How did South Carolina's 2007 physical-presence-era ruling analyze activities that could create sales and use tax nexus?

Plain-English summary

SC Revenue Ruling 07-3 was a physical-presence-era nexus checklist. It addressed dozens of separate contacts involving registration, property, facilities, software, representatives, contractors, customer service, trade shows, delivery, printers, advertising, and affiliated companies.

Every scenario rested on strict assumptions: the out-of-state business sold taxable tangible personal property to South Carolina customers; the one listed activity was its only possible South Carolina contact; and the activity was not de minimis unless stated otherwise. The ruling warned that combined activities, omitted facts, or different facts could change the result, and that sales-tax nexus did not necessarily match nexus for other taxes.

Several scenarios expressly required a facts-and-circumstances analysis, including resident credit-card customers, affiliated entities, mailing-list rentals, purchasing visits, trade shows, short temporary selling activity, some affiliate relationships, and advertising. The ruling also discussed then-special statutory treatment for qualifying distribution facilities and commercial-printer relationships.

What this means for you

Remote sellers reviewing historical periods

This document can help identify the categories of contacts the Department examined before modern economic-nexus rules, but its individual positions were superseded by RR 14-4 and later modified by RR 18-14.

Businesses using employees or contractors

The checklist treated in-state sales solicitation, installation, repair, training, technical help, delivery, customer service, and other representative activity as distinct nexus questions. The exact authority, frequency, and physical activity mattered.

Printing, advertising, and fulfillment arrangements

The ruling separated protected commercial-printer arrangements from other in-state property or activity and repeatedly cautioned that advertising and affiliate cases could depend on the full facts.

Common questions

Q: Did the ruling provide a universal safe-harbor list?
A: No. Each response applied only to its narrow assumed facts, and multiple contacts could change the conclusion.

Q: Did it address only sales and use tax?
A: Yes. The ruling expressly warned that nexus standards for other taxes could differ.

Q: Why is the old distribution-facility discussion especially historical?
A: The ruling itself said S.C. Code § 12-36-2690 was scheduled to be repealed for tax years after June 9, 2010.

Q: Was advertising always treated the same way?
A: No. The ruling said several local, national, and satellite advertising scenarios depended on facts such as a local personality's personal endorsement.

Q: Is RR 07-3 current guidance?
A: No. RR 14-4 expressly superseded it, and RR 18-14 later modified prior nexus guidance for remote sellers.

Citations and references

• Chapter 36 of Title 12 (South Carolina sales and use tax)
• S.C. Code § 12-36-2690 (former qualifying distribution-facility nexus rule discussed by the ruling)
• S.C. Code § 12-36-75 (commercial-printer nexus protection)
• Quill Corp. v. North Dakota (1992) and Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977) (physical-presence-era authorities cited by the ruling)
• SC Revenue Ruling #14-4 (expressly superseding checklist)
• SC Revenue Ruling #18-14 (later remote-seller economic-nexus guidance)

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR07-3.pdf
• Superseding guidance: SC Revenue Ruling #14-4
• Later economic-nexus guidance: SC Revenue Ruling #18-14

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P. O. Box 12265, Columbia, South Carolina 29211
Website Address: http://www.sctax.org

SC REVENUE RULING #07-3

SUBJECT:

Nexus Creating Activities for Sales and Use Taxes
(Sales and Use Tax)

EFFECTIVE DATE: Applies to all open periods under the statute, unless otherwise
stated in the Introduction.
SUPERSEDES:

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

REFERENCES:

Chapter 36 of Title 12 (2000; Supp 2006)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (Supp. 2000)
S. C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #05-2

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the
public and to Department personnel. It is an advisory opinion
issued to apply principles of tax law to a set of facts or general
category of taxpayers. It is the Department’s position until
superseded or modified by a change in statute, regulation, court
decision, or another Departmental advisory opinion.

