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Sales Tax State Activity Update - September 2008

South Carolina Separates Taxable and Non-taxable Telecom Services

South Carolina has amended a sales tax regulation regarding communication services to provide examples of taxable and non-taxable services.

The purpose of this regulation is to summarize longstanding Department opinion concerning the taxability of various communication services and to attempt to list as many communications services as possible that the Department has subjected to the tax, whether through formal advisory opinions, audits or informal advice provided to taxpayers.

The regulation lists several examples of communication services that are subject to the sales and use tax. Examples of taxable communications services include:

1. Telephone services, including services provided via the public switched telephone network (PSTN), a wireless system, a voice over Internet protocol (VoIP) system or any other method;
2. Teleconferencing services;
3. Paging services;
4. Answering services;
5. Cable television services;
6. Satellite programming services and other programming transmission services;
7. Fax transmission services;
8. Voice Mail messaging services;
9. E-Mail services;
10. E-Filing of Tax Returns (not filed by the person who prepared the return);
11. Database access transmission services or on-line information services;
12. Prepaid wireless calling arrangements (sale or recharge);
13. 900/976 Telephone Service

Examples of non-taxable communications services include:

1. Telephone services specifically exempted under Code Section 12-36-2120(11), such as toll charges between telephone exchanges, carrier access charges and customers access line charges established by the FCC or the South Carolina Public Service Commission;
2. Telegraph messages (exempt under Code Section 12-36-2120(11));
3. Communication services involving automatic teller machines (exempt under Code Section 12-36-2120(11));
4. Data processing services (as defined under Code Section 12-36-910(C);
5. Computer database information services provided by a cooperative service when the database information has been assembled by and for the exclusive use of the members;
6. E-Filing of Tax Returns (filed by the person who prepared the return);
7. Other charges specifically exempt from tax under federal or state law.

Charges for other communication services not listed are taxable if they constitute "charges for the ways or means for the transmission of voice or messages" and are not otherwise exempted under the law.

(Regulation 117-329, South Carolina Department of Revenue, approved by the General Assembly on 6/4/08, and effective upon publication in the State Register on 6/27/08)

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