When did South Carolina Revenue Ruling 15-4 exempt a residence rented for fewer than 15 days, and preserve its 4% property tax ratio?

Plain-English summary

South Carolina Revenue Ruling 15-4 explained two separate benefits for qualifying owner-rented residences.

First, rental income could be exempt from South Carolina sales tax on accommodations when it was wholly excluded from the taxpayer's federal gross income under IRC Section 280A(g). The ruling required all three of these conditions:

1. the rental income came from a qualifying dwelling unit;
2. the unit was actually rented for fewer than 15 days during the tax year; and
3. the taxpayer used the unit as a residence under IRC Section 280A(d).

Second, an owner who otherwise qualified for South Carolina's 4% owner-occupied legal-residence property tax assessment ratio could remain eligible when the residence was rented for no more than 72 days during the calendar year and the certification requirements were met.

The three accommodations-exemption tests

Qualifying dwelling unit

The ruling included a primary residence, vacation home, apartment, condominium, mobile home, boat, or similar property. A unit or portion used exclusively as a hotel, motel, inn, or similar establishment did not qualify under the federal definition discussed.

Fewer than 15 actual rental days

Fourteen days qualified; fifteen did not. The rental days could be consecutive or split across the year, but the total actual rental days had to remain below 15.

Used by the taxpayer as a residence

The taxpayer's personal-use days had to exceed the greater of 14 days or 10% of the days rented at a fair rental. The ruling's example of a home rented for 10 days and personally used during the rest of the year satisfied this test.

An exempt owner did not need a retail license or accommodations-tax returns for those qualifying rentals under the ruling.

Rental companies could not use the exemption

When an owner hired a rental company to rent the residence, the rental company—not the owner—was the accommodations retailer liable for tax. The ruling said rental companies were not eligible for the Section 12-36-920(A)(2) exemption.

Its example taxed a 10-day Masters-period rental handled by a rental company even though a direct owner rental with the same number of days could have qualified.

Examples

• 10-day direct owner rental: exempt when the dwelling-unit and personal-use tests were met; no retail license or accommodations returns required.
• 18 total rental days: not exempt under the fewer-than-15-day rule; tax, licensing, and return requirements applied unless another exemption did.
• 10-day rental through a rental company: taxable because the company was the retailer and could not use the owner's federal-income exclusion.

RR 15-4 did not analyze the separate fewer-than-six-rooms place-of-abode exemption or the 90-continuous-day rule. RR 16-10 later addressed rentals of 15 days or more and those other accommodations exemptions.

The 72-day property-tax rule

The sales-tax and property-tax day limits were different. A residence rented no more than 72 days could remain eligible for the 4% owner-occupied ratio if all other legal-residence conditions and certification requirements were met.

The county assessor could request relevant federal and state returns and Schedule E information to verify rental income, residency, and eligibility.

Common questions

Q: Does renting for exactly 14 days qualify?

A: It can, if the property is a qualifying dwelling unit and the taxpayer also meets the residence-use test.

Q: Does renting for exactly 15 days qualify?

A: No under Section 280A(g)'s fewer-than-15-day rule.

Q: Can a rental company claim the owner's exemption?

A: No. RR 15-4 treated the rental company as the taxable retailer.

Q: Is the 72-day rule an accommodations-tax exemption?

A: No. It concerns continued eligibility for the 4% owner-occupied property tax assessment ratio.

Citations and references

• S.C. Code Section 12-36-920(A)(2) (accommodations income excluded under IRC Section 280A(g))
• S.C. Code Section 12-43-220(c)(2)(iv) (owner-occupied legal residence rented no more than 72 days)
• IRC Section 280A(d), (f), and (g) (residence use, dwelling unit, and rental-day requirements)
• SC Revenue Ruling #16-10 (rentals of 15 days or more and other accommodations exemptions)

Subject

Vacation Rentals of Residence: Sales Tax Exemption for Rentals of Less Than 15 Days a Year and Property Tax Assessment Ratio for Rentals of Not More Than 72 Days a Year

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR15-4.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 #15-4
SUBJECT:

Vacation Rentals of Residence: Sales Tax Exemption for Rentals of
Less Than 15 Days a Year and Property Tax Assessment Ratio for
Rentals of Not More Than 72 Days a Year
(Sales Tax on Accommodations and Property Taxes)

EFFECTIVE DATE:

June 9, 2014

REFERENCES:

S.C. Code Section 12-36-920 (Supp. 2014)
S.C. Code Section 12-43-220 (Supp. 2014)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2014)
S. C. Code Ann. Section 1-23-10(4) (Supp. 2012)
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 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
In Act No. 259 of 2014, the General Assembly enacted legislation that provides an exemption
from sales tax on accommodations for taxpayers who rent out their residence for less than 15
days during the year and allows taxpayers who rent out their owner-occupied legal residence for
72 days or less during the year to remain eligible for the 4% property tax assessment ratio. This
advisory opinion provides taxpayer guidance regarding eligibility for these specific provisions. 1
LAW AND DISCUSSION
A. S.C. Code Section 12-36-920
A 7% sales tax is imposed upon the gross proceeds from the rentals or charges for sleeping
accommodations furnished at any place in which rooms, lodgings, or sleeping accommodations
of any kind are furnished, including taxpayer residences.
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This document does not address other exemptions from sales tax on accommodations under Code
Section 12-36-920 (places of abode with less than 6 sleeping rooms, rentals for 90 consecutive days, etc.).
For additional information on sales tax on accommodations see South Carolina Sales and Use Tax
Manual, Chapter 11. The manual can be found under the Law and Policy Section of the Department’s
website.

