Which activities did South Carolina Revenue Ruling 16-11 analyze as creating income tax nexus for an out-of-state corporation?

Plain-English summary

South Carolina Revenue Ruling 16-11 was a broad income tax nexus checklist for out-of-state corporations. It organized dozens of activities into a yes/no matrix covering:

• general business contacts and state registrations;
• ownership or leasing of South Carolina property;
• interests in South Carolina pass-through entities;
• licensing trademarks, franchises, software, patents, and copyrights;
• sales and nonsales employee activity;
• work by unrelated contractors;
• delivery and distribution;
• lending and other financial transactions;
• transactions with South Carolina printers; and
• cloud computing, software-as-a-service, and Internet activity.

The ruling's most important instruction was not to treat the matrix as a mechanical safe-harbor list. Each answer assumed that the one stated activity was the corporation's only South Carolina contact and that it was not de minimis unless the question or note said otherwise.

How to read the matrix

• A "yes" meant the stated activity, standing alone under the exact facts, created South Carolina income tax nexus.
• A "no" meant that activity alone did not create nexus.
• Several individually insufficient or de minimis contacts could create nexus when combined.
• Added facts, missing facts, a different business role, or a different level of activity could change the answer.
• The matrix addressed nexus only. A business also had to analyze whether Public Law 86-272 protected it from net income tax despite nexus.
• The answers did not decide other tax types, license fees, registrations, returns, withholding, unitary treatment, or foreign-commerce issues.

Because the official PDF uses checkmarks or positioning in yes/no columns that are not preserved reliably by text extraction, this page does not recreate every row's column assignment. The original PDF remains the controlling matrix.

Express examples and qualifications

The ruling's explanatory notes gave several clear examples:

• South Carolina followed a de minimis standard based on case-law principles.
• Five aircraft leased to airlines did not create nexus in the cited PLR when the aircraft made only three South Carolina landings out of 58,722 total landings; the activity was de minimis on those facts.
• Merely setting up promotional product displays did not create nexus, while inspecting inventory for quality control rather than reorder did.
• Sending employees to South Carolina for one to 30 days to assist independent counsel in defending a lawsuit did not give the out-of-state company nexus in the cited guidance; the South Carolina law firm remained taxable.
• Passive investors buying mortgage loans or credit-account balances did not have nexus merely because some debtors or collateral were in South Carolina under the cited example, though servicing loans in the state could change the analysis.
• Third-party repair, maintenance, warranty, setup, or installation work was generally treated as performed on the out-of-state company's behalf when that company contracted for or controlled the services.
• Some financial questions received no categorical answer because the stated facts were insufficient.

Public Law 86-272

RR 16-11 distinguished constitutional nexus from federal statutory protection. It identified Public Law 86-272 as one of the federal limits on a state's power to tax out-of-state businesses and treated some activities as protected under that law.

The ruling referred taxpayers to SC Revenue Ruling #97-15 for that separate analysis. An activity could establish nexus yet still require a Public Law 86-272 inquiry, and activities outside that protection could remove it.

Common questions

Q: Does one "no" answer guarantee no South Carolina nexus?

A: No. The ruling said combinations of activities could create nexus even when each activity alone did not.

Q: Did the ruling require physical property or employees in South Carolina?

A: No universal physical-presence requirement was stated. The matrix separately analyzed intangibles, pass-through interests, financial activities, SaaS customers and revenue, and other nontraditional contacts.

Q: Does registration with South Carolina automatically answer the tax question?

A: The ruling analyzed several kinds of registration separately. The exact registration and all other contacts must be matched to the original matrix and current law.

Q: Are contractor activities ignored because the contractor is unrelated?

A: No. The ruling analyzed unrelated-party activity and said controlled or contracted services could be treated as performed on the out-of-state company's behalf.

Q: Is the matrix current for every year?

A: Not necessarily. It reflects the Department's 2016 position and expressly anticipates later legal changes.

