When did a retailer with South Carolina nexus collect tax on a gift shipped between South Carolina and another state?

Plain-English summary

South Carolina Revenue Ruling #03-3 explained how delivery location affected sales and use tax when a customer bought merchandise as a gift and the retailer shipped it directly to the recipient.

The ruling treated the purchaser or donor as the consumer. The fact that the item was a gift did not remove the retail sale from tax. For a retailer with South Carolina nexus, a gift delivered to the purchaser or recipient in South Carolina was taxable.

When the contract required the South Carolina seller to deliver the gift to the recipient outside the state—directly, by carrier, or by mail—the sale qualified for the out-of-state delivery exemption. But if the purchaser took possession at the South Carolina store and later shipped it personally, the South Carolina sale remained taxable.

If both delivery and use stayed outside South Carolina, the ruling found no South Carolina tax. Proper shipping documentation was still required.

What this means for you

Retailers offering gift shipment

Record where the seller was contractually obligated to deliver the item. Carrier documents, postal records, and delivery records supported the out-of-state exemption.

Gift purchasers

Your home address did not necessarily control. The retailer's delivery to the recipient controlled the scenarios, while store pickup created South Carolina delivery.

Tax professionals

The ruling assumed nexus and analyzed transaction location. Current nexus and marketplace rules must be considered separately.

Common questions

Q: Was an item nontaxable merely because it was a gift?
A: No. The donor was treated as the consumer and the purchase remained a retail sale.

Q: What if a South Carolina store shipped the gift to another state?
A: The sale was exempt when the seller was contractually obligated to deliver it to the out-of-state recipient.

Q: What if the buyer picked up the gift in South Carolina and mailed it later?
A: The sale was taxable because delivery to the buyer occurred in South Carolina.

Q: What if an out-of-state retailer shipped the gift to a South Carolina recipient?
A: Under the ruling's nexus assumption, the transaction was subject to South Carolina sales or use tax.

Citations and references

• S.C. Code Ann. § 12-36-910(A) — sales tax
• S.C. Code Ann. § 12-36-1310(A) — use tax
• S.C. Code Ann. § 12-36-2120(36) — seller-required out-of-state delivery exemption
• S.C. Regulations 117-333 and 117-334 — donors as consumers and interstate shipments

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR03-3.pdf

Original ruling text

State of South Carolina

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

SC REVENUE RULING # 03-3

SUBJECT:

Gifts – Multistate Transactions
(Sales and Use Tax)

EFFECTIVE DATE:

Applies to all periods open under the statute.

SUPERSEDES:

All previous advisory opinions and any oral directives in conflict
herewith.

REFERENCES:

S. C. Code Ann. Section 12-36-910(A) (Supp. 2000)
S. C. Code Ann. Section 12-36-1310(A) (Supp. 2000)
S. C. Code Ann. Section 12-36-2120(36) (Supp. 2000)
S. C. regulation 117-334

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (Supp. 2000)
S. C. Code Ann. Section 1-23-10(4) (Supp. 2001)
SC Revenue Procedure #03-1

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the public
and to Department personnel. It is a written statement issued to apply
principles of tax law to a specific set of facts or a general category of
taxpayers. A Revenue Ruling is an advisory opinion; it does not have
the force or effect of law and is not binding on the public. It is,
however, the Department’s position and is binding on agency personnel
until superseded or modified by a change in statute, regulation, court
decision, or advisory opinion.

Introduction:
As a service to their customers, many retailers will directly ship merchandise purchased by a
customer as a gift directly to the intended recipient of the gift. For example, if a customer
purchases a golf shirt from ABC Golf and Tennis Shop as a gift for a friend, ABC Golf and
Tennis Shop will directly mail or otherwise ship the shirt to the customer’s friend.
Questions have arisen as to the retailer’s liability or responsibility for remitting the sales or use
tax on such transactions when the retailer has nexus with South Carolina and one or more of the
parties (retailer, the purchaser or donor of the gift, and the recipient or donee of the gift) is
located outside of South Carolina.

1

The following represents several scenarios that will be addressed in this advisory opinion:
Scenario A – Purchaser, Recipient and Retailer are all located within SC.
Scenario B – Purchaser and Retailer are located within SC, Recipient is not.
Scenario C – Purchaser and Recipient are located within SC, Retailer is not.
Scenario D – Purchaser is located within SC, Recipient and Retailer are not.
Scenario E – Recipient and Retailer are located within SC, Purchaser is not.
Scenario F – Recipient is located within SC, Purchaser and Retailer are not.
Law and Discussion:
Code Section 12-36-910(A) imposes a sales tax and reads:
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. (Emphasis added)
Code Section 12-36-1310(A) imposes a use tax and reads:
(A) 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.
SC Regulation 117-333 states in part:
Donors of tangible personal property are regarded as consumers thereof, and the tax
applies to the gross proceeds from the sale of the property to them.
With respect to goods coming into South Carolina from another state, SC Regulation 117-334
states:
(1) Goods coming into this State. When tangible personal property is purchased for use
or consumption in this State and (1) the seller is engaged in the business of selling such
tangible personal property in this State for use or consumption and (2) delivery is made
in this State, such sale is subject to the sales tax. Such sale is taxable regardless of the
fact that the purchaser’s order may specify that the goods are to be manufactured or
procured by the seller at a specified point outside this State and shipped directly to the
purchaser from the point of origin.

