Bill 3739

                    Current Status

Bill Number:               3739
Ratification Number:       329
Act Number                 317
Introducing Body:          House
Subject:                   Local sales and use tax

(A317, R329, H3739)

AN ACT TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING CHAPTER 10 TO TITLE 4 SO AS TO PROVIDE FOR THE LEVY OF A SALES AND USE TAX IN A COUNTY AREA BY SETTING FORTH DEFINITIONS, PURPOSES, AND REQUIREMENTS FOR A REFERENDUM, COLLECTION, USES, AND DISTRIBUTION; TO AMEND SECTION 12-35-580, RELATING TO A STATEMENT AND PREPAYMENT OF ESTIMATED SALES TAX LIABILITY, SO AS TO EXCLUDE THE IMPOSITION OF THE LOCAL OPTION SALES AND USE TAX FROM THE SECTION AND TO PROVIDE FOR AN ALLOCATION TO AND REIMBURSEMENT BY THE TAX COMMISSION FOR ADMINISTRATIVE EXPENSES TO IMPLEMENT THE TAX.

Be it enacted by the General Assembly of the State of South Carolina:

Local sales and use tax

SECTION 1. Title 4 of the 1976 Code is amended by adding:

Section 4-10-10. For purposes of this chapter:

(1) 'County area' means a county and all municipalities within its geographical boundaries.

(2) 'County' means the unincorporated areas of a county area or county government as the use of the term dictates.

(3) 'Municipality' means a municipal corporation created pursuant to Chapter 1 of Title 5 or a municipal government as the use of the term dictates.

(4) 'Minimum distribution' means an amount equal to two million dollars for the first distribution and after that adjusted annually on a cumulative basis by a percentage equal to the increase in revenues credited to the Education Improvement Act Fund for the most recently completed fiscal year over the revenues credited to that fund in the preceding fiscal year.

(5) 'Population' means population as determined in the most recent official United States Census.

Section 4-10-20. A county, upon referendum approval, may levy a sales and use tax of one percent on the gross proceeds of sales within the county area which are subject to tax under Chapter 35 of Title 12 and the enforcement provisions of Chapter 54 of Title 12. The sale of items with a maximum tax levied in accordance with Sections 12-35-516, 12-35-518, and 12-35-519 and Article 11 of Chapter 35 of Title 12 are exempt from the local sales and use tax. The adopted rate also applies to tangible personal property subject to the use tax in Section 12-35-810. Taxpayers required to remit taxes under Section 12-35-810 shall identify the county or municipality in the county area in which tangible personal property purchased at retail is stored, used, or consumed in this State. Utilities are required to report sales in the county or municipality in which consumption of the tangible personal property occurs. A taxpayer subject to the tax imposed by Article 6, Chapter 35 of Title 12, who owns or manages rental units in more than one county or municipality shall report separately in his sales tax return the total gross proceeds from business done in each county or municipality.

Section 4-10-25. The gross proceeds of sales of tangible personal property delivered after the imposition date of the tax levied under Section 4-10-20 in a county, either under the terms of a construction contract executed before the imposition date, or a written bid submitted before the imposition date, culminating in a construction contract entered into before or after the imposition date, are exempt from the local sales and use tax provided in Section 4-10-20 if a verified copy of the contract is filed with the South Carolina Tax Commission within six months after the imposition of the local sales and use tax.

Section 4-10-30. (A) The county election commission in each county shall conduct a referendum on the Tuesday following the first Monday in November on the question of implementing the local option sales and use tax within the county area. The state election laws apply to the referendum mutatis mutandis. The county election commission shall publish the results of the referendum and certify them to the county council. The sales and use tax must not be imposed in the county area, unless a majority of the qualified electors voting in the referendum approve the question.

(B) The ballot must read substantially as follows:

'Must a one percent sales and use tax be levied in County for the purpose of allowing a credit against a taxpayer's county and municipal ad valorem tax liability and for the purpose of funding county and municipal operations in the County area?

(C) If the question is not approved at the initial referendum, the county council may call for another referendum on the question. However, following the initial referendum, a referendum for this purpose must not be held more often than once in twelve months and must be held on the Tuesday following the first Monday in November.

(D) Two weeks before the referendum the county council and the municipal councils in the county area shall publish in a newspaper of general circulation within the jurisdiction the anticipated credit against property taxes in the first year of implementation of the property tax credit fund. The notice must show the anticipated credit on the following classes of property:

(1) a primary residence;

(2) personal property including, but not limited to, an automobile;

(3) a commercial facility;

(4) an industrial facility.

Section 4-10-35. (A) Upon petition of fifteen percent of the qualified electors of a county presented to the governing body of that county which has implemented the one percent sales and use tax authorized by this chapter requesting that this tax be rescinded, the county governing body shall conduct a referendum on the Tuesday following the first Monday in November next following on the question of rescinding the local option sales and use tax within the county area. The state election laws apply to the referendum mutatis mutandis. The county election commission shall publish the results of the referendum and certify them to the county council. The sales and use tax must be rescinded in the county area upon the certification of the results if a majority of the qualified electors voting in the referendum vote in favor of rescinding the tax.

