Charges added to the price of items sold by retailers to cover increased costs associated with the COVID-19 pandemic are subject to sales tax in South Carolina, according to guidance issued by the state Department of Revenue.
The DOR issued an information letter August 5 to “remind retailers and consumers of the application of the sales and use tax to an additional COVID-19 surcharge or fee, a handling fee, a takeout charge, or similar charge.”
The information letter explains that the state imposes a sales tax of 6 percent of the “gross proceeds of sales” on “every person engaged in South Carolina in the business of selling tangible personal property at retail,” in addition to any applicable local sales tax.
According to the department, “gross proceeds of sales includes all value that comes from or is a direct result of the sale of tangible personal property.” Consequently, the guidance says, “a COVID-19 surcharge or fee, a handling fee, a takeout charge, or a similar fee charged by a retailer, as part of the sale of tangible personal property, is includable in gross proceeds of sales, and subject to the sales tax, unless otherwise exempt.”
The DOR provides four examples in which COVID-19-related charges or fees added to the sales price of meals by a restaurant are subject to sales tax. Under the guidance, marketplace facilitators are responsible for remitting sales tax on COVID-19 surcharges added to meals sold by a restaurant through their platforms.
Another state, New Jersey, also recently issued guidance on how sales tax applies to COVID-19 surcharges. COVID-19-related charges and fees are subject to sales tax if a service or product sold by a business is subject to the tax, according to the New Jersey Division of Taxation.