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DSL service charges are not subject to sales and use tax from October 1, 1998 to November 1, 2003 due to the federal Internet Tax Freedom Act. This act is applicable to all Internet access, as well as preventing multiple or discriminatory taxes on electronic commerce. (South Carolina Department of Revenue, Private Letter Ruling 03-2, March 10, 2003)


In South Carolina, sales and use tax does not apply to charges for providing customers with high speed internet access. Paying a monthly fee and subscribing to DSL service allows customers to have an unlimited access to the Internet as well as supplying them with, personal web page space, email accounts, and other Internet tools. Even though a DSL line has voice and data capabilities, the customer is only subscribing to get Internet access and is not paying for voice communications. The federal Internet Tax Freedom Act, which covers the period from October 1, 1998 through November 1, 2003 includes charges for DSL high-speed internet access.(Private Letter Ruling 03-2, Department of Revenue, 3/10/2003)


Because a statute only requires a taxpayer's use of items in its manufacturing process, regardless whether or not it is directly used in the production line, various machines were found exempt. These machines included cleaners, chemicals, buffing machines, lifts, print screen trucks, and battery chargers. Because the agreements were included in the construction contracts, the contractor, not the taxpayer, was liable for sales tax on the materials purchased in accordance with the agreement. (South Carolina Department of Revenue, v. Springs Industries, Inc., South Carolina Court of Appeals, No. 2003-UP-029 (unpublished opinion), January 8, 2003)


South Carolina taxpayers my now report their use tax on their personal income tax returns. The use tax line was added to the state income tax return to facilitate the ease of collecting the tax. Use tax has proved difficult to collect in the past and the Department has increased their efforts to educate the public about it in order to assure better collection.


The mesh bags used to transport garments in several stages of their production and are used in the dyeing process are not exempt because containers, sacks, or bags used by manufacturers in shipping tangible personal property are exempt. (Private Revenue Opinion No. 00-2, South Carolina Department of Revenue, April 4, 2000)



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