2

If the conditions above are met it is immaterial (1) that the contract of sale is closed by
acceptance outside the State or (2) that the contract is made before the property is brought
into the State. Delivery is held to have taken place in this State (1) when physical
possession of the tangible personal property is actually transferred to the buyer within this
State or (2) when the tangible personal property is placed in the mails at a point outside
this State directed to the buyer in this State or placed on board a carrier at a point outside
this State (FOB or otherwise) and directed to the buyer in this State.
Engaging in business in this State shall include any of the following methods of
transacting business: maintaining directly, indirectly, or through a subsidiary, an office,
distribution house, sales house, warehouse or other place of business or by having an
agent, salesman or solicitor operating within the State under the authority of the seller or
its subsidiary.
(2) Goods shipped from this State. When tangible personal property is sold within the
State and the seller is obligated to deliver it to the buyer or to an agent of the buyer at a
point outside of the State or to deliver it to a carrier or to the mails for transportation to
the buyer or to an agent of the buyer at a point outside this State, the retail sales tax does
not apply provided the property is not returned to a point within the State. The most
acceptable proof of transportation outside the State will be:
(a) A way-bill or bill of lading made out to the seller's order and calling for delivery; or
(b) An insurance receipt or registry issued by the United States Postal Department, or a
Post Office Department receipt Form 3817; or
(c) A trip sheet signed by the seller's delivery agent and showing the signature and
address of the person outside this State who received the goods delivered.
However, where tangible personal property pursuant to a sale is delivered in this State to
the buyer or to an agent of his other than a common carrier the retail sales tax applies
notwithstanding that the buyer may subsequently transport the property out of the State.
With respect to goods leaving South Carolina, Code Section 12-36-2120(36) exempts from the
tax the gross proceeds of sales or sales price of:
tangible personal property where the seller, by contract of sale, is obligated to deliver to
the buyer, or to an agent or donee of the buyer, at a point outside this State or to deliver it
to a carrier or to the mails for transportation to the buyer, or to an agent or donee of the
buyer, at a point outside this State;
After reviewing the above statutes and regulations, it is the opinion of the Department that the
sale of tangible personal property to a person who will give that item away as a gift is a retail sale
subject to the tax.

3

If the buyer/donor of the item has the seller ship the items into South Carolina from a point
outside of South Carolina, then “[d]elivery is held to have taken place in [South Carolina] …
when physical possession of the tangible personal property is actually transferred to the buyer [or
a donee of the buyer] within this State or … when the tangible personal property is placed in the
mails at a point outside this State directed to the buyer [or a donee of the buyer] in this State or
placed on board a carrier at a point outside this State (FOB or otherwise) and directed to the
buyer [or a donee of the buyer] in this State.”
If the buyer/donor of the item has the seller ship the items outside of South Carolina from a point
inside of South Carolina, then the sale is exempt under Code Section 12-36-2120(36).
Conclusions:
Based on the above discussion, it is the opinion of the Department that a retailer that has nexus
with South Carolina is responsible for remitting the sales or use tax as follows with respect to the
following scenarios as outlined in the facts:
Scenario A – Purchaser, Recipient and Retailer are all located within SC: Since delivery
occurs in South Carolina, the sale is subject to the tax. See Code Section 12-36-910(A).
Scenario B – Purchaser and Retailer are located within SC, Recipient is not: Since the
seller, by contract of sale, is obligated to deliver the item to a carrier or to the mails for
transportation to the donee of the buyer, at a point outside South Carolina, the sale is
exempt pursuant to Code Section 12-36-2120(36).
Note: If the purchaser decides not to have the retailer ship the item and takes delivery of
the item at the SC store, the sale is subject to the tax since delivery occurs in South
Carolina, regardless of the facts that the purchaser himself may subsequently ship the item
outside of South Carolina. See Code Section 12-36-910(A).
Scenario C – Purchaser and Recipient are located within SC, Retailer is not: Since the
retailer has nexus with South Carolina and “[d]elivery is held to have taken place in
[South Carolina] … when the tangible personal property is placed in the mails at a point
outside this State directed to the buyer [or a donee of the buyer] in this State or placed on
board a carrier at a point outside this State (FOB or otherwise) and directed to the buyer
[or a donee of the buyer] in this State,” the sale is subject to the sales tax under Code
Section 12-36-910(A) or the use tax under Code Section 12-36-1310(A). See also SC
Regulation 117-334.
Scenario D – Purchaser is located within SC, Recipient and Retailer are not: Since
delivery occurred outside of South Carolina and the item does not come into South
Carolina, the sale is not subject to the tax.
Scenario E – Recipient and Retailer are located within SC, Purchaser is not: Since
delivery occurs in South Carolina, the sale is subject to the sales tax. See Code Section
12-36-910(A).

4

Scenario F – Recipient is located within SC, Purchaser and Retailer are not: Since the
retailer has nexus with South Carolina and “[d]elivery is held to have taken place in
[South Carolina] … when the tangible personal property is placed in the mails at a point
outside this State directed to the buyer [or a donee of the buyer] in this State or placed on
board a carrier at a point outside this State (FOB or otherwise) and directed to the buyer
[or a donee of the buyer] in this State,” the transaction is subject to the sales tax under
Code Section 12-36-910(A) or the use tax under Code Section 12-36-1310(A). See also
SC Regulation 117-334.
Note: Proper and sufficient documentation of transactions involving of an item purchased as a
gift and shipped to the recipient by the retailer will not hinge on the “gift” nature of the
transaction.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Burnet R. Maybank
Burnet R. Maybank, Director

, 2003
November 19
Columbia, South Carolina

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