Citations and references

• 15 U.S.C. Section 381 (Public Law 86-272)
• S.C. Code Ann. Section 12-6-555 (commercial-printer contacts)
• S.C. Code Ann. Section 12-6-4920 (interstate motor carriers)
• S.C. Code Ann. Section 12-6-1720(1)(c) (partnership-source rule cited in the ruling)
• Wisconsin Department of Revenue v. William Wrigley, Jr., Co., 505 U.S. 214 (1992)
• Geoffrey, Inc. v. South Carolina Tax Commission, 437 S.E.2d 13 (S.C. 1993)
• SC Revenue Ruling #97-15 (Public Law 86-272 guidance) and SC Revenue Ruling #08-1 (nonnexus examples)

Subject

Nexus Creating Activities for Income Taxes

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR16-11.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 #16-11

SUBJECT:

Nexus Creating Activities for Income Taxes
(Income Tax)

EFFECTIVE DATE:

Applies to all periods open under the statute, unless otherwise stated in
the Introduction.

SUPERSEDES:

SC Revenue Ruling #03-4 and all previous advisory opinions and any
oral directives in conflict herewith.

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.

Introduction:
Nexus is the minimum connection or contact between a taxpayer and a state sufficient to subject
the taxpayer to the taxing jurisdiction of a state. The Due Process and Commerce Clauses of the
United States Constitution, 15 U.S.C. §381 (Public Law 86-272) and other federal statutes
provide limitations on a state’s powers to tax out-of-state businesses.
Over the years, courts have provided limitations and guidelines in determining whether certain
activities create nexus with a taxing state. For example, see Quill Corp. v. North Dakota 504 U.S.
298 (1992), Wisconsin Department of Revenue v. William Wrigley, Jr., Co., 505 U.S. 214 (1992),
Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985), Helicopteros Nacionales de Columbia,
S.A. v. Hall, 466 U.S. 408 (1984), Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977), and
Geoffrey, Inc. v. South Carolina Tax Commission, 313 S.C. 15, 437 S.E.2d 13 (1993) cert. denied
510 U.S. 992 (1993).

The purpose of this advisory opinion is to update written guidance from the Department
concerning nexus creating activities for income tax purposes. For additional information in
determining whether Public Law 86-272 protects certain activities from South Carolina taxation
see SC Revenue Ruling #97-15.
This document reflects the Department’s official position regarding income tax nexus at the time
of its issuance. 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 resulting from a
court case will apply to all periods open under the statute unless the court states otherwise, and
any change resulting from a change in statute or regulation will be applicable as of the effective
date established by the General Assembly.
This document covers the following categories:
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
L.
M.

General Activities
Registration with State Agencies/Departments
Ownership/Leasing of In-State Property
Ownership Interest of In-State Pass-Through Entities
Licensing Intangibles
Employee Activities – Sales Related
Employee Activities – Non-Sales Related
Activities of Unrelated Parties
Distribution and Delivery
Financial Activities/Transactions
Transactions with South Carolina Printers
Cloud Computing or Software as a Service (SaaS) Transactions
Internet-Based Activities

Questions concerning the existence of nexus with South Carolina should be directed to the
Department’s Nexus/Discovery Section at 803-898-5235 or 803-898-5695.
Qualifications to Responses:
Each response is based upon the specific facts described in the question and the following
assumptions:
•

Each specific question by itself was the only possible nexus creating activity or relationship a
business has in South Carolina 1; and,

1

Even though some questions specifically state that the activity represents the business’s “sole activity” in South
Carolina, all other questions also represent the business’s sole activity in South Carolina, whether or not such is
specifically stated.

2

•

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 not, by itself,
create nexus with South Carolina. However, it is important to note that a combination of
several different de minimus activities or relationships, even if each, by itself, does not
create nexus, may create nexus with South Carolina.
Caution: Since a thorough review of the facts and circumstances of each taxpayer’s situation is
required in order to make a nexus determination, any variance from the facts stated in a question,
any additional facts not stated in a question, or additional facts not considered in answering the
questions below may change the answer set forth in this document.
Each response refers only to income tax nexus. Activities that create nexus for income tax
purposes differ somewhat from those that create nexus for other tax purposes. Further, the
Department did not address the imposition of any license fee, registration or filing requirements,
withholding responsibilities, or the consequences of unity and foreign commerce.
References used in preparation of this document include:

1. Wisconsin Department of Revenue v. William Wrigley, Jr., Co., 505 U.S. 214 (1992);
2. SC Revenue Ruling #97-15, an advisory opinion providing guidance for determining whether
   Public Law 86-272 protects certain activities from South Carolina taxation;
3. SC Revenue Ruling #08-1, an advisory opinion providing examples that show activities or
   relationships that will not, by themselves, create income tax nexus with South Carolina;
4. SC Private Letter Ruling #94-8, an advisory opinion concluding that a company’s leveraged
   leases of five aircraft to commercial airlines were de minimis when it had three landings in
   South Carolina and 58,722 landings everywhere for the tax year. Therefore, the company did
   not have nexus in South Carolina;
5. SC Private Letter Ruling #95-2, an advisory opinion addressing the appropriate sourcing of
   nonresident limited partners’ income in a limited partnership organized under Delaware law
   for the purpose of pooling resources in order to maximize investments in stocks, securities,
   and other intangible assets (including limited partnerships) for its own account. Based upon
   the facts, the nonresident partnership was not considered to carry on a business in South
   Carolina since its income was solely from its purchase and sale of property for its own
   account. 2 As a result, the income generated by the partnership was not considered South
   Carolina source income to its nonresident limited partners. Note, the advisory opinion did not
   address the taxation of the general partner, an S corporation, authorized to do business in
   South Carolina and maintaining an office in South Carolina;
   2

See SC Code Section 12-6-1720(1)(c).

3

6. SC Commission Decision #92-58, a decision distinguishable from SC Private Letter Ruling

95-2, wherein it was determined that an S corporation incorporated under South Carolina

law for the sole purpose of investing in stocks, bonds, real estate, and partnerships was not
merely an investment vehicle deriving income solely by reason of the purchase and sale of
property for its own account. The S corporation was a business with significant fee income
from financial advising, deal making, and financial contracts. As such, the gains from the
disposition of intangible assets and the interest income were derived from property connected
with the S corporation’s business and were apportionable, and the dividend income was
allocated to the shareholders’ domicile outside of South Carolina; and

7. Specific South Carolina income tax laws cited in the notes, e.g., SC Code Sections 12-6-555
   (persons contracting with a commercial printer) and 12-6-4920 (interstate motor carriers
   required to file).

4

A. General Activities
YES

1. The out-of-state corporation is doing business in South Carolina.
2. The out-of-state corporation makes sales to customers in South Carolina by
   means of an 800 telephone order number and advertises in South Carolina.
3. The out-of-state corporation is listed in the local telephone books of cities in
   South Carolina. The phone is not answered in South Carolina.
4. The out-of-state corporation uses local phone numbers in South Carolina, which
   are forwarded to the corporation’s headquarters located in another state.
5. The out-of-state corporation maintains a bank account at a bank located in
   South Carolina.
6. The out-of-state corporation provides consulting services in South Carolina
   during the year. The services are not de minimis.
7. The out-of-state corporation, through a third party, provides warranty services on
   goods sold in South Carolina.
   Note: If not de minimis and if the services are conducted on behalf of the outof-state corporation Generally, services will be considered to be conducted on
   behalf of the out-of-state company if that company contracts for or controls the
   services.
8. The out-of-state corporation sends catalogs to residents in South Carolina.
9. Does South Carolina have a de minimis standard?
   Note: South Carolina has a de minimis standard and follows the principles
   defined by case law. See Wisconsin Department of Revenue v. William Wrigley,
   Jr., Co., 505 U.S. 214 (1992), SC Revenue Ruling #97-15, SC Private
   Letter Ruling #94-8, and SC Code Section 12-6-4920.
10. Does South Carolina conform to the Multistate Tax Commission’s Nexus
    Bulletin 95-1 “Computer Company’s Provision of In-State Repair Services
    Creates Nexus?”
    Note: South Carolina has not adopted MTC’s Nexus Bulletin, but South Carolina
    generally considers services conducted by a third party to be on behalf of
    the out-of-state company if that company contracts for or controls the services.

5

NO

B. Registration with State Agencies/Departments
YES

NO

YES

NO

1. The out-of-state corporation is registered, authorized, certified or qualified by the
   Secretary of State, or other similar agency, to transact business in South Carolina
   as a foreign corporation.
2. The out-of-state corporation holds a general business license issued by South
   Carolina.
3. The out-of-state corporation holds a specialty license issued by South Carolina.
4. The out-of-state corporation is registered with South Carolina as a government
   vendor or contractor.

