The South Carolina Department of Revenue (“Department”) issued Revenue Ruling 17-2 to update its guidance to taxpayers regarding the applicability of the sales and use tax to communication services and compiled examples of taxable and non-taxable transactions (Revenue Ruling 17-2, South Carolina Department of Revenue, March 10, 2017). South Carolina imposes sales and use tax on “the gross proceeds accruing or proceeding from the charges for the ways or means for the transmission of the voice or messages…” pursuant to Code Sections 12-36-910(B)(3) and 12-36-1310(B)(3).
According to Revenue Ruling 17-2, the Department explained that it believes the following communication services are taxable pursuant to Code Sections 12-36-910(B)(3) and 12-36-1310(B)(3):
- Telephone services [not specifically exempted under Code Section 12-36-2120(11)], including telephone services provided via the traditional circuit-committed protocols of the public switched telephone network (PSTN), a wireless transmission system, a Voice over Internet Protocol (“VoIP”), or any other method
- Teleconferencing services
- Paging services pursuant to SC Information Letter #89-28
- Automated answering services pursuant to SC Information Letter #89-28
- Cable television services
- Satellite programming services and other programming transmission services (includes, but is not limited to, emergency communication services and television, radio, music, or other programming services)
- Fax transmission services pursuant to SC Revenue Ruling #89-14
- Voice mail messaging services pursuant to SC Revenue Ruling #89-14
- E-Mail services pursuant to SC Revenue Ruling #89-14
- Electronic filing of tax returns when the return is electronically filed by a person who did not prepare the tax return pursuant to Revenue Ruling #91-20
- Database access transmission services (online information services), such as legal research services, credit reporting/research services, charges to access an individual website (including application service providers), etc. pursuant to SC Revenue Ruling #89-14 and SC Private Letter Ruling #89-21 (note: this does not include 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 of the cooperative service)
- Streaming services that provide television programming, movies, music, and other similar content pursuant to Revenue Ruling #16-5
- Cloud-based services for processing and routing telephone calls within a customer’s telephone system pursuant to SC Private Letter Ruling #14-4
Additionally, the Department considers the following communication services to be subject to the sales and use tax pursuant to Code Section 12-36-910(b)(5) and Code Section 12-36-2645:
- Prepaid wireless calling arrangements (sale or recharge at retail) as defined in Code Section 12-36-910(b)(5)
- 900/976 telephone service
Conversely, the following communication services are not considered by the Department to be subject to the sales and use tax pursuant to Code Sections 12-36-910(B)(3) and 12-36-1310(B)(3):
- Telephone services specifically exempted under Code Section 12-36-2120(11), such as toll charges between telephone exchanges and carrier access charges and customer access line charges established by the Federal Communications Commission or the South Carolina Public Service Commission
- Telegraph messages per Code Section 12-36-2120(11)
- Communication services involving automatic teller machines pursuant to Code Section 12-36-2120(11)
- Data processing services as defined by Code Section 12-36-910(C) (SC Private Letter Ruling #12-2 and SC Private Letter Ruling #14-5)
- 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 of the cooperative services per Code Section 12-36-60
- Internet access (the term includes services that allow a user to connect to “the myriad of computer and communications facilities…which comprise the interconnected world-wide network or networks” known as the Internet, but is not meant to include charges to access individual websites)
- Non-automated answering services
An important note at the end of the advisory states that the Department attempted to list as many communication services as possible; however, it is not an exhaustive listing. Charges for other communication services not listed in the advisory are still subject to tax if they meet the basic definitions of taxable communications.