(B) The ballot must read substantially as follows:

'Must the one percent local option sales and use tax levied in County pursuant to Chapter 10, Title 4 of the 1976 Code be rescinded?

(C) A referendum for rescission of this tax may not be held earlier than two years after the tax has been levied in the county. If a majority of the qualified electors voting in the rescission referendum vote against rescinding the tax, no further rescission referendums may be held for a period of two years. If a majority of the qualified electors vote in favor of rescinding the tax, the tax may not be reimposed in the county for a period of two years. The petition requesting rescission must be presented to the county governing body at least one hundred twenty days before the Tuesday following the first Monday of November of that year or the referendum must be held on the Tuesday following the first Monday of November of the following year.

Section 4-10-40. (A) The revenue allocated to the Property Tax Credit Fund, as provided in Section 4-10-90, must be distributed to the county and the municipalities in the county area as follows:

(1) sixty-seven percent to the county;

(2) thirty-three percent to the municipalities in the county area so that each municipality receives an amount equal to what its percentage of population bears to the total population in all the municipalities in the county area.

(B) All of the revenue received by a county and municipality from the Property Tax Credit Fund must be used to provide a credit against the property tax liability of taxpayers in the county and municipality in an amount determined by multiplying the appraised value of the taxpayer's taxable property by a fraction in which the numerator is the total estimated revenue received by the county or municipality from the Property Tax Credit Fund during the applicable tax year and the denominator is the total of the appraised value of taxable property in the county or municipality as of January first of the applicable taxable year.

(C) All interest accruing to the credit funds received by a county or a municipality from the Property Tax Credit Fund must be used to provide an additional credit as provided in this section.

(D) If a municipality has adopted or adopts a redevelopment plan for a tax increment financed redevelopment project pursuant to Chapter 6 of Title 31, a deficiency resulting from the application of this section in the tax allocation fund or separate fund established to pay project costs must be funded from the municipality's allocation from the County/Municipal Revenue Fund each year so as to provide full funding for the project. A tax increment financing bond holder, agent, or trustee may enforce this requirement.

Section 4-10-50. (A) The revenue generated in a county area and set aside and allocated to the County/Municipal Revenue Fund must be distributed to the county and the municipalities in the county area as follows:

(1) fifty percent based upon the location of the sale;

(2) fifty percent based on population.

(B) The population of the county is the population of the county area, and the population of the municipalities is the population within the corporate boundaries of the municipalities in the county area.

Section 4-10-60. (A) At the end of each fiscal year and before August first a percentage, to be determined by the State Treasurer and not to exceed five percent of collections, must be withheld from those county areas collecting five million dollars or more from the sales and use tax authorized by this chapter, and that amount must be distributed to assure that each county area receives a minimum distribution. The difference between the minimum distribution and the actual collections within a county area must be distributed to the eligible units within the county area based on population as provided for in this chapter.

(B) The amount withheld from those county areas collecting five million dollars or more must be apportioned among the county and the municipalities in the county area in the same proportion as those units received remittances as provided in this chapter. An amount withheld in excess must be distributed back to the county areas whose collections exceed five million dollars based on the ratio of the funds available to the collections by each county area.

(C) As a condition precedent to a county area being subject to an assessment by the State Treasurer or being a recipient of revenue pursuant to this section, the county area must have implemented the sales and use tax as authorized by this chapter.

(D) The provisions of subsection (A) do not apply if the total number of county areas adopting the sales and use tax authorized by this chapter, which are projected by the Tax Commission to collect five million dollars or more, generated fifty percent or less during the most currently available fiscal year of the total statewide collections from the levy of a one percent sales and use tax, then those county areas generating five million dollars or more must be assessed five percent of the amount generated in the county area, and that amount must be used as a supplement to those county areas generating less than the minimum distribution. The supplement to those county areas generating less than the minimum distribution must be distributed so that each county area receives an amount equal to what its percentage of population bears to the total population in all of the county areas generating less than the minimum distribution which have implemented the sales and use tax authorized by this chapter. Once the amount of the supplement has been determined for each of the county areas to be supplemented, then the supplement must be distributed to the eligible units within the county area based on population as provided for in this chapter. However, the supplement to the county area combined with collections within the county area may not exceed the minimum distribution.

Section 4-10-70. No eligible unit within a county area may receive less from the distribution of the sales and use tax authorized by this chapter than it received in the previous fiscal year. However, if the amount of collections from the sales and use tax in the county area is less than the preceding fiscal year's collections, then the distributions to the eligible units within the county area must be reduced on a proportional basis.

Section 4-10-80. Annually by August fifteenth the State Treasurer shall report to the county chief administrative officers, county treasurers, and municipal clerks in those county areas which levy the sales and use tax authorized by this chapter the total amount of revenue collected as reported by the Tax Commission in the county area for the preceding fiscal year.

