The Palmetto Insider

The blog of the South Carolina Policy Council

Sales Tax Code Needs Dramatic Reform

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Last month, the Policy Council testified to the Tax Realignment Commission (TRAC) about sales tax reform in South Carolina.

Streamlining and simplifying the tax code is one of the key points addressed.

Case in point – take the following “explanations” pulled directly from the tax code:

Are sales of farm machinery to a farmer subject to the sales and use tax?

Sales of farm machinery meeting the requirements of the exemption in the sales and use tax law for farm machinery are exempt from the sales and use tax. If the sale of farm machinery does not meet the requirements of the exemption, the sale is taxable.

Does that provide clarity?

Let’s look at this other gem:

Do mopeds qualify for the maximum tax?

A moped that has pedals that allow for human propulsion does not qualify for the maximum tax.

A moped that does not have pedals and therefore does not allow for human propulsion qualifies for the maximum tax.

Why so much wording?

These kinds of sales tax complexities simply add to the compliance burden for companies.

With a lowered overall sales tax combined with no exemptions, we wouldn’t need such unintelligible language in the tax code.

South Carolina would be better off with a shorter, more concise tax code — much like Hong Kong, which has an entire tax code comprised in about 200 pages. By comparison, South Carolina’s Sales Tax Code is 306 pages — 52 pages alone dedicated just to FAQ.

The authors of Unleashing Capitalism show how Hong Kong has experienced a rapid growth in per capita income — rising from $3,757 in 1960 to $32,800 in 2002 — an annual growth rate of 5.3 percent. Meanwhile, South Carolina’s annual growth rate is 1.2 percent and its per capita income is $31,884.

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Written by SC Policy Council

December 29, 2009 at 9:26 am

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