The sales tax break that wasn’t – Wacky Tax Wednesday

Longevity runs in my family, so I view states that provide sales tax perks for elderly people with interest. Who knows? Maybe I’ll up and move when I’m pushing 90.

South Carolina is one of those states. It reduces the state sales tax by 1% for persons 85 years of age and older, meaning they’re entitled to pay 5% instead of 6% on purchases of tangible personal property and communications services (phone, cable services, etc.), and 6% instead of 7% on purchases of accommodations. Local sales taxes apply in addition to the state rate.

What it is

The 1% exclusion from state sales tax for individuals 85 and older has been in effect since August 15, 2001. It excludes qualifying elderly people from paying the part of the state sales tax designated for the South Carolina Education Improvement Act of 1984 Fund

[See Section 59-21-1010(B) and Section 12-36-2630]. There’s information about it on the South Carolina Department of Revenue website, though it doesn’t exactly jump out at you.

Since most people don’t make a habit of perusing state department of revenue websites, retailers are required to post signage about this sales tax exemption. Failure to do so can lead to fines and even revocation of a retail license. The department explains:

“A retailer who fails to post the required signs is subject to a penalty of up to $100 for each month or portion of the month the sign or signs are not posted. Continued failure to post the signs after a written warning from the Department of Revenue may result in revocation of the retailer’s retail license in accordance with Section 12-54-90. Failure to post the signs does not give rise to a cause of action by an individual eighty-five years of age or older who failed to request the exclusion and provide proof of age at the time of sale.”

No form is required to claim the exclusion. There’s no secret handshake. However, there are certain requirements:

1. The individual must purchase the tangible personal property himself or herself;
2. The tangible personal property must be purchased for his or her own personal use;
3. The purchaser must request the exclusion at the time of the sale; and,
4. The purchaser must provide the retailer with proof of age.

The exemption/exclusion does create an extra layer of complexity for retailers, who must report the 1% tax reduction for purchases made by individuals age 85 or older. As step-by-step instructions remind, “Before any deductions may be itemized… the gross proceeds of sales must be reported…. To claim a deduction on the state tax return, it should be identified as a type of deduction and the dollar amount.” Additional details.

Presumably the exclusion applies to Internet sales and phone and catalog sales as well as in-store sales. Yet buyers still have to furnish proof that they are the ones making the purchase and show proof of age. They may also have to explain to sellers what this exclusion is (perhaps citing South Carolina law). Sounds like more trouble than it’s worth to shave 1% off the sales tax. Let’s hope they don’t have to go through that to obtain the exclusion for communications services.

On the ground in South Carolina

Nonetheless, the exclusion is touted in South Carolina aging literature. The South Carolina Lieutenant Governor’s Office on Aging publishes a list of benefits available to senior citizens in South Carolina and the 1% sales tax exemption for persons 85 and older tops it. It adds that cards identifying the bearer as eligible are available from the Department of Revenue, though I can find no mention of such cards on the department website. The exclusion itself isn’t cited in the South Carolina Senior Citizen’s Handbook (also published by the Lieutenant Governor’s Office). However, it is mentioned on real estate websites aimed at the 55 plus crowd, and, I was happy to see, on the South Carolina Department of Motor Vehicles instructions for completing the application for title.

I happen to know a nonagenarian in South Carolina, so I asked her daughter if they were aware of the reduced rate of sales tax her mom’s been entitled to for the last 5+ years. She said she learned of the exclusion about a year ago (apparently the obligatory signs posting the exclusion are discretely placed) but doesn’t bother with it when she shops for her mother. In truth, her mother isn’t able to take advantage of the exclusion most of the time because she’s too frail to go shopping (see above, #1). My South Carolina contact doesn’t know of anyone who has asked for the exclusion, but she admits that it’s never been a topic of discussion.

There is at least one elderly gentleman from South Carolina who takes advantage of the exclusion, to the dismay of his fellow shoppers. His experience in asking for it? “It resulted in a lot of embarrassment as check-out clerks had to call their managers, etc. It’s a great way to make others in line hate you.” Still, he thinks it’s worth the hassle to save $1 for every $100 spent. Though many others of his age may share that viewpoint, how many have the energy to seek it out?

Cooler climes

Torrential rainfall and extreme summer heat aside, the climate in South Carolina is pleasant. The state boasts mountains and seacoast and historic charm, and I love that southern drawl. Still, if I move when I reach my sunset years, I may head north to Alaska instead. There’s no state sales tax, and many of the localities that impose local sales taxes provide a full exemption for seniors much younger than 85. Could be worth the long winter nights.