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South Carolina indicated that it does not believe an implant that used to degenerate spine disease is exempt from sales and use tax. In order for the exemption to take place, the device must replace a “missing part” of the body. A South Carolina Regulation 117-332 defines a prosthetic device as “an artificial device to replace a missing part of the body.” Thus, since the device merely prevented a malfunction of the body and is not defined as a prosthetic device, it did not qualify for the exemption. (Private Letter Ruling 05-3, South Carolina Department of Revenue, August 1, 2005)


The South Carolina Department of Revenue issued a revenue ruling to advise taxpayers on the treatment of warranties, maintenance contracts and similar service contracts. The state advised that tax was due on the sale or renewal of service contracts whether or not they were purchased in conjunction with the tangible personal property. If, however, the property sold is exempt from sales and use tax, the service contract charge would also be exempt. Also exempt from tax are parts used in repair of defective property if they are given without charge, sales tax was charged on the defective part or on the sale of the property on which the defective property was part, and the holder of the warrantee is not charged for labor or materials. (South Carolina Revenue Ruling #06-9, Effective Oct 1, 2005, Released November 16, 2006)


In a recent revenue ruling, South Carolina position for sales and use tax on communication services was explained. The following represents a partial list of communication services deemed taxable: telephone services (including a wireless transmission system or voice over Internet Protocol), teleconferencing services, paging services, answering services, cable television services, satellite programming services, fax transmission services, voice mail messaging services, e-mail services, database access transmission services, prepaid wireless calling arrangements, and 900/976 telephone services. On the other hand, the state indicated several services were exempt, including: certain telephone services exempted by statute, telegraph messages, communication services involving automatic teller machines, and data processing services. Further regulations apply. (Revenue Ruling 06-8, South Carolina Department of Revenue, November 16, 2006)


The South Carolina Department of Revenue has advised that a charge by a telecommunication service provider for early termination was subject to tax. The charge was a fixed dollar amount multiplied by the number of months remaining on the agreement. The Department found that this charge was subject to tax as part of the “gross proceeds of sales” of a taxable communication service. (Private Letter Ruling #06-2, South Carolina Department of Revenue. November 7, 2006)


South Carolina General Assembly passed Tax Reform Bill 4449 on February 9, 2006. The bill provides for a property tax exemption on the fair market value of owner-occupied residential property. To offset for potential state revenue losses, the bill imposes an additional 2% increase in state sales tax and provides for certain sales and use tax exemptions. The bill was sent to the South Carolina Senate Committee on Finance on February 14, 2006. In addition, the bill exempts unprepared food from sales tax, except for local sales and use tax enacted before May 31 of the year the exemption takes effect. Further, Fairfield County will impose a 1% increase in local sales and use tax, effective May 1, 2006, pending voter approval. (SC H 4449, ST 441)



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