Introduction:
Nexus is a sufficient connection between a person and a state, and a sufficient connection
between an activity, property, or transaction and a state, that allows the state to subject
the person, and the activity, property, or transaction to its taxing jurisdiction. The Due
Process and Commerce Clauses of the United States Constitution and other federal
statutes provide limitations on a state’s powers to tax out of state corporations.
Over the years, the courts have provided limitations and guidelines in determining
whether certain activities create nexus in a taxing state. For example, see Quill Corp. v.
North Dakota 502 U.S. 808, 112 S. Ct. 1904, 119 L. Ed. 2d 27 (1992), Complete Auto
Transit, Inc. v. Brady, 430 U.S. 274, 97 S. Ct. 1076, 51 L. Ed. 326 (1977), Miller
Brothers v. Maryland, 347 U.S. 340, 347, 74 S. Ct. 535, 98 L. Ed. 744 (1954), Scripto,
Inc. v. Carson, 362 U.S. 207, 80 S. Ct. 52, 4 L. Ed. 2d 54 (1960), National Bellas Hess,
Inc. v. Department of Revenue, 386 U.S. 753, 87 S.Ct. 1389, 18 L.Ed.2d 505 (1967),
Helicopteros Nacionales de Columbia, S.A. v. Hall, 104 S. Ct.1868 (1984), and National
Geographic Society v. California Bd. of Equal, 430 U.S. 551, 97 S. Ct. 1386, 51 L. Ed.
2d 631 (1977).
1

The purpose of this advisory opinion is to provide written guidance from the Department
concerning sales and use tax nexus creating activities. Initially, this project began as an
informal response to two surveys from national publications as to whether or not certain
types of business activities, by themselves, create sales and use tax nexus.
Because of the importance of this issue to taxpayers, the complexity of nexus issues and
the changes taking place in this area, the Department is issuing its responses to the issues
raised in these surveys as an advisory opinion.
This opinion reflects the Department’s official position regarding sales and use tax
nexus at this time. Since developments in this area are constantly taking place, any
response is subject to change due to a future statute, regulation, court decision, or
advisory opinion.
Any change in South Carolina’s position as set forth in this document that is not the
result of a court case or change in statute or regulation will be prospective. Any
change that is the result of a court case will apply to all periods open under the
statute unless the court states otherwise and any change in statute or regulation will
be applicable as of the effective date established by the General Assembly.
Questions concerning the existence of nexus with South Carolina should be directed to
the Department’s Nexus/Discovery Section at 803-898-5671 or 803-898-5886.
Qualifications to Survey Responses:
Each response is based upon the specific facts described in the survey question and
the following assumptions:
•

The business is selling tangible personal property 1 at retail to residents or
others in South Carolina;

•

Each specific survey question by itself was the only possible nexus creating
activity or relationship a business has in South Carolina 2 ; and,

•

The activities described are not “de minimis” unless the question or answer
specifically states otherwise.

A “yes” response indicates the activity or relationship will, by itself, create nexus
with South Carolina. A “no” response indicates the activity or relationship will, by
itself, not create nexus with South Carolina. However, it is important to note that a
combination of several different activities or relationships, even if each by itself does
1

See Code Section 12-36-60 for the definition of “tangible personal property” and the various imposition
provisions of Chapter 36 of Title 12 (Sales and Use Tax Code of Laws) for information as to services and
intangibles that are “tangible personal property” by definition.
2
Even though some survey questions specifically state that the activity represents the corporation’s “sole
activity” in South Carolina, all other survey questions represent the corporation’s sole activity in South
Carolina whether or not such is specifically stated. The difference in wording only represents how each
national publication worded its questions.

2

not create nexus, may create nexus with South Carolina. In addition, any variance
from the facts stated in a survey question, or any additional facts not stated in a
survey question, may change the answer set forth in this document.
Each response refers only to sales and use tax nexus. Activities that create nexus for sales
and use tax purposes differ somewhat from those that create nexus for other tax purposes.

Survey Answers
A. General Activities
YES

NO

YES

NO

1. The corporation holds a certificate of authority to conduct business in
   South Carolina, or is otherwise registered with the Secretary of State or any
   other regulatory agency in South Carolina.

2. The corporation issues credit cards to customers who reside in South Carolina.
   Note: The answer depends on the facts and circumstances.
   B. Property in South Carolina

3. The corporation’s sole activity in South Carolina is maintaining or using
   a place of business for selling tangible personalty.

