCE:

S.C. Code Ann. Section 12-21-1730 (Supp. 1987)
S.C. Code Ann. Section 12-21-2120 (Supp. 1987)
S.C. Code Ann. Section 12-21-1710(b) (Supp. 1987)

AUTHORITY:

S.C. Code Ann. Section 12-3-170(1976)
SC Revenue Procedure #87-3

SCOPE:

A Private Letter Ruling is a temporary document issued to a taxpayer,
upon request, and it applies only to the specific facts or circumstances
related in the request. Private Letter Rulings have no precedential value
and are not intended for general distribution.

Question:
Which party, the out-of-state distributor or the in-state retailer, is liable for the State soft drink
tax?
Facts:
ABC Distribution has several distribution centers throughout the country, including Georgia.
The location in Georgia supplies various retailers in South Carolina with soft drink products.
Discussion:
The issue concerns whether ABC, or each South Carolina retailer, is liable for the soft drink tax.
South Carolina imposes a license tax on finished soft drinks, syrups used to make soft drinks and
powders and bases used to make soft drinks. South Carolina Code Section 12-21-1730 reads:
Every person doing domestic or intrastate business within this State and engaging in the
business of selling, manufacturing, purchasing, consigning, using, shipping or
distributing, for the purpose of sale within this State, bottled drinks of every kind,
including but not limited to the following articles or things: soda water, ginger ale, cocacola, lime-cola, pepsi-cola, any product having an alcohol content of less than one-half
percent of weight or volume, fruit juices, vegetable juices, and all drinks and other

1

beverages and things commonly designated as "soft drinks" are, for the privilege of
carrying on the business, subject to the payment of a license tax which is measured by
and graduated in accordance with the sales of the person within the State, except as
otherwise provided in this article.
Every person, firm, corporation, club, or association, or any organization or
individual within the State of South Carolina, importing, receiving or acquiring
from without the State, or from any other source, beverages commonly designated
as soft drinks as contemplated by this article, for use or consumption within South
Carolina is subject to payment of [the] license tax at the rates provided for the
sale, offer for sale, or distribution of such soft drinks. (emphasis added)
Code Section 12-21-2120, which concerns an alternative method of paying the tax, reads:
Each manufacturer, wholesaler, distributor, or retailer first receiving untaxed
bottled soft drinks, syrups, premixed soft drink, or powders and bases for sale or
disposition in this State is subject to a tax at the rate of one dollar and twenty-two
cents a gross for each one cent of face value in the case of bottled soft drinks and
a tax at the rates prescribed in this article for syrups, premixed soft drink, or
powders and bases. Each manufacturer, wholesaler, distributor, or retailer
required to pay the tax shall make a report to the Commission, in the form as the
Commission may prescribe, of all bottled soft drinks, syrups, premixed soft drink,
powders and bases sold or disposed of in this State and pay the taxes due thereon
not later than the twentieth day of the month next succeeding the month of the
sale of disposition. (emphasis added)
In summary, a person doing domestic or intrastate business in South Carolina and distributing
soft drinks, is subject to a license tax. In addition, anyone first receiving soft drinks, from
outside of this State, is also subject to a license tax.
However, Code Section 12-21-1710(b) provides that:
Out-of-state distributors and wholesale dealers shall obtain appropriate
distributors' or wholesale dealers' licenses upon compliance with provisions of
this article and the regulations and administrative rules as may be issued by the
Commission.
Subsection (c) of Code Section 12-21-1710 reads:
Distributors, wholesale, and retail dealers licensed under this section shall file the
reports with the Commission as may be required not later than the twentieth day
of each month showing transactions for the preceding month. Any person who
fails to file the required reports must be penalized not less than twenty dollars nor
more than one hundred dollars, to be assessed and collected in the same manner
as other taxes are assessed and collected. The Commission may remit the penalty
in whole or in part.

2

Therefore, the statute permits an out-of-state distributor or wholesaler to act as a collection agent
for the soft drinks tax, but imposes no liability for the tax.
Furthermore, Code Section 12-21-3010 reads, in part:
The taxes and penalties imposed by this chapter shall be deemed a debt owing to
the State by the person against whom they shall be charged and shall be a lien
upon all property of such person.....(emphasis added).
The following quote is found in 68 Am.Jrs. 2d Sales and Use Tax, Section 14:
The intention of the legislature is to be gathered from a consideration not of a
single clause, sentence or section in the act, but from a consideration of the statute
as a whole, including amendments, and the courts must, if possible, give effect to
every word the statute contains and reconcile the terms employed therein so as to
render it consistent and harmonious.
In summary, a review of the "statute as a whole" indicates the legislature's intention to impose
the liability for the tax on the person "first receiving" or manufacturing bottled soft drinks in
South Carolina.
Conclusion:
The person, whether a manufacturer, wholesaler, distributor or retailer, first receiving or
manufacturing soft drink in South Carolina is liable for the soft drink tax, fond in Article 13,
Chapter 21 of Title 12. However, an out-of-state distributor can be licensed with the State as a
collection agent for the tax, thereby incurring a debt to the State for the tax required to be
collected, but such agent is not liable for the tax.

SOUTH CAROLINA TAX COMMISSION

s/S. Hunter Howard Jr.
S. Hunter Howard, Jr., Chairman

s/A, Crawford Clarkson Jr.
A. Crawford Clarkson, Jr., Commissioner

s/T. R. McConnell
T. R. McConnell, Commissioner

Columbia, South Carolina
March 1
, 1989

3