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COMMITTEE REPORT
March 31, 2022
H. 3709
Introduced by Reps. J.L. Johnson, M.M. Smith, Brawley, Govan, Pendarvis, Tedder, Matthews, Henegan, McDaniel and Henderson-Myers
S. Printed 3/31/22--H.
Read the first time January 26, 2021.
To whom was referred a Bill (H. 3709) to amend Section 12-36-2630, Code of Laws of South Carolina, 1976, relating to the seven percent sales tax on accommodations, so as to change the, etc., respectfully
That they have duly and carefully considered the same and recommend that the same do pass with amendment:
Amend the bill, as and if amended, SECTION 1, by striking Section 12-36-2630(2) and inserting:
/ "(2) a one percent tax, which must be credited as provided in Section 59-21-1010(B). The one percent tax specified in this item (2) does not apply to sales to an individual eighty-five seventy-eight years of age or older purchasing tangible personal property for his own personal use, if at the time of sale, the individual requests the one percent exclusion from tax and provides the retailer with proof of age; and" /
Renumber sections to conform.
Amend title to conform.
G. MURRELL SMITH, JR. for Committee.
Explanation of Fiscal Impact
State Expenditure
This bill lowers the age of individuals exempt from paying 1 percent of the total 7 percent tax on accommodations from age 85 or older to age 70 or older. RFA anticipates that DOR will be able to administer the amended exemption with existing staff and resources, as the department administers several sales tax exemptions as part of the department's regular duties. Therefore, this bill is not expected to impact expenditures for the agency.
State Revenue
The following taxes compose the 7 percent sales tax on accommodations:
• a 4 percent tax credited to the state general fund,
• a 1 percent tax credited to the EIA Fund, and
• a 2 percent local accommodations tax credited to the political subdivisions of the State.
Currently, individuals aged 85 years or older are exempt from paying the 1 percent tax credited to the EIA Fund. This bill would amend Section 12-36-2630(2) to exempt individuals aged 70 or older from paying this tax. The table below provides the total accommodations tax revenue received in recent years and our current forecast for FY 2020-21.
Fiscal Year Accommodations Tax Revenue (2%)
FY 2018-19 $75,229,292
FY 2019-20 $65,856,498
FY 2020-21 (estimate) $56,300,000
Based on estimates provided by the U.S. Census Bureau, approximately 2.4 percent of travel- aged individuals, defined as those age 18 and older, are currently exempt from the 1 percent EIA tax on accommodationsi. This legislation would increase this number to 14.1 percent, meaning 11.7 percent of individuals would be newly exempt from paying 1 percent of the total 7 percent tax on accommodations.
Because business closures resulting from the COVID-19 pandemic significantly impacted collections in FY 2019-20 and FY 2020-21, for this analysis we use FY 2018-19 collections to estimate FY 2021-22, assuming a return to historical levels. If consumers do not return to historical travel patterns following the pandemic as quickly, this estimate would be affected. Further, according to the S.C. Department of Parks, Recreation, and Tourism's Economic Contribution of Tourism in South Carolina: 2019 Tourism Satellite Account report, 71.4 percent of gross tourism spending is by residents, out-of-state visitors, and international visitors, with the remaining 28.6 percent of spending by businesses and governmental entitiesii. This analysis assumes that these values are proportional to spending on accommodations. Therefore, we have adjusted the impact downward by 28.6 percent, as travel related to government and business is unlikely to benefit from this 1 percent exemption.
Multiplying the FY 2018-19 local accommodations tax revenue by 11.7 percent, adjusting down to discount this figure for business and government, and dividing by 2 to account for the 1 percent tax rate for the EIA yields an estimated reduction in EIA Fund revenue of $3,142,000 beginning in FY 2021-22.
Frank A. Rainwater, Executive Director
Revenue and Fiscal Affairs Office
TO AMEND SECTION 12-36-2630, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE SEVEN PERCENT SALES TAX ON ACCOMMODATIONS, SO AS TO CHANGE THE AGE THAT A CERTAIN ONE PERCENT SALES TAX DOES NOT APPLY FROM INDIVIDUALS OVER THE AGE OF EIGHTY-FIVE TO INDIVIDUALS OVER THE AGE OF SEVENTY.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 12-36-2630(2) of the 1976 Code is amended to read:
"(2) a one percent tax, which must be credited as provided in Section 59-21-1010(B). The one percent tax specified in this item (2) does not apply to sales to an individual eighty-five seventy years of age or older purchasing tangible personal property for his own personal use, if at the time of sale, the individual requests the one percent exclusion from tax and provides the retailer with proof of age; and"
SECTION 2. This act takes effect upon approval by the Governor.
This web page was last updated on March 31, 2022 at 7:32 PM