The South Carolina Department of Revenue (DOR) has issued an information letter providing guidance on the service provider tax exemption for specified items sold to or used by internet access service providers and communications service providers (“Service Providers”).
On May 19, 2026, South Dakota enacted legislation, effective for tax years after 2025, permitting certain items sold to or used by Service Providers to be exempt from state and local sales and use tax by allowing a refund for taxes paid in the prior year.
Per the DOR’s guidance, the Service Provider Tax Exemption exempts from state and local sales and use tax all supplies, technical equipment, machinery, and electricity sold to Service Providers if the items are used in producing, broadcasting, or distributing internet access service, communications services, or any combination of such services pursuant to the provisions of Section 12-36-2120 of the South Carolina Code. South Carolina tax law deems Service Providers to be manufacturers for the purposes of this exemption. Note that the Service Provider Tax Exemption does not apply to data centers.
Service Providers meeting these qualifications may apply to the DOR for a refund of state and local sales and use taxes paid on eligible items no later than January 31 of the following year.
The DOR will calculate the total amount of refund requests no later than May 1. If the total amount of refund requests exceeds $10 million, the DOR will pro-rate refunds to ensure the total amount refunded does not exceed $10 million. The DOR will issue refunds no later than June 1.
The DOR’s guidance specifies that eligible applicants are internet access service providers and communications service providers producing, or distributing internet access service, communications services, or any combination of such services.
Applications for refund can be made using Form ST-609 (Service Provider Sales Tax Exemption Refund Application) at https://dor.sc.gov/. Service Providers must submit the completed application and required supporting documentation to [email protected] by January 31 for the prior year (for example, for tax year 2026, the due date is January 31, 2027).