Did PLR 94-1 impose South Carolina sales, use, or property tax on equipment sold for foreign resale and temporarily stored in-state?

Plain-English summary

South Carolina Private Letter Ruling 94-1 found that ABC Company, the seller, did not owe sales/use tax or property tax on large equipment sold to a foreign company for resale and temporarily stored in South Carolina before export.

The sales-and-use-tax conclusion rested on resale. The foreign buyer intended to resell the equipment in another country, so ABC's sale was a wholesale sale rather than a taxable retail sale under the cited statute.

For property tax, the Department treated the equipment as inventory while it remained temporarily at ABC's South Carolina facility. The ruling applied the historical inventory exemptions even though ABC performed routine inspections during storage.

Common questions

Q: Did shipment through Charleston make ABC's sale taxable? No. On the ruling's facts, the transaction was a sale for resale.

Q: Did temporary South Carolina storage create property tax for ABC? No. The equipment remained inventory under the cited historical provisions.

Q: Could the foreign buyer use the equipment during storage? The facts said no; apart from directing temporary storage, the buyer exercised no use in South Carolina.

Q: Can another exporter rely on this PLR? No. The ruling expressly limits reliance to its recipient and covered transactions.

Citations and references

• S.C. Code Ann. §§ 12-36-910 and 12-36-1310 (historical sales and use taxes)
• S.C. Code Ann. § 12-36-120 (wholesale sale for resale)
• S.C. Code Ann. § 12-37-220(B)(30) (historical inventory exemption)
• S.C. Code Ann. § 12-37-450 (historical business-inventory exemption)
• South Carolina Revenue Ruling 91-7 (inventory definition discussed in the PLR)

Subject

Property Shipped Overseas

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/PLR94-1.pdf

Original ruling text

SC PRIVATE LETTER RULING #94-1 (TAX)

TO:

ABC Company

SUBJECT:

Property Shipped Overseas
(Sales and Property Taxes)

DATE:

January 14, 1994

REFERENCE:

S. C. Code Ann. Section 12-36-910 (Supp. 1992)
S. C. Code Ann. Section 12-36-1310 (Supp. 1992)
S. C. Code Ann. Section 12-36-110 (Supp. 1992)
S. C. Code Ann. Section 12-36-120 (Supp. 1992)
S. C. Code Ann. Section 12-37-220 (Supp. 1992)
S. C. Code Ann. Section 12-37-450 (Supp. 1992)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (Supp. 1992)
SC Revenue Procedure #93-6

SCOPE:

A Private Letter Ruling is a document issued by the Department of Revenue to
a specific person.

NOTE:

A Private Letter Ruling may only be relied upon by the person to whom it is
issued and only for the transaction or transactions to which it relates. A Private
Letter Ruling has no precedential value.

Questions:

1. Is the ABC Company, as seller, liable for the sales and use tax with respect to the sale and
   storage of the equipment as described in the facts?
2. Is the ABC Company, as seller, liable for the property tax with respect to the sale and storage
   of the equipment as described in the facts?
   Conclusions:
3. The ABC Company, as seller, is not liable for the sales and use tax with respect to the sale and
   storage of the equipment as described in the facts. The equipment will be sold by ABC for the
   purposes of resale by the foreign company; therefore, the transaction is not subject to the sales
   and use tax pursuant to Code Section 12-36-120.
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2. The ABC Company, as seller, is not liable for the property tax with respect to the sale and
storage of the equipment as described in the facts. Such equipment is inventory while it is in
South Carolina and is exempt from the property tax under Code Section 12-37-220B(30).
Facts:
ABC Company is a large United States corporation with a facility in South Carolina. ABC is
qualified to do business in South Carolina.
ABC has contracted to sell two very large pieces of equipment to a foreign company. While the
components of the equipment were manufactured by ABC outside of South Carolina, the
equipment itself has been or will be manufactured or assembled in South Carolina. Ancillary
equipment manufactured or purchased outside of South Carolina will be sold along with the two
large pieces of equipment. The value of the equipment will be between $80,000,000.00 and
$100,000,000.00 and the equipment will weigh approximately 1,200,000 pounds.
The terms of the contract include the following:
1)

For equipment manufactured by ABC in South Carolina, title will pass to the foreign
company at ABC's South Carolina factory. Transportation and delivery will be made
freight along side vessel ("FAS") at the port of export - Charleston, South Carolina. The
risk of loss will also pass FAS port of export.

