Should you collect sales tax in South Carolina?
Sales tax is levied on the retail sale of tangible personal property to your customers, including leasing or renting tangible property. However, you will collect the sales tax if you determine the nexus in South Carolina. Nexus is the presence that may come physically or economically.
Physical nexus is typically created when your business has a store, warehouse, or office in South Carolina. The economic nexus is intertwined when you cross paths with threshold limits as already stipulated by the state. These thresholds are based on revenue.
Let’s explore if your business has a Physical nexus in South Carolina.
A physical nexus is integrated when your business is engaged in the following in South Carolina:
- Servicing tangible personal property in South Carolina.
- Maintaining, occupying, or using a place of business or an office in South Carolina.
- Employing or retaining any contractor, including an agent, representative, or salesman, by whatever name called, engaged in activities relating to selling, delivering, installing, or taking business orders.
- Leasing or owning any tangible personal property in a state.
- Having a stock of goods in South Carolina.
You may also refer to the South Carolina Revenue Department advisory to know more about activities that may create a physical nexus within the state.
Is it constituting an Economic nexus in South Carolina?
You must comply and register under sales tax rules if you are a remote seller (i.e., doesn’t have a physical presence in the state) and business sales in South Carolina exceed $100,000 during the current or previous calendar year.
Here is what the South Carolina Revenue Department says on economic nexus.
How can you Register for Sales tax in South Carolina?
You must apply online to get the sales tax permit by visiting the South Carolina MyDORWAY portal. Alternatively, you can complete the licensing application using the SCDOR-111 form and send it to their mailing address.
Additionally, before applying for a new tax account number, make sure you have the following information handy:
- EIN and Social Security numbers of all officers, partners, or owners.
- Address details (physical and mailing).
- Business incorporation dates in South Carolina.
- Contact information.
- Nature of business.
Is your product or services liable to Sales tax in South Carolina?
Tangible Property: Sales tax in South Carolina is imposed primarily on the retail sale of tangible personal property, e.g., Furniture, giftware, toys, etc.
Services: Services are generally not subject to sales tax in South Carolina. However, some exclusions include service or labor costs, laundry or dry cleaning, electricity, hotel stays, vehicle rentals, etc. Check out the state’s tax guide to know the taxability for your respective services.
Digital Product: South Carolina doesn’t charge sales tax on digital products except for streaming television programs, movies, music, and other similar content. Please see the South Carolina Revenue Department advisory (pg. 36) on digital transactions.
SAAS: SAAS is software that allows users to connect to the cloud and use it over an internet connection. This is taxable in South Carolina. Review the South Carolina Revenue Department advisory (pg. 225) on SAAS.
The state provides certain exemptions from the sales tax levy, such as food for home consumption, prescription drugs, manufacturing equipment, etc. Please click here to see what exemptions are covered (pg. 18).
You can read further by visiting the department website to know exactly what’s included in your list of items bound to pay sales tax.
How should you collect and calculate state taxes in South Carolina?
Collecting and computing accurate sales tax to be remitted to the state may involve stratospheric efforts, especially when you are not in South Carolina as th, as sales tax is destination-based in South Carolina, which means you must collect taxes on tangible property sold to buyers based in South Carolina.
Complexities involved where you have a business nexus even if not in the state. Any default may lead to severe concerns, penalties, or fines by the state. That is what TaxDo is here for you! Our specialized sales tax calculator and professional services will simplify your job and lighten your compliance burden and you can focus on other important business aspects.
South Carolina has a base sales tax rate of 6%, followed by the local tax rates, which can increase to 1%.
Below is the simple formula you can use to calculate your sales tax collection on each merchandise sold:
Sales Tax collectible = Sale value * (6% plus local tax rate)
Do you need to collect sales tax on Shipping Charges?
If non-taxable items are sold, shipping charges associated with such sale are not liable to sales tax. However, when a sale includes taxable and non-taxable items, shipping charges need to be apportioned relatively between the taxable and non-taxable parts of the sale. Accordingly, sales tax is applicable on the taxable portion of the sale. This link will take you to the official sales tax guidance issued by the state. Refer to page 342 to check the shipping charges taxability.
How should you file sales tax in South Carolina?
E-file: You can e-file and pay your taxes electronically.
Payments are to be remitted along with filing, which can be through multiple modes, including ACH credit, direct debit, credit cards, etc. If you want to know more about filings and payments, please click here.
Filing frequencies and due dates
Based on your reported sales tax or estimated taxable sales, the South Carolina Department of Revenue assigns you a filing frequency, which can be Monthly, Quarterly, or Yearly. According to your filing frequency, the due date for filing sales tax would be the 20th Day of the month following the relevant reporting period, except for annual filing, where the due date is the 20th of February of the following year.
Note: If the due date is a holiday or weekend, the next business day would be considered the final due date. This link will take you to the official South Carolina tax calendar, where you can see what the state says about sales tax filing due dates.
Are there any fines or penalties for default in filing or paying sales tax?
The state levies a penalty of 5% of sales tax due per month. The maximum penalty imposed will be 25% of the tax due. A 10% negligence penalty would be imposed for errors or incorrect filing.
However, assigning your tax burden to TaxDo would not result in you paying any penalty or interest. We will adhere to the due dates. Please review the guidelines (pg. 319) the South Carolina Tax Commission issued for penalties and interest.
Sales tax holiday in South Carolina
The South Carolina sales tax holiday applies to clothing, footwear, school supplies, etc. The sales tax holiday in the state is enjoyed from first Friday to Sunday in August. For detailed information, refer to the South Carolina Taxation Department advisory here (pg. 297).