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The person liable for the tax is the person in the business of furnishing the accommodations,
whether such person is the owner of the residence or a real estate agent, listing service, broker,
online travel company, or similar entity handling the accommodations. Unless otherwise
exempt, the person liable for the sales tax on accommodations must obtain a retail license and
remit the tax to the Department.
Code Section 12-36-920 imposes the sales tax on accommodations. It reads, in part:
(A) A sales tax equal to seven percent is imposed on the gross
proceeds derived from the rental or charges for any rooms,
campground spaces, lodgings, or sleeping accommodations
furnished to transients by any hotel, inn, tourist court, tourist camp,
motel, campground, residence, or any place in which rooms,
lodgings, or sleeping accommodations are furnished to transients
for a consideration. This tax does not apply:
(1) where the facilities consist of less than six sleeping
rooms, contained on the same premises, which is used as the
individual’s place of abode; or
(2) to gross proceeds from rental income wholly
excluded from the gross income of the taxpayer pursuant to
Internal Revenue Code Section 280A(g) as that code is defined
in Section 12-6-40(A). 2
The gross proceeds derived from the lease or rental of sleeping
accommodations supplied to the same person for a period of ninety
consecutive days are not considered proceeds from transients. . . .
B. Internal Revenue Code Section 280A(g)
I.R.C. § 280A, “Disallowance of Certain Expenses in Connection with Business Use of Home,
Rental of Vacation Homes, Etc.,” limits the federal income tax deductions a taxpayer may claim
with respect to the rental of a dwelling unit used by the taxpayer during the tax year as a
residence. 3 I.R.C. § 280A(g), “Special Rule for Certain Rental Use,” provides:

2

Emphasis is on the exemption added by 2014 Act No. 259.
I.R.C. § 280A(a) generally disallows deductions with respect to dwelling units used by the taxpayer
during the taxable year as a residence. I.R.C. § 280A(c)(3) provides an exception to the general
disallowance rule for items attributable to the rental of dwelling units. Deductions attributable to the
rental may still be claimed but not in excess of the amount by which the gross income derived from the
rental activity exceeds the deductions otherwise allowable without regard to such rental activity. I.R.C. §
280A(c)(5).
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2

Notwithstanding any other provision of this section or section 183,
if a dwelling unit is used during the taxable year by the taxpayer as
a residence and such dwelling unit is actually rented for less than
15 days during the taxable year, then—
(1) no deduction otherwise allowable under this chapter because
of the rental use of such dwelling unit shall be allowed, and
(2) the income derived from such use for the taxable year shall
not be included in the gross income of such taxpayer under section
61.
C. Gross Proceeds (from Rental Income) Exempt under Code Section 12-36-920(A)(2)
Under Code Section 12-36-920(A)(2), gross proceeds from rental income wholly excluded from
a taxpayer’s gross income under I.R.C. § 280A(g) is exempt from sales tax on accommodations.
In order to exclude rental income from gross income under I.R.C. § 280A(g), three requirements
must be met. 4
(1) Rental Income Must Be from a Dwelling Unit
The rental income must be from a dwelling unit – i.e., the rental income must be from a
house (primary residence or vacation home), apartment, condominium, mobile home,
boat, or similar property. Rental income from units or portions of a unit which are used
exclusively as a hotel, motel, inn, or similar establishment is not eligible. See I.R.C. §
280A(f)(1) and (2).
(2) Dwelling Unit Must Actually Be Rented Less than 15 Days
The dwelling unit must actually be rented for less than 15 days during the taxable year.
A taxpayer may rent out a dwelling unit multiple nonconsecutive days during the tax
year (e.g. 7 days in April and 5 days in July) or consecutive days (e.g. 14 days in July);
however, the total number of days the dwelling unit is actually rented out during the tax
year must be less than 15 days. I.R.C. § 280A(g).
(3) Dwelling Unit Must Be Used by the Taxpayer as a Residence
The taxpayer must use the dwelling unit during the taxable year as a residence for
purposes of I.R.C. § 280A – i.e., the taxpayer must use the dwelling unit for personal
purposes (as defined under I.R.C. § 280A(d)) for a number of days which exceeds the
greater of 14 days or 10% of the number of days during such year for which such unit is
rented at a fair rental. See I.R.C. § 280A(d).

