SOUTH CAROLINA SALES TAX AUDIT DEFENSE

Like most states, South Carolina regularly audits businesses for sales tax.  The audit typically starts with a phone call or a letter from the Department of Revenue. However, you have been contacted, you can be audited by the Department for 36 months from the date a return was filed by the South Carolina Department of Revenue for sales and use tax. The state can go back even farther back if sales and use tax returns have not been filed. The slightest error on a type of transaction, when multiplied over three years, can add up to a considerable amount of sales tax liabilities. Often times a sales tax audit can be driven purely by simply not having the correct paperwork can result in a huge assessment.

In South Carolina, whether contacted by phone or in writing, a sales tax audit can be a dreadful, lengthy and stressful process for a business. Following the initial contact there, an initial meeting is set to discuss the nature of the business that has been audited. After an audit plan is developed, the auditor will perform an examination by comparing the taxpayer’s books and records to the items reported on the sales tax return. Upon completion of the examination, the Department will issue a report with adjustments. It is important to know that you have the right to have an attorney represent you during your audit by completing a power of attorney form.

From a very general view, South Carolina taxes the sales or use of tangible personal property in the state, certain digital goods, and the enumerated services. South Carolina also taxes laundering services, dry-cleaning services, dying services, and pressing services. Importantly, as a result of Wayfair, South Carolina has enacted similar legislation to those who sell into South Carolina but do not have a physical presence. In short, if you or your client’s business sells more than $100,000 or over 200 separate transactions into South Carolina, it may have sales and use tax collection obligations.