Section 4-10-90. (A) The Tax Commission shall administer and collect the local sales and use tax in the manner that sales and use taxes are administered and collected pursuant to Chapter 35 of Title 12. The commission may prescribe forms and promulgate regulations in conformity with this chapter, including tables prescribing the amount to be added to the sales price. The county shall notify the Tax Commission and the State Treasurer through delivery of a certified copy of a resolution adopted by the county following the referendum within ten days of the date of the referendum for the tax to be imposed at the beginning of the next quarter. Failure to deliver the resolution within the ten days shall cause a delay of the imposition until the first day of the subsequent calendar quarter. Notwithstanding the provisions of this subsection, the local sales and use tax must not be imposed before July first following the first referendum held pursuant to Section 4-10-30.

(B) All revenues collected by the Tax Commission on behalf of a county area pursuant to this chapter must be remitted to the State Treasurer to be credited to a Local Sales and Use Tax Fund which is separate and distinct from the state general fund. After deducting the amount of refunds made and the costs to the Tax Commission of administering the tax, not to exceed one-half of one percent of the fund or seven hundred fifty thousand dollars, whichever is greater, the State Treasurer shall deposit the revenue into the Local Sales and Use Tax Fund which consists of two separate funds: the Property Tax Credit Fund and the County/Municipal Revenue Fund. The revenue collected pursuant to this chapter must be allocated to each fund as follows:

(1) During the first year after the effective date of this act, sixty-three percent to the Property Tax Credit Fund and thirty-seven percent to the County/Municipal Revenue Fund.

(2) During the second year after the effective date of this act, sixty-five percent to the Property Tax Credit Fund and thirty-five percent to the County/Municipal Revenue Fund.

(3) During the third year after the effective date of this act, sixty-seven percent to the Property Tax Credit Fund and thirty-three percent to the County/Municipal Revenue Fund.

(4) During the fourth year after the effective date of this act, sixty-nine percent to the Property Tax Credit Fund and thirty-one percent to the County/Municipal Revenue Fund.

(5) During the fifth year after the effective date of this act, and each year thereafter, seventy-one percent to the Property Tax Credit Fund and twenty-nine percent to the County/Municipal Revenue Fund.

The allocation of revenue to each fund provided for in this section must remain uniform as to the percentage allocated to each fund regardless of the year in which a county adopts the local sales and use tax. The State Treasurer shall distribute monthly the revenues according to the provisions of this chapter.

(C) The Tax Commission shall furnish data to the State Treasurer and to the governing bodies of the counties and municipalities receiving revenues for the purpose of calculating distributions and estimating revenues. The information which may be supplied to counties and municipalities includes, but is not limited to, gross receipts, net taxable sales, and tax liability by taxpayers. Information by taxpayer received by appropriate county or municipal officials is considered confidential and is governed by the provisions of Section 12-54-240. A person violating this section is subject to the penalties provided in Section 12-54-240. If because of refunds by the Tax Commission or for any other reason, an overpayment is made to a county or municipality, the State Treasurer shall withhold from subsequent payments a sufficient amount to adjust for the overpayment and direct funds to the proper entity. However, all corrections of allocations from the Local Sales and Use Tax Fund must be made within the current fiscal year.

Section 4-10-100. Notwithstanding the date of general imposition of the local sales and use tax authorized pursuant to this chapter, with respect to services that are regularly billed on a monthly basis, the local sales and use tax is imposed beginning on the first day of the billing period beginning on or after the date of general imposition."

Estimated sales tax liability exclusion

SECTION 2. Section 12-35-580 of the 1976 Code is amended by adding at the end:

"For the purposes of this section the imposition of a local option sales and use tax provided for in Chapter 10 of Title 4 must not be taken into account."

Tax Commission administrative expenses

SECTION 3. (A) Of the funds appropriated in Part I of the 1990-91 General Appropriations Act under formula funded Aid to Counties and Municipalities, an amount not to exceed seven hundred fifty thousand dollars must be allocated to the South Carolina Tax Commission to defray the administrative start-up expenses incurred by the commission in fiscal year 1990-91 for the implementation of the local sales and use tax provided for in Chapter 10 of Title 4 of the 1976 Code and as added in Section 1 of this act. The State Treasurer shall withhold this amount from the income tax distribution with counties and municipalities sharing equally. No funds provided for in this section may be drawn upon by the commission before November, 1990. However, no funds may be drawn unless at least one favorable referendum has been conducted in which the electors of that county have approved the imposition of the tax. If the expenses are not incurred by the commission by May 31, 1991, the funds must be distributed to the counties and municipalities.

(B) The amount allocated to the commission pursuant to subsection (A) must be reimbursed by the commission from the administrative expense provided to the commission in Section 4-10-90(B) of the 1976 Code, as added in Section 1 of this act.

Time effective

SECTION 4. This act takes effect upon approval by the Governor.

Approved the 2nd day of February, 1990.