When are electricity and fuel used at South Carolina homes exempt from sales and use tax?

Plain-English summary

South Carolina Revenue Ruling #19-5 says electricity, natural gas, fuel oil, kerosene, LP gas, coal, and other combustible heating materials are exempt when used for residential purposes. The rule applies to sales on or after October 1, 2019 and focuses on actual living use rather than the utility's rate classification.

A primary residence, vacation home, or second home qualifies when people occupy it with the intent that it serve as a residence, dwelling, or abode. The exemption covers condominium units, timeshare units, and single-family homes.

Renting the home does not remove the exemption. The ruling says a rented residence qualifies for any number of rental days because the renter uses it as a dwelling during the rental period. A temporarily vacant home also remains exempt while listed for sale or awaiting another renter, until it stops being used for residential purposes.

The exemption does not apply after a home is converted to a professional office, restaurant, or other business use. It also does not apply to electricity or fuel used by a construction contractor while building and marketing the home; those utilities become exempt only after sale to someone using the property residentially.

What this means for you

Homeowners and vacation-home owners

Electricity and heating fuel remain exempt whether the property is a principal home or a second or vacation home, so long as its function is residential living.

Short-term and long-term rental owners

The ruling does not impose a minimum rental duration. A single-family-style home remains residential during a rental of any number of days. This differs from hotels, motels, dormitories, nursing homes, summer camps, and resort lodges, which the regulation treats as temporary or transient facilities outside the exemption.

Utilities and fuel providers

Determine the property's actual use. RR #19-5 replaced the Department's prior policy of accepting utility tariff classifications as the deciding test for these homes.

Builders and commercial conversions

Charge tax while a contractor consumes utilities to construct or market a home. Likewise, charge tax once a house is used as an office, restaurant, or other business rather than a dwelling.

Common questions

Q: Does a temporarily empty rental lose the exemption?
A: No. It remains exempt while awaiting sale or another residential tenant, until its use changes.

Q: Are parking and security lights at a mobile-home park exempt?
A: Yes, under the ruling, because they are integral and necessary to the residents' use of the mobile homes. The example does not extend to subdivision common areas.

Q: Does the exemption cover a house converted to an office?
A: No. Business use is distinguished from residential living use.

Citations and references

• S.C. Code Ann. § 12-36-2120(33) — residential electricity and fuel exemption
• S.C. Regulation 117-323 — meaning of residential purposes and excluded transient facilities

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR19-5.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 125, Columbia, South Carolina 29214-0575

SC REVENUE RULING #19-5

SUBJECT:

Residential Electricity and Fuel Exemption – Primary Residence,
Vacation Homes and Second Homes 1
(Sales and Use Tax)

EFFECTIVE DATE:

For sales of electricity and fuel made on and after October 1, 2019.

REFERENCES:

S.C. Code Ann. Section 12-36-2120(33) (2014)
S.C. Regulation 117-323 (2012)

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
South Carolina exempts from the sales and use tax the sale of electricity and other fuels used for
“residential purposes.” Electrical power and propane fuel providers in South Carolina have
requested guidance on the application of this exemption to various scenarios involving homes
that may be rented or used for business purposes.
The purpose of this advisory opinion is to address the application of the exemption to sales of
electricity or fuel for use in primary residences, vacation homes and second homes, some of
which may be rented during the year, and homes which have been converted to business use.

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Primary residences, vacation homes and second homes include condominium units, timeshare units, and single
family homes. For information on the taxation of electricity or fuel sold for use in the common areas of apartments
and similar residential facilities, see SC Revenue Ruling #92-4.

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In determining whether electricity is used for residential purposes, the Department has long
accepted the rate classifications (tariff guidelines) used by the power companies in establishing
the rate at which electricity will be sold to a customer, provided such classifications are
reasonable. This advisory opinion replaces that determination, representing a change in policy
effective October 1, 2019, with respect to sales of electricity for use in primary residences,
vacation homes, and second homes. 2
LAW
Code Section 12-36-2120 provides exemptions from the sales and use tax and reads, in part:
Exempted from the taxes imposed by this chapter are the gross proceeds of sales, or sales
price of:

(33) electricity, natural gas, fuel oil, kerosene, LP gas, coal, or any other combustible
heating material or substance used for residential purposes....
Regulation 117-323 defines the term “residential purposes” and provides as follows:
...the term “residential purposes” ... is construed to mean any space or area occupied by
one or more individuals with the intent that such space or area serves as a residence,
house, dwelling or abode. Included in the exemption are single family houses, duplexes,
condominium units, apartments and mobile homes of a permanent type used by a person
or persons as a place of residence, house, dwelling or abode. All sales to such locations
would be exempt.
Electricity, natural gas, fuel, oil, coal or any other type of combustible heating materials
centrally metered or delivered to a central storage tank (or area) to duplexes,
condominium units, apartments or mobile homes of a permanent type, and billed as such,
would be considered as used for residential purposes and exempt.
Excluded from the exemption are hotels, motels, dormitories, nursing homes, summer
camps, resort lodges and other dwellings of a temporary or transient nature. All sales to
such locations would be taxable. (Emphasis added.)
The Attorney General, in an opinion dated August 23, 1979, addressed the meaning of the term
residential purposes and concluded the literal meaning of the term should apply. This decision
was based in part on the reasoning that:
...the word “residence” in a restrictive covenant is equivalent to “residential” and is used
in contradistinction to “business,” and that if a building is used as a place of abode and no
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Sales of electricity or fuel by electrical power and fuel providers for use in primary residences, vacation homes and
second homes made prior to October 1, 2019 will be subject to assessment by the Department for sales of electricity
or fuel that do not meet either the tariff guidelines used by power companies to establish residential electricity rates
or the guidelines established in this advisory opinion.

