Are a utility-scale solar facility's electricity sales for resale subject to South Carolina sales tax or electric power tax?

Plain-English summary

South Carolina Revenue Ruling 15-14 reaches two different tax results for the same utility-scale solar electricity sale:

• Sales and use tax: does not apply because electricity sold to an electric utility or cooperative for resale is a wholesale sale.
• Electric power tax: applies to the electricity sold for resale within South Carolina unless the sale is otherwise exempt.

The ruling concerns a utility-scale generating facility selling electricity exclusively to utilities or electric cooperatives for resale to their customers.

Why sales tax does not apply

South Carolina treats electricity as tangible personal property. Sales tax generally applies to retail sales of tangible personal property, while a sale to a licensed retailer, dealer, jobber, or wholesaler for resale is a wholesale sale.

Because the utility or cooperative buys the solar electricity for resale rather than its own use or consumption, the generating facility's sale is wholesale and outside the sales and use tax imposed on retail transactions.

Why electric power tax applies

The ruling separately applies Code Section 12-23-10. It describes an electric power tax of five-tenths of one mill per kilowatt hour on a person selling electric power for resale within South Carolina, subject to the statutory exceptions and exemptions.

Accordingly, avoiding sales tax as a wholesale transaction does not also eliminate electric power tax. The two taxes use different rules.

Common questions

Q: Is electricity tangible personal property for South Carolina sales tax?

A: Yes. The ruling quotes the statutory definition expressly including sales of electricity.

Q: Why is the solar facility's sale not a taxable retail sale?

A: The utility or cooperative purchases the electricity for resale, making it a wholesale sale under the definitions cited by the ruling.

Q: Does wholesale treatment eliminate every South Carolina tax on the sale?

A: No. The ruling concludes that electric power tax applies unless a separate exemption covers the sale.

Q: Does the ruling address electricity sold directly to an end user?

A: No. Its stated facts involve electricity sold exclusively to utilities or cooperatives for resale.

Citations and references

• S.C. Code Ann. §§ 12-36-910 and 12-36-1310 (sales and use taxes)
• S.C. Code Ann. § 12-36-60 (electricity included in tangible personal property)
• S.C. Code Ann. §§ 12-36-110 and 12-36-120 (retail and wholesale sale definitions)
• S.C. Code Ann. § 12-23-10 (electric power tax)

Subject

Solar Energy Facility – Sale of Electricity

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR15-14.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 12265, Columbia, South Carolina 29211

SC REVENUE RULING #15-14

SUBJECT:

Solar Energy Facility – Sale of Electricity
(Sales and Use Tax and Electric Power Tax)

REFERENCES: S.C. Code Ann. Section 12-36-910 (2014)
S.C. Code Ann. Section 12-36-1310 (2014)
S.C. Code Ann. Section 12-36-60 (2014)
S.C. Code Ann. Section 12-36-110 (2014)
S.C. Code Ann. Section 12-36-120 (2014)
S.C. Code Ann. Section 12-23-10 (2014)
AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2014)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

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

Overview
The building of utility size solar energy facilities is on the rise in the United States and the
Southeast. These facilities can involve substantial acres of land, and the cost of construction can
exceed $100 million. These utility size solar energy facilities sell electricity exclusively to
electric utilities or electric cooperatives for resale to customers.
This advisory opinion addresses how South Carolina’s sales and use tax and electric power tax
apply to the electricity generated and sold by utility size solar energy facilities.

Questions

1. Is the sale of electricity by a utility size solar energy generating facility to electric utilities or
   electric cooperatives for resale subject to the South Carolina sales and use tax?
2. Is the sale of electricity by a utility size solar energy generating facility to electric utilities or
   electric cooperatives for resale subject to the South Carolina electric power tax?
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Conclusions

1. The sale of electricity by a utility size solar energy generating facility to electric utilities or
   electric cooperatives for resale is a wholesale sale and, therefore, is not subject to the South
   Carolina sales and use tax.
2. The sale of electricity by a utility size solar energy generating facility to electric utilities or
   electric cooperatives for resale is subject to the South Carolina electric power tax, provided
   that the sale is not otherwise exempt.

Discussion

1. Sales and Use Tax
   Code Section 12-36-910 imposes a sales tax on the gross proceeds of sales on every person
   engaged or continuing within this State in the business of selling tangible personal property at
   retail. Code Section 12-36-1310 imposes a use tax on the use, storage, or consumption of
   tangible personal property purchased at retail for storage, use, or consumption in South Carolina,
   regardless of whether the retailer is engaged in business in South Carolina.
   Code Section 12-36-60 defines the term “tangible personal property” and states, in part:
   “Tangible personal property” means personal property which may be seen,
   weighed, measured, felt, touched, or which is in any other manner perceptible to
   the senses. It also includes … sales of electricity ….
   Code Section 12-36-110 defines the terms “retail sale” and “sale at retail” to mean, in part:
   … all sales of tangible personal property except those defined as wholesale sales. The
   quantity or sales price of goods sold is immaterial in determining if a sale is at retail.
   Code Section 12-36-120 defines the terms “wholesale sale” and “sale at wholesale” to mean, in
   part, 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[.]
   Based on the above, the sale of electricity by a utility size solar energy generating facility sold to
   electric utilities or electric cooperatives for resale is a wholesale sale and, therefore, is not
   subject to South Carolina sales and use tax.

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2. Electric Power Tax
Code Section 12-23-10 imposes an electric power tax and provides, in part:
In addition to all other taxes of every kind imposed by law:
(1) every person, except the State, a county, a municipality, or an agency or
political subdivision of it, engaged in the business of selling electric power for
resale within the State is subject to the payment of an excise, license, or privilege
tax of five-tenths of one mill upon each kilowatt hour of electric power sold for
resale within the State, except upon such electric power purchased from a vendor,
however remote, previously taxed under this subsection. …
(Emphasis added.)
Therefore, the sale of electricity by a utility size solar energy generating facility to electric
utilities or electric cooperatives for resale is subject to the South Carolina electric power tax,
provided that the sale is not otherwise exempt.
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Rick Reames III
Rick Reames III, Director
December 8
, 2015
Columbia, South Carolina

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