What is the economic nexus standard in South Carolina that will require a remote seller to obtain a retail license and begin collecting and remitting the South Carolina Sales and Use Tax for deliveries into South Carolina?
In South Carolina, a remote seller whose gross revenue from sales delivered into South Carolina exceeds $100,000 in the previous calendar year or the current calendar year has economic nexus (i.e., substantial nexus) with South Carolina and is responsible for obtaining a retail license and remitting South Carolina Sales and Use Tax.
What is “gross revenue”?
“Gross revenue” includes:
- the total gross revenue from all sales of tangible personal property delivered into South Carolina, including all taxable retail sales, exempt retail sales, and wholesale sales of tangible personal property;
- the total gross revenue from all sales of products transferred electronically into South Carolina, whether or not the transfer of such product is subject to the South Carolina Sales and Use Tax; and
- the total gross revenue from all services delivered into South Carolina, whether or not the service is subject to the South Carolina Sales and Use Tax.
Example 1 – Sales on Own Website: Assume a remote seller makes sales into South Carolina via his own website. His annual South Carolina sales total $100,001. These sales consist of $75,000 in taxable retail sales and $25,001 in exempt retail sales and wholesale sales. Since the remote seller’s total gross revenue from all sales into South Carolina exceeds $100,000, the remote seller meets South Carolina’s nexus standard, and he is required to obtain a retail license and remit the Sales and Use Tax to the Department.
Example 2 – Sales by Own Website and Via a Marketplace: Assume a remote seller makes sales on her own website as well as through a marketplace. The remote seller sells $75,000 of items into South Carolina from her own website. A marketplace makes sales of $50,000 of products owned by the remote seller, and the marketplace collects or processes customer payments from these marketplace sales.
The calculation of the remote seller’s economic nexus standard includes the gross revenue from property owned by the remote seller but sold via the marketplace. Since the remote seller’s total gross revenue from South Carolina exceeds $100,000 ($75,000 + $50,000), the remote seller meets South Carolina’s nexus standard. She is required to obtain a retail license and remit the Sales and Use Tax to the Department on her “gross proceeds of sales” of $75,000.
Since South Carolina’s economic nexus standard is based on “gross revenue” and not “gross proceeds of sales,” revenue from the sales made via the marketplace in this example (Example 2) are included in the calculation for determining if the remote seller has established economic nexus with South Carolina. However, under South Carolina Sales and Use Tax law, the sales made via the marketplace are sales
by the marketplace, and the marketplace is required to report and remit the Sales and Use Tax on the marketplace’s “gross proceeds of sales,” which includes the $50,000 in sales of products owned by the remote seller but sold by the marketplace.
What is the difference between “gross revenue” and “gross proceeds of sales?”
For many remote sellers, gross revenue and gross proceeds of sales will be the same.
In general, gross revenue is all revenue from sales into South Carolina, regardless of whether the revenue is subject to the South Carolina Sales and Use Tax. Gross revenue is used solely for determining if a remote seller has economic nexus with South Carolina. It does not determine liability for the tax.
Gross proceeds of sales is the basis or measure for the Sales and Use Tax. It only applies to the sale of tangible personal property as defined in the South Carolina Sales and Use Tax law.
Example 1 – Gross Revenue and Gross Proceeds are the Same: Assume a remote seller sells t-shirts into South Carolina for $25 and charges $5 for shipping via the U.S. Postal Service. The “gross revenue” and “gross proceeds of sales” are the same for this transaction - $30.
Example 2 - Gross Revenue and Gross Proceeds are Different: Assume a remote seller sells software in three different ways. His gross revenue from South Carolina is as follows:
Disks and Flash drives $ 55,000
ASP (SaaS)
$ 25,000
Downloads $ 30,000
Total $110,000
Since software sold on disks and flash drives and via an ASP (SaaS) are subject to the South Carolina Sales and Use Tax, and software sold via downloads are not, “gross revenue” and “gross proceeds of sales” are different. Gross revenue for the remote seller in this example is $110,000 and gross proceeds of sales is $80,000 ($55,000 + $25,000). The remote seller meets South Carolina’s economic nexus standard because his “gross revenue” from South Carolina in the prior year or the current year exceeds $100,000, but he is only required to report $80,000 in “gross proceeds of sales” on his Sales and Use Tax return. The South Carolina Sales and Use Tax will be based on the $80,000 in “gross proceeds of sales.”
For purposes of calculating the South Carolina economic nexus standard, when is a sale deemed to occur?
Generally, sales by remote sellers are deemed to occur upon delivery in South Carolina.
What is “tangible personal property” for purposes of determining South Carolina’s economic nexus standard?
“Tangible personal property” is personal property which may be seen, weighed, measured, felt, touched, or which is in any other manner perceptible to the senses. It also includes services and intangibles, the sale or use of which are subject to tax under South Carolina’s Sales and Use Tax law. The services specifically subject to the South Carolina Sales and Use Tax are:
- communications
- laundry and related services
- furnishing of accommodations
- electricity
For the services that are specifically subject to the Sales and Use Tax, and therefore by definition are “tangible personal property,” see Chapters 2 and 3 of the South Carolina
Sales & Use Tax Manual.