4

Taxpayers seeking additional guidance on qualifying under I.R.C. § 280A should consult I.R.S.
Publication 527, “Residential Rental Property (Including Rental of Vacation Homes)” or consult their tax
advisor.

3

For example, Taxpayer owns a home in South Carolina that he uses for personal
purposes every day during the tax year, except for 10 days in April when he rents out
the home at a fair rental price. Accordingly, Taxpayer must use the home for personal
purposes for more than 14 days during the tax year in order to qualify under I.R.C §
280A(d). 5 Here, Taxpayer used the home for personal purposes for more than 14 days;
therefore, Taxpayer used the home as a residence during the tax year for purposes of
I.R.C. § 280A.
Taxpayers who are exempt from the sales tax on accommodations under Code Section 12-36920(A)(2) are not required to obtain a retail license or file accommodations tax return(s) with the
Department.
Taxpayers who are subject to the sales tax on accommodations under Code Section 12-36920(A) are required to obtain a retail license and file accommodations tax return(s) with the
Department, including Forms ST-388 (State Sales, Use, and Accommodations Tax Return) and
ST-3T (State Accommodations Report by County or Municipality). Taxpayers can obtain a
retail license (the cost is $50) online via the South Carolina Business One Stop at
www.scbos.sc.gov, or by completing Form SCTC-111.
Note: When the owner of a residence employs a rental company to rent out the owner’s
residence, the rental company (not the owner) is liable for the sales tax on accommodations, i.e.,
the rental company is the “taxpayer.” Rental companies are not eligible for the exemption under
Code Section 12-36-920(A)(2).
D. Examples
In each of the following examples, assume that the home being rented out qualifies as a
“dwelling unit” under I.R.C. § 280A(f) and that the taxpayer uses the home during the taxable
year as a residence under I.R.C. § 280A(d).
(1) Taxpayer Rents Out Residence for Less than 15 Days During the Year – Exempt from Sales
Tax on Accommodations. During the calendar year, Taxpayer rents out his home in North
Augusta for 10 days in April during the Masters.
The Taxpayer meets the requirements of I.R.C. § 280A(g) and is eligible for the
accommodations tax exemption under Code Section 12-36-920(A)(2). Accordingly,
Taxpayer is not required to obtain a retail license, and he is not required to file
accommodations tax returns with the Department.
(2) Taxpayer Rents Out Residence for 15 Days or More During the Year – Subject to Sales Tax
on Accommodations. During the calendar year, Taxpayer rents out his vacation home in
Myrtle Beach for 10 days in June and 8 days in July.

5

Fourteen days is greater than 10% of 10 rental days (1 day).

4

Because the residence has been rented out for 15 days or more during the tax year (here 18
days), Taxpayer does not meet the requirements of I.R.C. § 280A(g). Accordingly,
Taxpayer is not eligible for the accommodations tax exemption under Code Section 12-36920(A)(2). Unless otherwise exempt, Taxpayer is required to (1) obtain a retail license and
(2) remit the 7% sales tax on accommodations to the Department (plus the applicable local
tax on accommodations) and file accommodations tax returns with the Department.
(3) Taxpayer Uses Rental Company to Rent Out Residence During the Year – Subject to Sales
Tax on Accommodations. During the calendar year, Taxpayer hires ABC Rental Company
to rent out his home in North Augusta for 10 days in April during the Masters.
When the owner of a residence employs a rental company to rent out the owner’s residence,
the rental company (not the owner) is liable for the sales tax on accommodations. Rental
companies are not eligible for the exemption under Code Section 12-36-920(A)(2). Thus,
when the owner of a residence employs a rental company to rent out the residence the gross
proceeds derived from the rental are subject sales tax on accommodations, even if the
residence is rented out for less than 15 days during the year. Accordingly, ABC Rental
Company is required to (1) obtain a retail license and (2) remit the 7% sales tax on
accommodations to the Department (plus the applicable local tax on accommodations) and
file accommodations tax returns with the Department.
NEW PROPERTY TAX LEGISLATION
In Act No. 259 of 2014, the General Assembly also enacted legislation affecting property taxes
for South Carolina homeowners who rent out their homes to vacationers during the year. Code
Section 12-43-220(c)(2)(iv) now provides that the owner of a residence that is not rented out for
more than 72 days in a calendar year is eligible for the 4% assessment ratio for owner-occupied
legal residences, provided that the owner or the owner’s agent has made a proper certification as
required by Code Section 12-43-220(c)(2)(ii) in the application and the owner is otherwise
eligible for the 4% assessment ratio.
For purposes of determining eligibility, rental income, and residency, the assessor annually may
require a copy of applicable portions of the owner’s federal and state tax returns, as well as the
Schedule E, “Supplemental Income and Loss,” from the applicant’s federal tax return for the
applicable tax year. For more information regarding eligibility for the 4% assessment ratio
taxpayers should contact their county assessor’s office.
SOUTH CAROLINA DEPARTMENT OF REVENUE

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

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