C. Ownership/Leasing of Property in South Carolina

1. The out-of-state corporation owns raw land.
2. The out-of-state corporation stores inventory or other goods in a public warehouse
   for fewer than 30 days per year.
   Note: Except for independent contractors under Public Law 86-272 and persons
   storing material in connection with a printing contract under SC Code Section
   12-6-555.
3. The out-of-state corporation ships in-process inventory to an unrelated party in
   South Carolina solely for processing.
   Note: Except for processing in connection with a printing contract under SC
   Code Section 12-6-555.
4. The out-of-state corporation consigns goods to vendors, independent contractors,
   or other parties.
   Note: Except for independent contractors under Public Law 86-272.
5. The out-of-state corporation owns display racks.
   Note: Furnishing and setting up display racks and advising customers on the
   display of the company’s products without charge or other consideration is
   a protected activity under SC Revenue Ruling #97-15. The answer assumes
   that the corporation does not sell or lease the racks and the racks do not operate
   to prepare the product for use or as vending machines.

6

YES

NO

YES

NO

6. The out-of-state corporation owns tooling, molds, dies, etc., located at a
   manufacturing facility in South Carolina.
7. The out-of-state corporation leases (as lessor) real estate in South Carolina to an
   unrelated third party.
8. The out-of-state corporation leases (as lessor) rented mobile property such as rail
   cars, planes, and trailers, which the lessee may use in South Carolina. The use
   is not de minimis.
   Note: See SC Private Letter Ruling #94-8 where it was concluded that the
   leasing of airplanes landing in SC three times per year was de minimis.
9. The out-of-state corporation owns or leases automobiles provided to salespersons.
10. The out-of-state corporation owns or leases trucks or automobiles used by
    non-salespersons.
11. The out-of-state corporation owns or leases other machinery or equipment.
12. The out-of-state corporation holds title to property located in South Carolina
    until the contract price has been paid.
    Note: Assuming ownership has not passed and that holding title does not
    serve merely as a security interest.
13. The out-of-state corporation files a security interest on inventory sold until the
    contract price has been paid.
14. The out-of-state corporation owns or leases a place for company employees,
    directors, and officers.
    Note: Assuming ownership or long term rental of real property in South
    Carolina.

D. Ownership Interest of In-State Pass-Through Entities

1. The out-of-state corporation owns an interest in an investment partnership or LLC
   taxed as a partnership that has operations in South Carolina.
   Note: Although the income may not be taxed in SC. See SC Commission
   Decision #92-58 and SC Private Letter Ruling #95-2.
2. The out-of-state corporation owns a general interest in a partnership that is doing
   business in South Carolina.

7

YES

NO

YES

NO

3. The out-of-state corporation owns a limited interest in a partnership that is doing
   business in South Carolina.
4. The out-of-state corporation owns an interest in an LLC that is doing business in
   South Carolina and is involved in managing the LLC.
   Note: Assuming the LLC is taxed as a partnership or S Corporation.
5. The out-of-state corporation owns an interest in an LLC that is doing business in
   South Carolina, but is not the managing member or otherwise involved in managing
   the LLC.
   Note: Assuming the LLC is taxed as a partnership or S Corporation.
6. The out-of-state corporation owns an interest in an entity located in South Carolina
   that is disregarded for federal income tax purposes.
   Note: Assuming the entity is doing business or owns property in South Carolina.
7. The out-of-state corporation has an ownership interest or a beneficial interest in a
   flow-through entity, directly or indirectly through one or more other flow-through
   entities, that has substantial nexus in South Carolina.

E. Licensing Intangibles 3

1. The out-of-state corporation licenses trademarks or trade names to related entities
   with locations in South Carolina.
2. The out-of-state corporation licenses trademarks or trade names to unrelated entities
   with locations in South Carolina.
3. The out-of-state corporation sells/licenses franchises (such as fast-food franchises)
   to residents of South Carolina.
   Note: Assuming this does not mean the sale of an entire business, e.g., not an
   outright sale of a restaurant and not a sale of all of franchisor’s interest in the
   franchise.
4. The out-of-state corporation licenses canned software to consumers in South
   Carolina.
5. The out-of-state corporation sells/licenses the right to use a patent or copyright
   to related entities with locations in South Carolina.

