News and Insights

South Carolina Imposes Sales Tax on Optional Damage Waiver Fees

Tax Development Apr 15, 2016

A South Carolina administrative law court (“Court”) ruled that optional damage waivers purchased with equipment rentals were subject to sales tax. The rental company argued that waiver fees were not part of its rental receipts because the waiver was an optional service, and the waiver agreement was separate from the company’s equipment rental agreement.

However, the Court determined that the rental and waiver agreements were one document and not separate contracts. The waiver fee was included in the rental agreement, and the waiver agreement included a statement that it was an additional part of the rental agreement. In addition, although the waiver was optional when purchased, it became a part of the transaction.

In finding that the waiver fees were part of the price of the rental, the Court reasoned that the true object of the damage waiver was to obtain use of rented equipment while minimizing the financial risk for any damage to the equipment. Because the waiver fees were part of the “value proceeding or accruing from the…rental of tangible personal property,” the fees were subject to the South Carolina sales tax.  


John P. Lyon

Susann Perez-Johnson