The South Carolina Department of Revenue (DOR) issued a draft Revenue Ruling to provide guidelines to counties who are considering imposing, or are currently imposing, a transportation tax. Comments on the draft Revenue Ruling can be submitted until April 12, 2022, and a conference, if requested, will be held on April 19, 2022 at 11:00 am at DOR’s main office in Columbia.

The draft Revenue Ruling follows the South Carolina Supreme Court decision in Richland County and the Central Midlands Regional Transit Authority v. S.C. Department of Revenue, 811 S.E.2d 758 (2018) which determined DOR had administrative, oversight, and enforcement responsibilities related to the use of transportation tax funds and SC Information Letter #18-10 issued by DOR in 2018 that provided guidelines on the use of transportation tax funds.

The draft Revenue Ruling largely mirrors the guidelines contained in SC Information Letter #18-10. By issuing the guidance in the form of a Revenue Ruling instead of an information letter, however, a court will provide greater deference to the guidelines established by DOR. Counties should carefully review the guidance to determine whether any actual or planned transportation tax expenditures fall outside of the guidelines, and provide comments on the draft Revenue Ruling to address any perceived deficiencies in the guidelines.

Notably, the draft Revenue Ruling indicates DOR has established a Compliance Audit Section responsible for audits of local sales and use taxes administered by DOR. Counties should be prepared for increased audits of expenditures of transportation tax funds, and other local sales and use taxes administered by DOR (e.g. local option tax, education capital improvement tax, capital project tax, school district tax, and the tourism development tax).

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