South Carolina tax filers must now declare use tax liability

Many states, including South Carolina, seem to be searching for ways to increase revenues.  One way to do that is to become more aggressive in enforcing the often ignored Use Tax.

A use tax is the government’s way of saying you still have to pay sales taxes even if you bought goods out of state.  If you personally ventured across the state line and bought goods in another state and paid that state’s sales taxes that is generally the end of the matter.  You may owe a use tax but you are generally given credit for any sales taxes paid to the other state which reduces your Use Tax liability.  However, if you purchased goods online or over the telephone you most likely did not pay any sales tax on the purchase and the Use Tax is now a factor in preparing your state tax return.

The South Carolina Use Tax has been around since the early fifties.  But just like highway speed limits and jay walking laws, this law was frequently ignored, by both the tax payers and their governments.  The line for declaring Use Tax liability has been on the Form SC1040 for many years now.  In previous years everyone was pretty much free to ignore this line item if they so chose.  The assumption was that if you put nothing on that line then you had no use tax liability.  This all seems to be changing now.

This year each South Carolina taxpayer will have to affirmatively declare a use tax liability under penalty of perjury as indicated by their signature on the tax return.  .  If you bought goods that are subject to the use tax you will have to declare that amount and pay the corresponding use tax with your income tax return.  If you did all of your shopping locally and do not owe Use Tax then you will still need to affirmatively declare that you had a zero tax liability.

So what does this mean for you?  It means that you now need to keep track of all those out of state purchases, whether online or otherwise, and report those purchases on your state tax return.  Your tax preparer must ask you about your purchases subject to Use Tax.  You must put an entry on the form.  If the number is zero then so be it.  You will owe nothing.  But if you thought you saved a few pennies on birthday presents for the grandkids by shopping out of state to avoid paying sales tax on those purchases then you must report this on your state tax return and pay the appropriate percentage.  This will either reduce your refund or increase your balance due.

If you have questions about Sales and Use Tax issues please give us a call at 803 732-4288