4. The corporation’s sole activity in South Carolina is maintaining or using
   a place of business for storing 3 tangible personalty.
5. The corporation’s sole activity in South Carolina is maintaining or
   using a distribution facility that 4 :
   (a) meets the definition of a “distribution facility 5 ” as found in Code
   Section 12-6-3360(M)(8).
   3

For purposes of this scenario, the storage facility does not meet the definition of a “distribution facility” as
defined in Code Section 12-6-3360(M)(8) and discussed in Question B.3. See also footnote #5.
4
This question was not a part of the surveys from national publications, as discussed in the Introduction,
but was added to ensure persons reviewing this opinion would be aware of South Carolina’s special rules
concerning a “distribution facility” provided for in Code Section 12-36-2690. See footnote #5.
5
Code Section 12-36-2690 states that “owning or utilizing a distribution facility [as defined in Code
Section 12-6-3360] within South Carolina is not considered in determining whether the person has a
physical presence in South Carolina sufficient to establish nexus with South Carolina for sales and use tax
purposes.” Code Section 12-6-3360(M)(8) defines a “distribution facility” as “an establishment where
shipments of tangible personal property are processed for delivery to customers. The term does not include
an establishment where retail sales of tangible personal property are made to retail customers on more than
twelve days a year except for a facility which processes customer sales orders by mail, telephone, or
electronic means, if the facility also processes shipments of tangible personal property to customers and if
at least seventy-five percent of the dollar amount of goods sold through the facility are sold to customers
outside of South Carolina.” Code Section 12-36-2690 is schedule to be repealed for tax years after June 9,
2010; therefore, the answer will change if Code Section 12-36-2690 is repealed.

3

YES

NO

YES

NO

(b) does not meet the definition of a “distribution facility” as found in
Code Section 12-6-3360(M)(8).

4. The corporation’s sole activity in South Carolina is maintaining
   tangible personalty for lease through a representative.
5. The corporation’s sole activity in South Carolina is the presence in
   South Carolina of an affiliated entity.
   Note: The answer depends on the facts and circumstances.
6. The corporation’s sole activity in South Carolina is the existence of
   unrelated in-state office (e.g. advertising).
7. The corporation’s sole activity in South Carolina is licensing software
   for use in South Carolina.
   Note: See SC Revenue Ruling #05-13 for information as to the taxation of
   software. As set forth in the revenue ruling, if software is delivered in
   tangible form or if the purchaser is charged to access an Application Service
   Provider (“ASP”) website to use software, the transaction would be
   taxable. If the software is delivered electronically, the transaction would
   not be subject to the tax.
8. The corporation’s sole activity in South Carolina is that of a mail-order
   catalog seller with property or solicitors in South Carolina.
9. The corporation’s sole activity in South Carolina is the drop shipment
   of catalogs in South Carolina, for mailing to residents within South Carolina.

10. The corporation’s sole activity in South Carolina is renting customer
    mailing lists to other vendors in South Carolina.
    Note: The answer depends on the facts and circumstances.
    C. Activities of an Employee or Third Party (e.g., Sales Representative,
    Independent Contractor or Affiliated Company)

11. The corporation’s sole activity in South Carolina is the presence of a
    representative selling in South Carolina.

4

YES

2. The corporation authorizes an employee or third party (e.g., independent
   contractor, affiliated company or other representative) to install, deliver,
   service, or repair merchandise in South Carolina or hires independent
   contractor to perform warranty or repair services on tangible personal
   property in South Carolina. (The repairs may be under warranty for which
   there is no separate charge or may be under warranty for which there was
   a separate charge.)
   3

The corporation uses an employee or third party (e.g., independent contractor,
affiliated company, or other representative) to investigate, handle or resolve
customer issues, provide training or technical assistance, or otherwise provide
customer service to customers in South Carolina.
Note: This answer assumes that the employee or third party is physically
present in South Carolina.