3

See Geoffrey, Inc. v. South Carolina Tax Commission, 437 S.E.2d 13 (S.C. 1993).

8

YES

NO

YES

NO

YES

NO

6. The out-of-state corporation sells/licenses the right to use a patent or copyright
   to unrelated entities with locations in South Carolina.

F. Employee Activities – Sales Related

1. Employees, while in South Carolina, accept and approve customer orders.
2. Employees, while in South Carolina, negotiate prices, subject to approval
   outside South Carolina.
3. Employees, while in South Carolina, investigate credit-worthiness of customers.
4. Employees, while in South Carolina, secure or accept deposits on sales.
5. Employees, while in South Carolina, handle credit disputes.
6. Employees, while in South Carolina, attend trade shows or maintain sample/display
   rooms for one to 14 days per year.
7. Employees, while in South Carolina, maintain a two-month supply of free samples.
8. Employees, while in South Carolina, check customers’ inventories for reorder.
9. An employee, while in South Carolina, makes a single sale on his own initiative
   and without the company’s prior knowledge. The sale is not de minimis.
10. Employees, while in South Carolina, solicit sales of services in South Carolina.
    The solicitation activity is not de minimus.
11. Employees, while in South Carolina, perform a sales-related function associated
    with services and are reimbursed for the costs of maintaining a home office.
12. Employees, while in South Carolina, operate mobile stores.

G. Employee Activities – Non-Sales Related

1. Employees, while in South Carolina, collect delinquent accounts.

9

YES

2. Employees, while in South Carolina, repossess property.
3. Employees, while in South Carolina, regularly perform installation, repair,
   maintenance, or warranty services.
4. Employees, while in South Carolina, perform installation, repair, or warranty
   services one to four times per year.
   Note: Unless de minimis.
5. Employees, while in South Carolina, set up promotional display of products
   (e.g., end caps) and inspect inventory.
   Note: The setting up of promotional displays of products will not create nexus.
   The inspection of inventory for purposes other than reorder, such as quality
   control, will create nexus.
6. Employees, while in South Carolina, supervise or inspect installation.
7. Employees, while in South Carolina, conduct training courses, seminars, or lectures
   two times per year.
   Note: Unless sales training.
8. Employees, while in South Carolina, provide engineering or design functions
   related to customized products.
9. Employees, while in South Carolina, handle customer complaints.
   Note: Facilitating communications between the company and the customer
   when the purpose of such mediation is to ingratiate the sales personnel with
   the customer is a protected activity. See SC Revenue Ruling #97-15.
10. Employees, while in South Carolina, pick up defective merchandise.
11. Employees, while in South Carolina, pick up or replace damaged or returned
    property.
12. Employees, while in South Carolina, provide shipping information and coordinate
    deliveries.
13. Employees, while in South Carolina, telecommute from their homes located in
    South Carolina and perform non-solicitation activities.

10

NO

YES

14. One employee telecommutes from his home located in South Carolina and performs
    back-office administrative business functions, such as payroll, as opposed to
    direct customer service or other activities directly related to the employer’s
    commercial business activities.
15. One employee telecommutes from his home located in South Carolina and performs
    product development functions such as computer coding.
16. Employees, while in South Carolina, assist the out-of-state corporation in defending
    a lawsuit (e.g., legal staff and witnesses) while in South Carolina for one to
    30 days.
    Note: See SC Revenue Ruling #08-1 where the Department concluded that the
    use of the South Carolina court system by an out-of-state company sending
    various employees to South Carolina to assist its independent legal counsel in
    defending a lawsuit does not give the out-of-state company nexus with South
    Carolina. The law firm providing counsel is taxable in South Carolina.
17. Employees fly into South Carolina on a commercial airline for business purposes.
18. Employees, while in South Carolina, purchase raw material and inventory while in
    South Carolina for 20 or fewer days.
19. Employees, while in South Carolina, attend seminars.
20. Employees, while in South Carolina, attend an annual training seminar, convention,
    trade show, retreat, or board of directors meeting for up to 14 consecutive days
    each year. During their stay, employees maintain contact with the out-of-state
    office, and conduct business over the telephone, computer, etc. in South Carolina.
21. Employees fly into South Carolina on a company plane to attend a seminar.
22. Employees fly into South Carolina on a company plane to attend sports events as
    spectators.
23. Employees, while in South Carolina, attend seminars or social functions while staying
    on a company yacht docked in waters in South Carolina for up to 14 days.
24. Employees, while in South Carolina, hold job fairs, hiring events, or other recruiting
    activities for the out-of-state office.
    Note: Unless in the recruiting business.
25. Employees, while in South Carolina, hire, supervise, or train other employees.
    Note: Unless sales training.

