South Carolina considers new sales tax holidays for 2026

• The South Carolina Legislature may create a small business sales tax holiday. The tax-free period would last for one month, and qualifying small businesses would get to select which month they would offer it.
• South Carolina could establish a disaster preparedness sales tax holiday to be held each spring starting in 2026.
• South Carolina’s annual sales tax holiday is currently held during one weekend in August. It could be extended to the entire month of August.

A sales tax holiday is a period when products or services ordinarily subject to sales tax are temporarily exempt.

Tax-free periods can last for a day, a weekend, a week, or even longer. They can apply to all products and applicable sales taxes (i.e., state and local taxes), or only to certain products and state or local sales taxes. Most states place price caps on qualifying products.

About 20 states currently plan to hold one or more sales tax holidays in 2026.

South Carolina House Bill 4619 exempts from sales and use tax “sales made at a small business located in this State during one month each year of the small business’s choosing.” Interestingly, any month will do so long as the small business lets the South Carolina Department of Revenue know by October 1 of the previous year which month it has chosen. This sales tax holiday would not apply to remote sellers.

To qualify to participate in the small business tax holiday, a business must be considered a “small business” by the U.S. Small Business Administration (SBA) and the North American Industry Classification System (NAICS). Per the SBA, “Most manufacturing companies with 500 employees or fewer, and most non-manufacturing businesses with average annual receipts under $7.5 million, will qualify as a small business.” The SBA matches small business size standards to NAICS codes.

As the act would take effect upon approval by the governor, it’s unclear whether any business would be able to offer a small business sales tax holiday in 2026 if the bill is enacted. Small businesses could be required to wait until 2027, so they can share the necessary information with the Department of Revenue by October 1, 2026.

House Bill 4817 seeks to establish an annual disaster preparedness sales tax holiday. In 2026, the tax-free weekend would be held from 12:01 a.m. Friday, May 2, through 11:59 p.m. Sunday, May 4. For 2027 and subsequent years, the tax holiday would take place the last full weekend in April, from 12:01 a.m. Friday until 11:59 p.m. the immediately following Sunday.

The emergency supply items listed here would be exempt from South Carolina sales tax during the disaster preparedness sales tax holiday, provided the retail sales price per item is $60 or less. Items normally sold in pairs or packages may not be separated to qualify for the temporary exemption.

• AAA-cell, AA-cell, C-cell, D-cell, 6-volt, or 9-volt batteries (except coin batteries, automobile batteries, and boat batteries)
• Cellular phone batteries or cellular phone chargers
• Duct tape
• Fire extinguishers, smoke detectors, or carbon monoxide detectors
• Gas or diesel fuel tanks or containers that can hold five gallons or less
• Ground anchor systems including, but not limited to, bungee cords, rope, or tie-down kits
• Nonelectric food storage coolers or water storage containers; artificial ice, blue ice, ice packs, or reusable ice
• Nonelectric can openers
• Portable self-powered light sources, including battery-powered flashlights, lanterns, or emergency glow sticks
• Portable self-powered or battery-powered radios, two-way radios, weather band radios, or NOAA weather radios
• Plywood, window film, or other materials specifically designed to protect window openings
• Self-contained first-aid kits
• Tarpaulins, plastic sheeting, plastic drop cloths, or other flexible, waterproof sheeting
   

The first $1,000 of the sales price of portable generators and power cords would also be exempt.

If enacted, the disaster preparedness sales tax holiday would apply to state and applicable local sales taxes.

Senate Bill 728 would extend the current South Carolina tax-free weekend to the entire month of August. The tax-free period would commence on August 1 at 12:01 a.m. each year and conclude at midnight on August 31.

Nothing else about the annual sales tax holiday would change.

The three proposed sales tax holidays would impact retailers and sellers in different ways.

The small business sales tax holiday could potentially stimulate sales for qualifying businesses. However, it would also require those businesses to account for the tax holiday in their point-of-sale (POS) and ecommerce systems. This would likely increase compliance costs, which could offset any gains.

The disaster preparedness tax holiday would require businesses that sell eligible goods to update their sales systems so that they don’t apply sales tax to qualifying goods. While this could increase costs, businesses may also experience an increase in sales of qualifying goods.

Extending the annual South Carolina tax-free weekend to one month may not pose too much of a compliance burden for businesses that already have systems in place to exempt qualifying transactions for a weekend. And these businesses could see a bump in sales during the entire month of August, at least for qualifying goods.

Businesses would be wise to pay attention to the bills described above, and to generally monitor the South Carolina Legislature until it adjourns on May 7, 2026. If any of the above bills become law, retailers may need to act fast.

In the meantime, now is a good time to assess how nimble your sales tax compliance systems are. If you were required to quickly turn sales tax on or off for particular products, could you do so?

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