4. The corporation’s sole activity in South Carolina is an employee/representative providing training to South Carolina customers.
5. The corporation’s sole activity in South Carolina is an employee/representative providing trouble-shooting to South Carolina customers.
6. The corporation’s sole activity in South Carolina is purchasing agents
   entering South Carolina to acquire tangible personal property.
   Note: See Helicopteros Nacionales de Columbia, S.A. v. Hall, 104 S. Ct.
   1868 (1984). The answer depends on the facts and circumstances.
7. The corporation’s sole activity in South Carolina is attendance by a
   sales representative at two or three day trade show.
   Note: The answer depends on the facts and circumstances, including
   but limited to, what the representative does at the trade show, the business’
   intent with respect to returning to the state, etc.
8. The corporation sells tangible personal property while temporarily located
   in South Carolina for up to three days.
   Note: The answer depends on whether or not the corporation’s presence or
   sales are de minimis, the business’ intent with respect to returning to the state,
   the value of the sales, and other facts and circumstances. However, even if
   nexus is not established, the seller must be licensed and remit the tax on all
   sales made by the employee during the trade show.

5

NO

YES

9. The corporation sells tangible personal property to residents in South Carolina
   from outside the state (e.g., by telephone, over the Internet, via catalog/direct
   mail, or otherwise) and has an employee visit South Carolina four or more
   times during the year.
10. The corporation’s sole activity in South Carolina is telemarketing activity
    into South Carolina (telemarketer not located in South Carolina).
11. The corporation’s sole activity in South Carolina is the use of a telemarketing
    firm with a South Carolina office.
12. The corporation hires an unrelated call center or fulfillment center located
    in South Carolina to process telephone or electronic orders that primarily
    derive from out-of-state customers.
13. The corporation’s sole activity in South Carolina is using an in-state
    photographer, if the vendor's products are shipped to South Carolina during
    the photographic sessions.
14. The corporation collects delinquent accounts using a collection agency in
    South Carolina or hires attorneys or other third parties to file collection suits
    in South Carolina.
15. The corporation is affiliated with an entity that sells tangible personal
    property or services to customers in South Carolina, and
    (a) the South Carolina affiliate sells similar merchandise and uses
    common trade names, trademarks or logos.
    (b) uses the South Carolina affiliate to accept returns, take orders, perform
    customer service or distribute advertising materials on its behalf.
    (c) sells tangible personal property over the Internet or by catalog and
    has an affiliated company that operates a retail store in South Carolina.
    Note: The answer depends on the facts and circumstances.
16. The corporation sells tangible personal property to residents in South
    Carolina from outside the state and authorizes an employee or third party
    (e.g., sales representative, independent contractor, or affiliated company)
    to solicit sales in South Carolina.
17. The corporation has employees or representatives occasionally enter
    South Carolina to meet with South Carolina suppliers of goods or services.
    Note: See Helicopteros Nacionales de Columbia, S.A. v. Hall, 104 S. Ct.
    1868 (1984). The answer depends on the facts and circumstances.
    6

NO

YES

NO

YES

NO

YES

NO

18. The corporation’s sole activity in South Carolina is soliciting through
    independent agents.
19. The corporation’s sole activity in South Carolina is using a broker to
    arrange rentals of customer mailing lists to vendors in South Carolina and
    other states.
    Note: See SC Revenue Ruling #05-13 for analogous information as to the
    taxation of software. As such, if the mailing list is delivered in tangible form,
    the transaction would be taxable. If the software is delivered electronically,
    the transaction would not be subject to the tax.

D. Delivery

1. The corporation’s sole activity in South Carolina is in-state delivery via
   company-owned vehicles.
2. The corporation’s sole activity in South Carolina is the presence of a
   representative to deliver merchandise in South Carolina 6 .
3. The corporation delivers merchandise in South Carolina by means other
   than common carrier or the U.S. Postal Service.

4. The corporation uses a company in South Carolina to drop-ship
   merchandise to customers.
   Note: See SC Revenue Ruling #98-8.
   E. Transactions with South Carolina Printers

5. The corporation’s sole activity in South Carolina is using a South Carolina
   printing company to print catalogs or advertisements, if the vendor's
   personnel enter the state occasionally (1-3 times per year) during
   the printing process.
   Note: See Code Section 12-36-757 .