2)

For equipment manufactured by ABC outside of South Carolina, title will pass at the out
of state manufacturing location. Transportation and delivery will be made freight along
side vessel ("FAS") at the port of export - Charleston, South Carolina. The risk of loss
will also pass FAS port of export.

3)

For equipment purchased by ABC outside of South Carolina, the equipment will be
resold to the foreign company at the supplier's location. Title will pass at the out of state
supplier's location. Transportation and delivery will be made freight along side vessel
("FAS") at the port of export -Charleston, South Carolina. The risk of loss will also pass
FAS port of export.

In all cases, ABC will pay the transportation costs.
The foreign company is not qualified to do business in South Carolina. The equipment will be
resold by the foreign company with the sale expected to take place in a different foreign country.
ABC will sell the equipment to the foreign company prior to December 31, 1993; however, the
equipment manufactured in South Carolina will be temporarily stored at ABC's manufacturing
facility in South Carolina until March, 1994. At that time it will be transported to the port in
Charleston for delivery in accordance with the above terms. While the equipment is stored at
ABC's facility, ABC will routinely inspect it.
Other than instructing ABC to temporarily store the equipment, the foreign company will exercise
no use of the equipment while it is in storage.
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Discussion:
SALES AND USE TAX
Code Section 12-36-910(A) imposes the South Carolina sales tax and reads, in part:
A sales tax, equal to five percent of the gross proceeds of sales is imposed upon every
person engaged or continuing within this State in the business of selling tangible personal
property at retail.
Code Section 12-36-1310(A) imposes the South Carolina use tax and reads, in part:
A use tax is imposed on the storage, use, or other consumption in this State of tangible
personal property purchased at retail for storage, use, or other consumption in this State, at
the rate of five percent of the sales price of the property, regardless of whether the retailer is
or is not engaged in business in this State.
Therefore, for the 5% sales and use tax to apply, there must be a retail sale or purchase of tangible
personal property.
Code Section 12-36-110 defines the terms "retail sale" and "sale at retail" to mean "all sales of
tangible personal property except those defined as wholesale sales."
Code Section 12-36-120 reads in part:
"Wholesale sale" and "sale at wholesale" mean a sale of:
(1) tangible personal property to licensed retail merchants, jobbers, dealers, or
wholesalers for resale, and do not include sales to users or consumers not for resale;
Therefore, as a wholesale sale, the sale of the equipment in question by ABC to the foreign
company is not subject to the State sales and use tax since only retail sales are subject to the tax.
PROPERTY TAX
Code Section 12-37-220B(30) exempts from property taxes "all inventories".
While Code Section 12-37-220A(6) exempts "all inventories of manufacturers, except
manufactured articles which have been offered for sale at retail or which have been available for
sale at retail" (including certain specifically listed fuels for use by a public utility), Code Section
12-37-220B(30) exempts all inventories.
In addition, Code Section 12-37-450 exempts one hundred percent of the "inventory of business
establishments ... for the 1987 and subsequent tax years ..."

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"Where is it possible to do so, it is the duty of the courts, in the construction of statutes to
harmonize and reconcile laws, and to adopt that construction of a statutory provision which
harmonizes and reconciles it with other statutory provisions." 73 Am. Jur. 2d, Statutes, Section
254.
As such, all inventories of manufacturers, not just those articles manufactured for sale at
wholesale; all inventories of business establishments; and certain fuels listed in Code Section 1237-220A(6) for use by a public utility are exempt from the property taxation.
In SC Revenue Ruling #91-7, the Commissioners defined "inventory", as:
Merchandise purchased for resale is "inventory" for purposes of the business inventory tax
exemption (Section 12-37-450) and South Carolina income taxation. The purpose for
which merchandise was bought and held governs in determining whether it is inventory,
not the fact that it may subsequently be resold. Equipment which is rented out by rental
businesses and material and supplies used in a business are examples of property which are
not inventory, and therefore, not exempt from property taxation under Code Section[s] 1237-450 and 12-37-220(B)(30).
In continuing to exempt certain fuels used by public utilities, the ruling further notes:
This ruling is not intended to change the items deemed to be inventories of manufacturers
in S.C. Code Ann. Section 12-37-220(A)(6).
Based on the above, ABC, as seller, is not liable for the property tax with respect to the sale and
storage of the equipment as described in the facts.
For questions concerning the shipment of property out of South Carolina, contact Research and
Review at (803) 737-4744 or John McCormack at (803) 737-4438 with respect to sales and use tax
issues and Kin Purvis at (803) 737-4468 with respect to property tax issues.

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