SC Revenue Ruling #18-14 (Sept. 18, 2018; effective Nov. 1, 2018) — Retailers Without a Physical Presence (Remote Sellers) — Economic Nexus (SC Revenue Ruling #18-14)

# Scope, effective date, and weight

SC Revenue Ruling #18-14 (Sales and Use Tax), 'Retailers Without a Physical Presence (Remote Sellers) — Economic Nexus.' Effective for sales made on or after November 1, 2018, unless a later date is otherwise provided. Supersedes SC Revenue Advisory Bulletin #01-7 and all previous conflicting documents; modifies SC Revenue Ruling #14-4. Authority: S.C. Code Ann. § 12-4-320; § 1-23-10(4); SC Revenue Procedure #09-3. A Revenue Ruling is an advisory opinion issued to apply principles of tax law to a set of facts or general category of taxpayers; it is the Department's position until superseded or modified by a change in statute, regulation, court decision, or another Departmental advisory opinion. Note: South Carolina's economic nexus standard for sales tax is set by this ruling interpreting Code Section 12-36-70 — the statute itself carries no dollar threshold.

# I. Overview of nexus and the Wayfair decision

Nexus is a sufficient connection between a person and a state, and a sufficient connection between an activity, property, or transaction and a state, that allows the state to subject the person, and the activity, property, or transaction to its taxing jurisdiction. On June 21, 2018, the United States Supreme Court in South Dakota v. Wayfair, Inc., 585 U.S. _, 138 S. Ct. 2080 (2018), ruled that retailers (including online retailers) without physical presence in a state may be subject to sales and use tax, overturning Quill Corp. v. North Dakota, 504 U.S. 298 (1992) and National Bellas Hess, Inc. v. Department of Revenue of Illinois, 386 U.S. 753 (1967). South Carolina Code Section 12-36-70 defines 'retailer' and 'seller' to include persons not maintaining an office or location in this State but soliciting business by direct or indirect representatives, manufacturers agents, distribution of catalogs, or other advertising matter, and by reason thereof receiving orders for tangible personal property or for storage, use, consumption, or distribution in this State. South Carolina had not enforced this provision against retailers without a physical presence because of the constitutional restrictions under National Bellas Hess and Quill; following Wayfair, South Carolina requires retailers without a physical presence who establish an economic presence to remit sales and use tax on a prospective basis beginning November 1, 2018. For purposes of the ruling, a 'remote seller' is a retailer with no physical presence in South Carolina (e.g., marketplace, online, catalog, or mail order retailer), including any related entity assisting the remote seller in sales, storage, distribution, payment collection, or in any other manner.

# II. Substantial nexus standard — $100,000 gross revenue, no transaction prong

In accordance with Code Section 12-36-70 and the principles of Wayfair, a remote seller whose gross revenue from sales of tangible personal property, products transferred electronically, and services 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. South Carolina applies no separate transaction-count threshold.

# III. Calculation of the $100,000 standard — gross revenue including exempt, wholesale, electronic, and service sales

The $100,000 economic nexus standard for a remote seller 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; the total gross revenue from all sales of products transferred electronically into South Carolina, whether or not the transfer is subject to 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 tax. Example 1 (own website): a remote seller with $100,001 of annual South Carolina sales — $75,000 taxable retail and $25,001 exempt retail and wholesale — meets the standard and must obtain a retail license and remit tax. Example 2 (own website plus marketplace): a remote seller with $75,000 of own-website sales and $50,000 of its products sold into South Carolina via a marketplace that collects payment counts both, exceeds $100,000, and must obtain a retail license and remit tax on its own $75,000 of gross proceeds; the marketplace is required to be licensed and remit tax on its gross proceeds, including the $50,000 of the remote seller's products it sold.

# IV. Registration and remittance timing

Remote sellers having economic nexus with South Carolina in calendar year 2017, or from January 1, 2018 through September 30, 2018, were responsible for remitting sales and use tax on all taxable South Carolina sales made on and after November 1, 2018, and were required to obtain a retail license by that date; tax, penalties, and interest are not assessed for taxable sales before November 1, 2018. Remote sellers establishing economic nexus on or after October 1, 2018, are responsible for remitting tax for all taxable sales beginning the first day of the second calendar month after economic nexus is established, and must obtain a retail license by that day (e.g., nexus established December 10, 2018 → license and collection by February 1, 2019). Remote sellers who fail to timely obtain a retail license are subject to assessment, penalties, and interest for all taxable sales beginning with the date the license was required.

# V-VII. Voluntary registration, licensing, and filing requirements

Remote sellers not required to collect may voluntarily obtain a retail license at any time and remit tax for all taxable sales made on and after the license effective date, continuing until the license is closed. Licensing: online via MyDORWAY.dor.sc.gov (electronic application with $50 fee), or paper Form DOR-111RS, 'Remote Seller Sales and Use Tax Registration.' A licensed remote seller must file a sales and use tax return and report total gross proceeds of sales for each month it is licensed. Returns are due by the 20th day of the following month and must be filed for all months, even months with no South Carolina sales or no tax due; if total state and local tax due does not exceed $100 for any month, the seller may file quarterly upon Department approval.