6

This answer assumes the representative is not operating out of a facility that meets the definition of a
“distribution facility” in Code Section 12-6-3360(M)(8). See also footnotes #3 and #5.
7
Code Section 12-36-75 states:
“(A) Notwithstanding any other provision of this chapter, tangible or intangible property that is: (1) owned
or leased by a person that has contracted with a commercial printer for printing and used in connection with
a printing contract; and
(2) located at the premises of the commercial printer;

7

YES

NO

YES

NO

2. The corporation’s sole activity in South Carolina is using a South Carolina
   printing company to print catalogs or advertisements, if the vendor's
   personnel do not enter South Carolina during the printing process.
   Note: See Code Section 12-36-758 .

3. The corporation’s sole activity in South Carolina is using a South Carolina
   printing company where the taxpayer’s printing materials or printed
   goods are stored.
   Note: See Code Section 12-36-759 .
   F. Advertising

4. The corporation’s sole activity in South Carolina is advertising on local
   media (e.g., newspapers, radio, TV).
   Note: The answer depends on the facts and circumstances (e.g., nexus may
   exist if the advertising consists of a personal endorsement by a local personality)

5. The corporation’s sole activity in South Carolina is advertising on national
   media, which may be circulated in South Carolina (e.g., national magazines
   or TV).
   Note: The answer depends on the facts and circumstances (e.g., nexus may
   exist if the advertising consists of a personal endorsement by a local personality)

shall not be considered to be, or to create, an office, a place of distribution, a sales location, a sample
location, a warehouse, a storage place, or other place of business maintained, occupied, or used in any way
by the person. A commercial printer with which a person has contracted for printing by reason of any
printing contract which may include storing and shipping the items printed shall not be considered to be in
any way a representative, an agent, a salesman, a canvasser, or a solicitor for the person.
(B) Notwithstanding any other provision of this chapter, the following shall not cause a person that has
contracted with a commercial printer for printing to have a duty to register as a retailer or to collect or remit
the sales or use tax imposed by this chapter:
(1) the ownership or leasing by that person of tangible or intangible property located at the South Carolina
premises of the commercial printer and used in connection with printing contracts;
(2) the sale by that person of property printed or imprinted at and shipped or distributed from the South
Carolina premises of the commercial printer by the commercial printer;
(3) the activities performed pursuant or incident to a printing contract by or on behalf of that person at the
South Carolina premises of the commercial printer by the commercial printer; or
(4) the activities performed pursuant or incident to a printing contract by the commercial printer in South
Carolina for or on behalf of that person.”
8
See footnote #7.
9
See footnote #7.

8

YES

3. The corporation’s sole activity in South Carolina is advertising on satellite TV.
   Note: The answer depends on the facts and circumstances (e.g., nexus may
   exist if the advertising consists of a personal endorsement by a local personality)
4. The corporation’s sole activity in South Carolina is spillover advertising
   from neighboring states.
   Note: This answer assumes that the advertiser and retailer have no physical
   presence in South Carolina.
5. The corporation’s sole activity in South Carolina is that of a mail-order
   catalog seller with only mail communication in the state.
   Note: This answer assumes that the retailer has no physical presence in
   South Carolina and that the catalogs are not mailed from within South Carolina.
6. The corporation’s sole activity in South Carolina is mailing catalogs to
   South Carolina consumers.
   Note: This answer assumes that the retailer has no physical presence
   in South Carolina and that the catalogs are not mailed from within South
   Carolina.
   Note: As stated in the “Introduction,” the above answers are based on the
   assumption that the business is selling tangible personal property at retail to
   residents or others in South Carolina and that each specific survey question by itself
   was the only possible nexus creating activity or relationship a business has in South
   Carolina. However, it is important to note that a combination of several different
   activities or relationships, even if each by itself does not create nexus, may create
   nexus with South Carolina. In addition, any variance from the facts stated in a
   survey question, or any additional facts not stated in a survey question, may change
   the answer set forth in this document.
   SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Ray N. Stevens
Ray N. Stevens, Director
, 2007
September 25
Columbia, South Carolina

9

NO