11

NO

H. Activities of Unrelated Parties
YES

1. Unrelated third parties located in South Carolina provide fulfillment services
   (i.e., fill product orders from inventory owned by the out-of-state corporation).
2. Unrelated third parties located in South Carolina collect regular or delinquent
   accounts.
   Note: If the unrelated third party is performing the activity for more than one
   company, the answer will depend on additional facts.
3. Unrelated third parties located in South Carolina investigate credit-worthiness of
   new customers.
   Note: If the unrelated third party is performing the activity for more than one
   company, the answer will depend on additional facts.
4. Unrelated third parties located in South Carolina repossess property. The parties
   Activities are not de minimis.
5. Unrelated third parties located in South Carolina repair or provide maintenance,
   including warranty services that are not de minimis and are conducted on behalf
   of the out-of-state company.
   Note: Generally, services will be considered to be conducted on behalf of the
   out-of-state company if that company contracts for or controls the services.
6. Unrelated third parties located in South Carolina assist with the “set-up” or
   installation of the company’s products that are not de minimis and are conducted
   on behalf of the out-of-state company.
   Note: Generally, services will be considered to be conducted on behalf of the
   out-of-state company if that company contracts for or controls the services.
7. Unrelated third parties located in South Carolina perform repairs under standard or
   extended warranty that are not de minimis and are conducted on behalf of the
   out-of-state company.
   Note: Generally, services will be considered to be conducted on behalf of the
   out-of-state company if that company contracts for or controls the services.
8. Unrelated third parties located in South Carolina close mortgage loans for an
   out-of-state financial organization.
   Note: If the unrelated third party is performing the activity for more than one
   company, the answer will depend on additional facts.

12

NO

YES

NO

YES

NO

9. Unrelated third parties located in South Carolina service mortgage and/or consumer
   loans for an out-of-state financial organization.
   Note: If the unrelated third party is performing the activity for more than one
   company, the answer will depend on additional facts.

I. Distribution and Delivery

1. The out-of-state corporation ships products into South Carolina in returnable containers.
   Note: Assuming the corporation asks for their return.
2. The out-of-state corporation delivers goods into South Carolina (from a point outside
   South Carolina) to customers in the corporation’s owned or leased vehicles.
3. The out-of-state corporation picks up defective products or scrap materials in South
   Carolina in taxpayer-owned vehicles.
4. The out-of-state corporation picks up raw materials in South Carolina in taxpayerowned vehicles.
   Note: Assuming the pickup is not a back haul (i.e., the out-of-state corporation
   picks up shipments at the destination or nearby location in South Carolina for
   delivery to another point).
5. The out-of-state corporation travels through South Carolina in taxpayer-owned trucks,
   but does not pick up or deliver goods in South Carolina.
   Note: SC Code Section 12-6-4920 for the filing requirements for interstate motor
   carriers.
6. The out-of-state corporation “back hauls” shipments in corporate-owned trucks.
7. The out-of-state corporation holds title to electricity flowing through a transmission
   wire within South Carolina (the transmission neither originates nor terminates in South
   Carolina).
   Note: Assuming the corporation does not own or lease the transmission wire.
8. The out-of-state corporation holds title to natural gas flowing through a pipeline within
   South Carolina (the natural gas neither originates nor terminates in South Carolina).
   Note: Assuming the corporation does not own or lease the pipeline.

