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Use Tax: The Basics

Use Tax: The Basics. Presented by the sc department of revenue. Use Tax. Use Tax applies to a transaction between an out of state seller and a purchaser where there has been a purchase of tangible personal property. Use Tax. Use tax is complimentary to the sales tax

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Use Tax: The Basics

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  1. Use Tax:The Basics Presented by the sc department of revenue

  2. Use Tax Use Tax applies to a transaction between an out of state seller and a purchaser where there has been a purchase of tangible personal property

  3. Use Tax • Use tax is complimentary to the sales tax • Serves to “even the playing field” where out of state sellers are concerned

  4. Use Tax • Purchaser is liable for the use tax • Purchaser is relieved of the use tax liability if he has a receipt from the retailer specifying South Carolina tax collected

  5. Liability for the Use Tax • Purchaser • The person storing, using or consuming the tangible personal property

  6. Use Tax • Credit for taxes paid AND legally due another state • To be legally DUE another state, goods must be delivered in that state • If tax is paid to a registered out-of-state retailer, no additional tax is due to SC • If substantial use of goods occurs outside SC, then no additional use tax is due

  7. Use Tax • Use Tax is due on items purchased via: • Internet • Example: Ebay, Amazon • TV • Example: Home Shopping Network • Mail Order Catalog • Example: Land’s End

  8. Purchaser’s Certificate of Registration • required for those persons not making retail sales • who purchase tangible personal property from outsideSouth Carolina • and store, use or consumethe property inSouth Carolina

  9. Purchaser’s Certificate of Registration • Apply by using Form SCDOR111 • Apply on SCBOS • Apply at the DOR Service Centers • Mail the SCDOR 111 • No charge for a Purchaser’s Certificate of Registration

  10. How Do You Report Use Tax? • ST-3 (or other returns) • Worksheet (Back of ST-3) Line 2 – Out of state purchases Line 3 - Total of Gross Proceeds of Sales and out of state purchases • DOR Individual Use Tax, UT-3, SC1040 • Subject to 6% state sales/use tax • Subject to applicable local taxes • Tax is reported monthly, quarterly or annually

  11. Withdrawals for Own Use • When you purchase items for resale and you withdraw the item for your own use or use in your business, sales tax is due on the fair market valueof the item withdrawn • Fair market value is essentially the price at which you would sell the item at retail to the customer (not less than cost)

  12. Freight Charges and Delivery Charges • Regulation 117-310 • Freight Charges – Separately stated • FOB Destination – Taxable • FOB Origin – Non-Taxable • Not Defined – Taxable • Delivery Charges • Taxable

  13. Hardware Warranty/Maintenance • SC Revenue Rulings # 11-1 and 11-2 • Contract sold at the same time as the hardware (equip) = TAXABLE (eff. 9/1/11) • Contract NOT sold at the same time as the hardware (equip) = NOTTAXABLE (eff. 10/1/05)

  14. Software Products Software, both canned and custom, is subject to the tax (unless delivered via electronic means)

  15. Software Maintenance • Contract sold at the same time as the product = TAXABLE (eff. 9/1/11) • Contract NOT sold at the same time as the product = NOTTAXABLE (eff. 10/1/05) • See SC Revenue Ruling # 11-2

  16. Software • Software License: A license to use or consume IStaxable

  17. Additional Information • See SC Revenue Rulings # 11-1 and 11-2 • http://www.sctax.org/Tax+Policy/default.htm

  18. Discounts • Taxpayers are allowed a discount for filing returns and paying taxes timely. • If total tax due (for all taxes) is less than $100, the discount is 3% • If total tax due (for all taxes) is $100 or more, the discount is 2%

  19. Discount Maximums • $3,000 in a state fiscal year • July 1 through June 30 • Per Taxpayer, all locations, for all tax types • $3,100 if you file Electronically • $10,000 if non resident retailer not required to register in SC

  20. Types of Returns • ST-3 – State Sales and Use Tax Return • ST-389 – Schedule for Local Taxes • ST-388 – Sales/Use/Accommodations • ST-403 – Sales/Use/Aviation Fuel • ST-455 – Sales/Use/Maximum Tax • ST-501 – Sales/Use/Durable Medical Equipment

  21. Local Taxes • Local Option Sales Tax • Capital Projects Tax • Transportation Tax • School District Tax/Education Capital Improvement Tax • Tourism Development Tax

  22. Map of Local Taxes

  23. Local Option Sales Tax • Imposed to reduce the property tax burden on persons in the county • Example: Richland

  24. Transportation Tax • Imposed to defray the debt service on bonds issued for various transportation projects (i.e. roads & bridges) • Example: Beaufort

  25. Capital Projects Tax • Imposed to defray the debt service on bonds issued for various capital projects in the county (i.e. roads, bridges, public facilities, water/ sewer projects) • Example: Lancaster

  26. School District Tax • Imposed to pay debt service on general obligation bonds and/or cost of capital improvements • Example: Lexington

  27. Tourism Development Tax • Imposed specifically for tourism advertisement and promotion directed at non-South Carolina residents • Example: City of Myrtle Beach

  28. Reminder • Transactions exempt from the Food Tax are still subject to the 1% Local Taxes • Exception: The following counties exempt food from the 1% School District Tax. • Cherokee • Chesterfield • Darlington • Dillon • Horry • Jasper • Lee • Lexington • (Clarendon County imposes the 1% School District Tax on the purchases of food that may be purchased with USDA food coupons)

  29. New for 2012 Effective January 1, 2012 • York County- 1% Capital Projects Tax exempts sales of unprepared food Effective April 1, 2012 • Newberry County – 1% Capital Projects Tax exempts sales of unprepared food

  30. New for 2012 Effective July 1, 2012 • Greenwood County will no longer imposed the 1% Capital Projects Tax on their sales and purchases. • The State sales tax rate will be reduced from 3.5% to 1.75% for retailers/providers making sales of Durable Medical Equipment and Related Supplies.

  31. Review • Who is responsible for the use tax? • Purchaser (buyer) • How do you report use tax? • Businesses use ST-3 or ST-455 • Line 2 on worksheet • Line 3 on front of form • Personal use is DOR Individual Use, UT-3 or SC-1040 • How much is the discount for filing returns and paying taxes timely? • 2% or 3%

  32. Contact Numbers Monday-Friday 8:30 a.m.-4:45 p.m. • General Sales Tax Questions • (803) 896-1420 • Technical Sales Tax Questions • (803) 896-1370

  33. Questions

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