Sales Tax Articles
Sales Tax State Activity Update - January 2005
Internet Access Exemption in South Carolina
South Carolina has issued an information letter clarifying their position on the taxation of Internet access. In 1998, Congress established a tax moratorium in the Internet Tax Freedom Act. The moratorium was extended under the Internet Nondiscrimination Act. The most recent extension was signed by the President on December 3, 2004 and further extended the ban on the taxation of Internet access until November 1, 2007.
The original moratorium prohibited the taxation of Internet access, unless the tax was generally imposed and actually enforced prior to October 1, 1998. The Department reviewed its enforcement activity with respect to Internet access and determined in 1998 that it had not issued an advisory opinion specifically stating that charges for Internet access were taxable and did not have an audit policy in place to enforce the assessment and collection of the tax on Internet access. Therefore, the Department determined that the imposition of the sales and use tax was not grandfathered under the Congressional moratorium and it could not tax Internet access.
With the extension of the moratorium, charges by an ISP that allow a customer Internet access are not subject to South Carolina sales and use tax. Therefore, the Department will only impose sales and use tax on Internet access after November 1, 2007 if Congress does not extend the moratorium beyond November 1, 2007 and the General Assembly enacts legislation or approves a regulation to impose the sales and use tax upon Internet access.
Note: Charges by a third party to access or use that third party's individual website does not constitute Internet access and does not come within the moratorium.
(South Carolina Information Letter #04-27, Department of Revenue, 12/21/04)
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