South Carolina Issues Guidance on Datacenter Exemption

Tuesday, September 3rd, 2013

South Carolina

The South Carolina Department of Revenue has released a revenue ruling discussing the exemption for computers and electricity used in a datacenter. In 2012, South Carolina enacted an exemption for sales of computers and electricity used in datacenters. The revenue ruling addressed several aspects of this exemption.

The exemption applies to sales of computers, computer equipment, computer hardware, computer software, and electricity used by a datacenter. A "datacenter" is a facility that provides infrastructure for hosting or data processing services. The facility must have fully redundant power and cooling systems.

For a taxpayer's purchases to qualify for this exemption, the datacenter must meet certain requirements. It must create and maintain at least 25 full-time jobs at the datacenter, and these jobs must meet certain compensation requirements. The datacenter must maintain these jobs for three years after the datacenter has been certified as having met investment and jobs requirements. The taxpayer must also invest at least $50 million in real and personal property over a five year period.

Before a taxpayer can use this exemption, it must notify both the Department of Revenue and the Department of Commerce in writing. The Department of Revenue will issue an exemption certificate for the datacenter. If the certificate is used to make purchases that do not qualify for the exemption, the purchaser is liable for any taxes, interest, and penalties due.

For the electricity exemption, only electricity used in the "datacenter" is exempt. Electricity used in the following areas, for example, does not qualify for exemption: administrative offices, cafeterias, elevators used for carrying personnel, first aid rooms, maintenance shops, parking lots, storage warehouses, supervisory offices, and supply rooms.

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TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

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