South Carolina Internet Sales Tax

Learn about the Internet sales tax rules for South Carolina.

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If you are selling goods or products online and some of your customers are located in South Carolina, you need to be aware of the state’s Internet sales tax rules. As you read, keep in mind that collection of sales tax on Internet sales has been a matter of ongoing debate both at the state and federal level. 

The federal government is currently considering legislation that would affect large Internet retailers and how online sales taxes are collected in all states. The proposed federal law, called the Marketplace Fairness Act of 2013, would allow states to require sellers not physically located in their state to collect taxes on online and catalog sales made to people in their state. Sellers that make $1 million or less in annual sales and have no physical presence in the state would be exempt from this requirement. States would have to meet certain criteria to simplify their sales tax laws and make sales tax collection easier before they could require sellers to collect the tax.

Below is an article on the current rules on Internet sales tax in South Carolina. A new federal law would affect all state Internet sales tax laws so be sure to check for updates in this area.

The General Rule: Physical Presence in the State

The current default rule throughout the United States is that you must collect sales tax on Internet sales to customers in those states where your business has a “physical presence.” The physical-presence rule is based on a 1992 United States Supreme Court decision, Quill Corp. v. North Dakota, that addressed the obligations of mail-order businesses to collect sales tax on out-of-state sales; the decision has been extended to include online retailers. Generally speaking, a physical presence means such things as:

  • having a warehouse in the state
  • having a store in the state
  • having an office in the state, or
  • having a sales representative in the state.

While the physical-presence rule may seem clear, in the case of South Carolina, as well as a fair number of other states, that is not necessarily the case. In Quill, the Supreme Court discusses not only physical presence, but also several types of potential “nexus” (connection) between a business and a state. The type of “nexus” the Supreme Court ultimately found relevant for mail-order businesses was based on the Commerce Clause of the Constitution, which—as described by the Supreme Court—means physical presence. However, many states, including South Carolina, have used the term “nexus” rather than “physical presence” in their sales tax laws, regulations, or other official documents, and, in the process, have sometimes defined nexus in ways that some people may think goes beyond physical presence.

For initial guidance on how physical presence is determined specifically under South Carolina law, consult Section 12-36-80 of the South Carolina Code of Laws (S.C. Code), which defines the phrase “Retailer maintaining a place of business in this State.” (South Carolina’s full sales tax statute, S.C. Code 12-36, is available online as a single document.) The definition refers to maintaining a place of business directly or by a subsidiary. A separate section of the sales tax statute, S.C. Code 12-36-1340, adds that a retailer who distributes catalogs or other advertising materials that lead to orders from South Carolina residents must collect and pay sales tax.

As you might expect, the corollary to the physical-presence rule is that, if you do not have a physical presence in the state, you generally are not required to collect sales tax for an Internet-based sale to someone in that state.

Additional Guidance on “Nexus” and Physical Presence

South Carolina Revenue Ruling #07-3, issued by the state’s Department of Revenue (DOR), presents “the Department’s official position regarding sales and use tax nexus at this time.” It also warns that this is an area subject to change at any time due to a new statute, regulation, court decision, or advisory opinion. Most of the Ruling consists of a series of several dozen Yes-or-No questions, ostensibly with answers. However, in many instances, neither “Yes” nor “No” is indicated, but, rather, the area for an answer has been left blank.

While the Ruling is difficult to summarize, key questions and answers on mail order and catalog businesses suggest that no sales tax needs to be collected “assum[ing] that the retailer has no physical presence in South Carolina and that the catalogs are not mailed from within South Carolina.” In answer to a question regarding businesses selling items over the Internet or by catalog, and with an affiliated company running a retail store in the state, neither “Yes” nor “No” is indicated; instead, the answer is left blank. There is no question addressed specifically and exclusively to Internet sales.

Because of the ambiguities involved, you should strongly consider reviewing the Ruling for yourself—or perhaps seeking professional guidance.

The South Carolina Sales and Use Tax Manual (2011 Edition), prepared by the DOR, contains 23 chapters and runs to 326 pages; many individual chapters are also available for individual download. Chapter 3 states that “An out-of-state retailer must obtain a retail license and remit either the South Carolina sales tax or use tax on retail sales shipped into South Carolina if the out-of-state retailer has a physical presence in South Carolina,” and goes on to briefly provide examples of physical presence, which largely match the items in the bulleted list presented earlier in this article. Chapter 23 of the Manual, running more than 50 pages, covers Frequently Asked Questions; in several cases, answers to questions indicate that a business without a physical presence in South Carolina is not required to obtain a retail license—and is not liable for sales tax.


Example 1: You are operating solely out of a warehouse in Little Rock, Arkansas and make a sale to a customer in Greenville, South Carolina—a state where your business has no physical presence: You are not required to collect sales tax from the Greenville customer.

Example 2: You are operating solely out of an office in Mount Pleasant, South Carolina and make a sale to a customer in Rock Hill, South Carolina: You are required to collect sales tax from the Rock Hill customer.

Example 3: After several years of operating solely out of a warehouse in Little Rock, Arkansas, you open a one-room satellite office just outside of Columbia, South Carolina—a state where previously you had no physical presence. A day later, you make a sale to a customer in Charleston, South Carolina: You are required to collect sales tax from the Charleston customer.

Non-Taxable Items

In limited cases, items sold via the Internet to South Carolina customers may be exempt from sales tax under South Carolina law. For example, textbooks and various other publications, when used in primary or secondary schools, or institutions of higher learning, are exempt from sales tax. The DOR publishes a readable list of most exemptions, including annotations to relevant statutes and DOR rulings and regulations, as Chapter 9 of its Sales and Use Tax Manual. Chapters 14 through 21 of the same Manual discuss additional exemptions, generally based on the status of the purchaser rather than on the type of item sold. You can review the exempt-items statute at S.C. Code 12-36-2120, in its entirety.

South Carolina also has an annual sales tax holiday running from the first Friday in August through to the following Sunday. The tax holiday covers a variety of items, including clothing, clothing accessories, footwear, school supplies, computers, printers, software, blankets, bed linens, sheet sets, and bath towels, among other items. For additional information, check the DOR’s sales tax holiday information webpage, which has links to a FAQ page and to SC Revenue Ruling 10-7.

The Customer’s Responsibility

In cases where the online retailer does not have to collect sales tax, it is the customer’s responsibility to pay the tax—in which case it is known not as a sales tax but, rather, a “use tax.” The DOR publishes both a simple webpage and a more extensive FAQ page on the use tax. In answer to a relatively lengthy question on the FAQ page about whether South Carolina purchasers are liable for use tax for purchasing items from Internet retailers who do not charge sales tax, the FAQ page answers simply, “Yes.”

For much more detailed information, consider reviewing Chapter 3 of the DOR’s Sales and Use Tax Manual (which mentions, among many other things, that use tax applies to purchases over the Internet from out-of-state retailers).

Final Words

While you might not know it from looking solely at South Carolina’s sales tax statute, the issue of whether to require online retailers to collect sales tax in states where they have no physical presence has been a matter of significant debate in many states and at the federal level. However, at this time South Carolina has not enacted any law that would require out-of-state retailers to collect sales tax from South Carolina customers.

In South Carolina, the physical-presence rule applies for Internet retailers. However, because the issue has been contentious in many places around the country, you should consider checking in periodically with the South Carolina Department of Revenue to see if the rules have changed. For more general information on taxes on Internet sales, see Nolo's article Sales Tax on the Internet. And, for information on the rules about collecting sales tax for Internet sales in any other state, see Nolo’s article, 50-State Guide to Internet Sales Tax Laws.

September 2012

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