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business carried on, it would be used for “residence purposes” only, whether occupied by
one family or a number of families. Jernigan v. Capps, 187 Va. 73, 45 S.E.2d 886. Also,
the terms “residence purposes” and “residences” require use of the property for living
purposes as distinguished from uses for business or commercial purposes. MacDonald v.
Painter, Texas, 441 S.W. 2d 179.
QUESTIONS AND ANSWERS

1. Q. Is the sale of electricity or fuel sold for use in a primary residence, vacation home or
   second home exempt from sales and use tax under Code Section 12-36-2120(33)?
   A. Since a primary residence, vacation home or second home is occupied by one or more
   individuals for living purposes with the intent that the property serve as their “residence,
   house, dwelling or abode,” sales of electricity or fuel to these homes are exempt from
   sales and use tax under Code Section 12-36-2120(33) and SC Regulation 117-323.
   Note: In accordance with the regulation, the exemption does not apply to hotels, motels,
   dormitories, nursing homes, summer camps and resort lodges, regardless of the duration
   of stay.
2. Q. Is the sale of electricity or fuel sold for use in a primary residence, vacation home or
   second home that is rented exempt from sales and use tax under Code Section 12-362120(33)?
   A. Since a primary residence, vacation home or second home that is rented (for any number
   of days) is occupied by the renter for living purposes with the intent that the property
   serve as their “residence, house, dwelling or abode” during the rental period, sales of
   electricity or fuel to these homes are exempt from sales and use tax under Code Section
   12-36-2120(33) and SC Regulation 117-323.
3. Q. Is the sale of electricity or fuel sold for use in a primary residence, vacation home or
   second home that is temporarily vacant (e.g., the property is listed for sale, or the
   property remains vacant while the owner looks for another renter, etc.) exempt from sales
   and use tax under Code Section 12-36-2120(33)?
   A. Yes, until the property is no longer used for residential purposes.
4. Q. Is the sale of electricity sold to a mobile home park to provide lighting for parking areas,
   as well as security, for the residents of the park exempt from sales and use tax under
   Code Section 12-36-2120(33)?
   A. Yes. Since the electricity used for providing lighting for parking areas as well as security
   for the residents of a mobile home park is integral and necessary to each individual
   mobile home’s residential use, the sale of electricity for such lights is exempt from sales
   and use tax under Code Section 12-36-2120(33). This example does not apply to the
   common areas of residential subdivisions. See SC Revenue Ruling #17-1.

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5. Q. Is the sale of electricity or fuel sold for use in a single family type home converted to
business use, such as a professional office or restaurant, exempt from sales and use tax
under Code Section 12-36-2120(33)?
A. No. Electricity or fuel sold for use in homes that are used for business purposes, as
opposed to living purposes, is not exempt from sales and use tax under Code Section 1236-2120(33) and SC Regulation 117-323.

6. Q. Is the sale of electricity or fuel sold to a construction contractor for use during the
   construction and sale of a home (primary residence, vacation home or second home)
   exempt from sales and use tax under Code Section 12-36-2120(33)?
   A. No. Since the home is under construction or is being marketed for sale by a person in the
   business of building and selling the home (i.e., the construction contractor), the sale of
   electricity or fuel for use in constructing and selling the home is not exempt from the
   sales and use tax under Code Section 12-36-2120(33). The electricity or fuel used in the
   home is subject to the sales tax until it is sold to someone who will use it for residential
   purposes.
   ADDITIONAL GUIDANCE
   For additional guidance on the application of the residential electricity exemption to other
   transactions, see the following advisory opinions:
7. SC Revenue Ruling #17-4 – Residential Electricity Exemption – Nursing Homes,
   Assisted Living Facilities, Healthcare Facilities, Dormitories, and Prisons.
8. SC Revenue Ruling #17-1 – Residential Electricity Exemption – Vacant Apartment
   Units, Separately Metered Pools, Storage Sheds, and Other Structures at a Single Family
   Home, and Common Areas Maintained by a Homeowners’ Association.
9. SC Revenue Ruling #92-4 – Residential Electricity Exemption – Apartment Complexes.
10. SC Technical Advice Memorandum #87-5 – Residential Electricity Exemption –
    Residential Area Lights.
    SOUTH CAROLINA DEPARTMENT OF REVENUE

s/W. Hartley Powell
W. Hartley Powell, Director
July 7
, 2019
Columbia, South Carolina

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