In the current sales tax environment, more attention is being given to sales tax exemptions, their validity and appropriate use. According to The State, South Carolina’s Homepage, a recent lawsuit against the state is challenging sales tax exemptions. The law firm of “Lewis and Harpootlian said Monday the latest suit has merit because the number of exemptions has increased, and because of the fact the state now exempts more than it collects.” Lewis is quoted as saying, “The holes are eating the cheese.”
The State identified that $2.7 billion is collected in exemptions each year in the state of South Carolina, while only $2.19 billion is collected in annual sales tax revenue. “Of that amount, 4 percent goes to the state’s general fund, 1 percent to education, and 1 percent to property tax relief for homeowners.” That means for every exemption given, less money is available for educational purposes and to relieve homeowners of property tax burdens.
Are these sales tax exemptions valid? This is the question that Lewis brings before the South Carolina Supreme Court. According the Lewis and Harpootlian, a minority of businesses not receiving tax exemptions are being unfairly discriminated against, and a number of exemptions that developed over the years are unnecessary and not beneficial to the general populace. One exemption is “the $300 sales tax cap on cars and boats” which benefits those able to afford a yacht, but Lewis indicates that exemptions should be “…for the most needy,” and “yacht owners…are not the most needy.”
With the ongoing needs of states to increase revenue or reduce spending, many sales tax issues will be coming under scrutiny. From extending sales tax to all Internet sales to modifications in the exemption certificates laws to increasing the number of items for which sales tax is required, sales tax issues are at the forefront of today’s legal and political environment.
About the Author: Susan McLain has over 15 years experience in technical and marketing writing, graphic design, business development and marketing management. She currently works for Avalara, Inc., a Software-as-a-Service (SaaS) company providing automated solutions for sales and use tax compliance for businesses of all sizes. The AvaTax family of products provide accurate, to the rooftop sales tax calculation, automated exemption certificate management and seamless filing, reporting and remittance of sales tax liability.