13

J. Financial Activities/Transactions
YES

1. The out-of-state corporation negotiates and obtains bank loans from a bank located in
   South Carolina. Officers of the corporation visit the bank at least twice a year to
   discuss business.
2. The out-of-state corporation makes loans secured by real estate located in South
   Carolina.
   Note: No response, depends on facts that are not provided.
3. The out-of-state corporation makes loans secured by tangible personal property in
   South Carolina.
   Note: No response, depends on facts that are not provided. SC Revenue Ruling #08-1
   provides an example where a NC finance company does business in NC and TN. The
   company makes a personal loan to a NC resident who moves to SC the following
   year. The finance company does not have nexus with SC. The result would not change
   if the NC resident who moved to SC had his personal car secured by the NC loan.
   Further, the finance company does not have nexus with SC if the SC borrower contacts
   the NC finance company to renew the loan.
4. The out-of-state corporation issues credit cards to residents of South Carolina.
5. The out-of-state corporation purchases, via the secondary market, mortgage loans,
   secured by real estate located in South Carolina.
   Note: No response, depends on facts that are not provided. SC Revenue Ruling #08-1
   provides an example where a NY finance company is in the business of packaging
   and selling credit card and mortgage loans to passive investors throughout the US. A
   few of the debtors and some of the property securing the loans are located in SC. The
   passive investors do not have nexus with SC. Note, however, if the purchaser “services”
   the loans in SC, there may be nexus depending on the facts and circumstances.
6. The out-of-state corporation is a passive investor who purchases, via the secondary
   market, credit account balances of residents of South Carolina.
   Note: No response, depends on facts that are not provided. SC Revenue Ruling #08-1
   provides an example where a NY finance company is in the business of packaging
   and selling credit card and mortgage loans to passive investors throughout the US. A
   few of the debtors and some of the property securing the loans are located in SC. The
   passive investors do not have nexus with SC. Note, however, if the purchaser “services”
   the loans in SC, there may be nexus depending on the facts and circumstances.
7. The out-of-state corporation makes personal loans to residents of
   South Carolina who traveled across the state-border to obtain the loans.
   Note: No response, depends on facts that are not provided.
8. The out-of-state corporation makes personal loans to out-of-state
   residents who over a number of years subsequently move to South Carolina.
   Note: See SC Revenue Ruling #08-1 debt examples.

14

NO

YES

NO

YES

NO

YES

NO

9. The out-of-state corporation makes automobile loans to out-of-state
   residents who over a number of years subsequently move to South Carolina.
   Note: See SC Revenue Ruling #08-1 debt examples.
10. The out-of-state corporation is in the business of packaging and selling credit card
    and mortgage loans to passive investors throughout the United States. A few of the
    debtors and some of the property securing the loans are located in South Carolina.
    Note: See SC Revenue Ruling #08-1 debt examples.
11. The out-of-state corporation forecloses on one parcel of real estate located in
    South Carolina.
    Note: No response, depends on facts that are not provided.
12. The out-of-state corporation forecloses on several parcels of real estate located
    in South Carolina.

K. Transactions with South Carolina Printers 4

1. The out-of-state corporation leases tangible personal property located at a printer
   in South Carolina for use in connection with a printing contract. Once
   the work is complete, the printer ships the printed material out of South Carolina
   for addressing and mailing.
2. The out-of-state corporation owns raw materials at a South Carolina printer.
3. The out-of-state corporation visits South Carolina printers for quality control
   purposes one to six times per year.

L. Computer and Internet Based Transactions

1. The out-of-state corporation provides access to its software to South Carolina
   customers and pays independent contractors to perform configuration/set-up services
   in South Carolina.
2. The out-of-state corporation provides access to its software to South Carolina customers
   and has employees solicit business in South Carolina.

4

See SC Code Section 12-6-555.

15

YES

3. The out-of-state corporation provides access to its software to South Carolina
   customers and lacks a physical presence in South Carolina, but has a substantial number
   of customers with billing addresses in South Carolina.
4. The out-of-state corporation provides access to its software to South Carolina customers
   and lacks a physical presence in South Carolina, but earns a substantial amount of revenue
   from customers in South Carolina.
5. The out-of-state corporation owns an internet server located in South Carolina.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Rick Reames III
Rick Reames III, Director
July 27
, 2016
Columbia, South Carolina

16

NO