Were bank drive-up windows, night depositories, pneumatic systems, and security equipment real or personal property for South Carolina property tax?

Plain-English summary

South Carolina Revenue Ruling 98-2 classified four categories of installed bank equipment as real property for property-tax purposes: drive-up teller windows, night depositories, pneumatic drive-up systems, and security equipment.

The result was not absolute. A bank could classify a particular item as personal property if it showed that removal would not be costly, time-consuming, and destructive to the building.

Equipment covered by the ruling

The ruling addressed:

• drive-up windows, including the vision window, teller counter, and sliding tray;
• night depositories, including the wall head, drawer, and deposit safe;
• pneumatic drive-up systems, including curbside boxes or stands, transfer tubes, and compressor equipment; and
• security cameras, monitoring equipment, entry-detection devices, signaling equipment, and wiring.

Why classification mattered for banks

Section 12-11-30 provided that the chapter's bank income tax was in place of other bank taxes except use tax, documentary stamp tax, and taxes on real property. The ruling therefore explained that banks did not pay property tax on personal property but did pay it on real property.

The Department relied on a 1967 South Carolina Attorney General opinion about vault doors, night depositories, and heating and air-conditioning systems. That opinion treated attached equipment as real property when removal would be costly, time-consuming, and destructive.

Attachment and intended permanence

The quoted authorities defined real property to include structures and other things annexed or attached to land that pass with a conveyance. They also explained that “permanent” attachment did not require an item to remain forever; it was enough that the item appeared intended to stay until worn out, until the building's purpose ended, or until replaced by something more suitable.

An agreement between private parties calling an item personal property did not control its tax classification. The physical attachment and removal facts controlled. The quoted Attorney General opinion applied the same analysis whether the bank owned the building or occupied it under a lease.

Common questions

Q: Were all four equipment categories automatically real property?

A: They were presumed to be real property under the ruling, but a particular item could be personal property if it could be removed without costly, time-consuming, and destructive work.

Q: Did the rule apply to leased bank premises?

A: Yes. The authority quoted by the ruling said the classification applied whether the bank owned or leased the land and building.

Q: Could a lease or contract declare the equipment personal property for tax purposes?

A: Not by itself. The ruling's quoted Attorney General opinion said an agreement could bind the parties but did not determine the property's tax character.

Citations and references

• S.C. Code Ann. § 12-11-30 (bank tax and real-property exception)
• S.C. Code Ann. § 12-37-10(1) and (2) (real- and personal-property definitions quoted in the ruling)
• South Carolina Attorney General Opinion No. 2238 (March 8, 1967)
• Paris Mountain Water Company v. Woodside, 133 S.C. 383, 131 S.E. 37 (1925)

Subject

Banks - Real Versus Personal Property

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR98-2.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P. O. Box 125, Columbia, South Carolina 29214

SC REVENUE RULING # 98-2

SUBJECT:

Banks - Real Versus Personal Property
(Property)

EFFECTIVE DATE:

Applies to all periods open under the statute.

SUPERSEDES:

All previous documents and any oral directives in conflict herewith.

REFERENCES:

S. C. Code Ann. Section 12-11-30 (1976)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (Supp. 1997)
SC Revenue Procedure #97-8

SCOPE:

A Revenue Ruling is the Department of Revenue's official advisory
opinion of how laws administered by the Department are to be applied
to a specific issue or a specific set of facts, and is provided as guidance
for all persons or a particular group. It is valid and remains in effect
until superseded or modified by a change in the statute or regulations
or a subsequent court decision, Revenue Ruling or Revenue Procedure.

Questions:
For property tax purposes, how are banks to classify the following items? More specifically,
should they be classified as real property or personal property?
1.

Drive-up windows. This is the vision window and the assembly that includes the teller
counter with the sliding tray.

2.

Night depositories. This includes the wall head which includes the drawer and the safe that
collects and holds the deposits.

3.

Pneumatic drive-up systems. This includes the curbside boxes or stands, the transfer tubes
and the compressor equipment.

4.

Security equipment. This includes the cameras, monitoring equipment, entry detection
devices, signaling equipment and wiring.

Conclusion:
For purposes of the property tax, all of the above items are deemed to be real property. However,
if it can be demonstrated that it would not be costly, time consuming and destructive to a
particular building to remove the items, then the items may be classified as personal property.

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Discussion:
Code Section 12-11-30 reads:
The income tax provided in this chapter shall be in lieu of all other taxes on banks, except
the use tax, the documentary stamp tax and taxes on real property. The real property of any
such bank shall be taxed in the place where it may be located, the same as the real property
of individuals.
In summary, banks do not pay property taxes on personal property. However, they do pay
property taxes on real property. Therefore, it must be decided if the items in question are real or
personal property.
Attorney General’s Opinion No. 2238 (March 8, 1967) addresses the issue at hand. To quote
from that opinion:
In your memorandum of February 28, 1967, you request the opinion of this office of
whether a vault door, night depository, and a heating and air conditioning system within a
building occupied by a bank is to be considered as realty or personalty for ad valorem tax
purposes.
You refer to two different situations, the first being where the bank is the owner of the land
and building; and the other, where the bank occupies the land and building by lease.
The General Assembly has provided, by statute, definitions for real or personal property.
‘Real property shall mean not only land, city, town and village lots but also all
structures and other things therein contained or annexed or attached thereto which
pass to the vendee by the conveyance of the land or lot.’
‘Personal property shall mean all things, other than real estate, which have any
pecuniary [money] value...’ [Sections 12-37-10(1) and (2)]
Our Supreme Court, in the case of Paris Mountain Water Company v. Woodside, 133 S.C.
383, 131 S.E. 37, was concerned with whether water pipes placed in lands belonging to
others were to be taxed as realty or personalty and the Court, in holding that the pipe was to
be taxed as realty, stated:
‘In the requirement of an intention to make the article annexed a permanent accession
to the land, the expression of permanent does not, it seems, imply that the annexation
must be intended to be perpetual, but rather that the article shall appear to be intended
to remain where fastened until worn out, until the purpose to which the realty is
devoted has been accomplished, or until the article is superseded by another article
more suitable for the purpose.’

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It appears, therefore, that the items involved herein would be annexed to the real property
and become a part of the same. The agreement between the parties that items remain
personalty while binding upon the parties is not determinable of the character of the
property for tax purposes.

A bank vault door was held by the California Supreme Court to be realty and taxed as such
in the cases of San Diego Trust and Savings Bank v. San Diego County, 105 P.2d 194, 16
Calif. 2d 142, 133 A.L.R. 16; Trabue Pittman Corporation v. Los Angeles County, 175
P.2d 512, 29 Calif.2d 385.
It is, therefore, the opinion of this office that the vault door, night depository, and the
heating and air conditioning systems contained in a bank building and affixed thereto in
such a manner that the removal of the same would be costly, time consuming and
destructive to the building, constitutes a part of the building and subject to the ad valorem
tax as real property. Such items would be taxed as realty whether the land and building
were the property of the bank or whether the bank occupied such property under the terms
of the lease.
Based on the above-quoted opinion, it is concluded that the items in question are to be classified
as real property. However, the items may be classified as personal property, if it can be shown
that it would not be costly, time consuming and destructive to a particular building to have them
removed from the building.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Burnet R. Maybank III
Burnet R. Maybank III, Director

, 1998
January 11
Columbia, South Carolina

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