Does South Carolina have a separate economic nexus standard for local Sales and Use Tax?
No. If a retailer has substantial nexus with South Carolina, the retailer has substantial nexus with each local jurisdiction in South Carolina for purposes of local Sales and Use Taxes administered and collected by the Department.
What are examples that explain common types of sales that are included when determining South Carolina’s economic nexus standard?
Examples best illustrate the computation of the economic nexus standard for remote sellers selling various types and amounts of tangible personal property. It is important to understand that the economic nexus standard is based upon “gross revenue.” The examples assume the person is a remote seller (i.e., is an out-of-state seller with no physical presence in SC) that only makes the sales listed in each specific example and the product is owned by that remote seller, unless otherwise stated.
Part A – Taxable, Exempt, and/or Wholesale Sales by Remote Seller
| Example 1: All taxable sales
Remote seller sells common household items via his own website or through his own catalog and telephone sales operations (e.g., furniture, pet supplies, cosmetics, jewelry, etc.).
| Over $100,000
| Yes
Remote seller must obtain a retail license and collect and remit SC Sales and Use Tax on all taxable retail sales.
|
$100,000 or less
| No
Remote seller is not required to, but may voluntarily, obtain a retail license and collect and remit SC Sales and Use Tax.
|
| Example 2: All nontaxable sales
Remote seller sells only items that are exempt from SC Sales and Use Tax (e.g., sales to federal government, sales of medicine by prescription, etc.).
| Over $100,000
| Yes
Remote seller must file “zero tax due” sales tax returns; seller may request quarterly or annual filings in lieu of monthly filings.
|
| Example 3: All wholesale sales
Remote seller only sells items for resale (i.e., wholesale sales). Wholesale sales are not subject to SC Sales and Use Tax.
| Over $100,000
| Yes However, since the remote seller is
not a retailer (i.e., does not make retail sales), he is
not required to obtain a retail license or collect SC Sales and Use Tax.
|
| Example 4: Both taxable and nontaxable sales
Remote seller sells some items that are taxable and some items that are exempt from SC Sales and Use Tax.
| Exempt = $ 99,000
Taxable = $ 1,001 Total = $100,001
| Yes
Remote seller must obtain a retail license and collect and remit SC Sales and Use Tax on all taxable retail sales.
|
| Example 5: Sales exempt from State tax, but subject to local tax
Taxpayer sells unprepared food, which is exempt from SC state Sales and Use Tax, but is subject to local Sales and Use Taxes in certain counties.
| Over $100,000
| Yes
See DOR website for local tax chart of counties imposing tax on unprepared food.
|
Part B – Sales Via a Marketplace
Example 6: Both sales via own website and sales via marketplace sales Remote seller sells via his own website. He also lists his products for sale on a marketplace that has economic nexus with South Carolina and that collects or processes the customer’s payment.
| Own website sales = $99,000
Sales of the remote seller’s product by a marketplace = $300,000
| Yes
Sales of a remote seller’s product by a marketplace retailer (i.e., $300,000) and by his own website (i.e., $99,000) are used in computing the SC economic nexus standard of the remote seller. However, the remote seller is only responsible for reporting and remitting the SC Sales and Use Tax on the $99,000 in sales he made via his own website. The marketplace is responsible for reporting and remitting the SC Sales and Use Tax on the $300,000 from sales of the remote seller’s products made via the marketplace.
|
|
Example 7: All marketplace sales
Remote seller only sells via another person’s marketplace.
| Over $100,000
| Yes
While the remote seller has economic nexus with SC (i.e., over $100,000 in sales via another person’s marketplace), the remote seller is not making retail sales under SC law and therefore is not a retailer. The remote seller is not required to obtain a retail license or collect SC Sales and Use Tax.
|
| $100,000 or less | No |
Example 8: Marketplace is the remote seller
Marketplace sells items that it owns and items owned by many others via its website.
| Over $100,000
| Yes Marketplace must obtain a retail license and collect and remit SC Sales and Use Tax on all taxable retail sales, including all taxable retail sales of items owned by others.
|
Part C – Sales of Services
Example 9: All taxable services
Taxpayer sells services subject to the SC Sales and Use Tax (e.g., certain communications services). Services that are subject to tax are those defined as “tangible personal property” under SC Sales and Use Tax.
| Over $100,000
| Yes
Remote seller must obtain a retail license and collect and remit SC Sales and Use Tax on all taxable retail sales.
|
$100,000 or less
| No
Remote seller is not required to, but may voluntarily, obtain a retail license and collect and remit SC Sales and Use Tax.
|
Example 10: All nontaxable services Taxpayer only sells services that are not subject to the SC Sales and Use Tax (e.g., professional services, security monitoring, etc.) Services that are not subject to tax are those services not included in the definition of “tangible personal property” under SC Sales and Use Tax law.
| Over $100,000
| Yes
However, since the remote seller is not a retailer (i.e., does not make retail sales), he is not required to obtain a retail license or collect SC Sales and Use Tax.
|
