The South Carolina Department of Revenue (DOR) has issued a private letter ruling regarding the taxability of scaffolding used by a contractor that installs insulation. XYZ was a construction contractor that installed insulation for property owners and frequently used temporary scaffolding during the installation services. ABC contracted with XYZ to deliver, install, and remove scaffolding owned by ABC to XYZ’s project sites. ABC did not charge XYZ a rental fee or a charge for the use of the scaffolding. Instead, ABC charged XYZ the actual costs of labor and materials to deliver, install, and remove the scaffolding. XYZ passed along these costs to its customers at cost plus a small markup.
While XYZ contracted with ABC for the delivery, assembly, disassembly, and removal of scaffolding at XYZ’s customer’s property, XYZ’s customer did not rent the scaffolding and would not be subject to sales tax for the use of the scaffolding. The DOR determined that XYZ’s use of the scaffolding, like other tangible personal property used in the insulation installation, was incidental to the purpose of the transaction between XYZ and its customer. The insulation installation was the true object of the transaction.
The DOR determined that ABC rented tangible personal property to XYZ. The delivery, assembly, and disassembly services were incidental to the transfer of the scaffolding from ABC to XYZ. The true object of the transaction between ABC and XYZ was the rental of tangible personal property, which is subject to sales tax in South Carolina. The DOR noted that that fact that neither company characterized the payment as a rental fee is irrelevant in determining the true object of the transaction. The DOR determined that the entire gross proceeds for the rental of scaffolding from ABC to XYZ is subject to sales tax, without any deduction for cost of materials, labor, service, or any other expenses.
The last section of the private letter ruling discussed whether South Carolina law allows a credit for the sales taxes that ABC previously paid on the original purchase of the scaffolding materials. The DOR stated that ABC had the option to present a resale certificate to the seller at the time of purchase of the scaffolding. ABC failed to utilize a resale certificate on its original purchase, which does not grant them a credit for sales tax liability determined after the fact. (Private Letter Ruling No. 25-1, South Carolina Department of Revenue, September 15, 2025)