South Carolina—Sales and Use Tax: Effective Date of Taxability of Buydown Payments from Tobacco Companies Revised to July 1, 2021
South Carolina: The South Carolina Department of Revenue issued an information letter revising the effective date for the sales and use taxability of tobacco company payments to retailers, commonly known as buydowns, to July 1, 2021. In a previous Revenue Ruling (20-3), the department had stated that taxability of buydowns would be effective for retail sales occurring on or after January 1, 2021. According to Revenue Ruling 20-3, a tobacco company’s buydown payments to retailers are subject to sales tax. Further, a buydown contract requires a tobacco company to pay a retailer a specific amount for each pack of cigarettes sold as long as the retailer agrees to lower the price of the cigarettes. Moreover, sales tax is imposed on the total amount received by the retailer as a result of selling tangible personal property. The source of the amount earned is not relevant. Therefore, the buydown payments based on the retailer’s sales are included in the gross proceeds of sales and are taxable. But for the cigarettes sold by the retailer, it would not receive the buydown payments from the tobacco company. If the retailer receives payments from a tobacco company based on its purchases, however, the payment does not accrue from retail sales and are not taxable. Information Letter 20-35, South Carolina Department of Revenue, December 22, 2020
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