The South Carolina House Tax Policy Review Committee introduced its sales tax proposal on Thursday, May 2. It was read for the first time and referred to the Ways and Means Committee.
Bill H. 4532 (Reps. Pope, Clemmons, Daning, Taylor, and others) is similar to a plan proposed by the TRAC Commission a decade ago to essentially eliminate all sales tax exemptions.
The plan would lower the state sales tax from 6% to 3%. In return, taxes would begin on electricity, food and medicine at 25% of the gross proceeds of sales, which would roughly equate to a sales tax rate of 1.25%.
The bill addresses a full range of services to be taxed, including offices of certified public accountants, tax preparation services; payroll services and “other accounting services.”
House Ways and Means Tax Subcommittee Chairman Alan Clemmons (R-Myrtle Beach) testified that he plans to hold public hearings around the state this summer and fall on the bill in preparation for debate in the legislature next year.
SCACPA opposes any effort to enact a state sales or use tax on accounting services. Application of such a tax penalizes individuals and businesses seeking to comply with state law, generates an administrative burden for the business community and creates an economic disadvantage for businesses to move to South Carolina or to supply services within the state. As this bill is debated, SCACPA will alert its members and encourage you to get in touch with legislators to voice your opinion.
The bill will not become law this year and it will not yet be debated in subcommittee. Legislative “crossover deadline” rules require that for bills to be considered by the opposite chamber this session, all bills must receive third and final reading by April 10. Bills that do not meet this deadline can still be debated but must reach a much higher threshold for debate by receiving a two-thirds vote of the body. As this is the first year of a two-year legislative term, any bills that do not become law this year will retain their place when the legislature meets in January for the second year of the session.
The bill’s progress can be tracked here.
When the final report of the TRAC Commission was filed in December 2010 and set parameters for service taxes, it explained that it sought to avoid taxing business-to-business services. Areas targeted by the TRAC 2010 report to be taxed would include personal care, residential repairs, document preparation, storage facilities and taxidermy. The full report can be read here.
This 14-member ad hoc committee was created in 2016 by Speaker of the House Jay Lucas and is responsible for reviewing South Carolina’s current tax code and submitting suggestions for reform to the Speaker. The committee’s objective since formation is to provide recommendations that make South Carolina’s tax code fairer, broader and flatter.
The SC House Tax Policy Review Committee’s meeting agenda and video archives dating to August 2016 can be found here.