News and Insights

South Carolina Supreme Court Upholds Sales and Use Tax Exemptions

Tax Development May 14, 2013

On May 8, 2013, the South Carolina Supreme Court shot down a broad challenge to the state’s administration of sales and use tax. Attorney Matthew Bodman filed suit in 2011 alleging that the numerous exemptions to the tax were not rationally related to the tax itself. The fatal flaw in his argument, according to the court, was that Bodman did not single out individual exemptions or caps for criticism. Rather, he focused on the sheer size and number of exemptions, now reportedly exempting a greater volume of revenue than is actually collected by the tax.

The court relied on the well-established burden of proof beyond a reasonable doubt that is required to strike down taxation classifications under a rational basis analysis. To be exempt from tax, Bodman argued, the exemption must be rationally related to the purpose of the tax itself. The validity of this argument, however, was not tested by the court. Bodman, in failing to address any one particular exemption, did not meet the burden required for the type of constitutional scrutiny he proposed.


Jeremiah T. Lynch