Tax Law

Incidentally, Damage Waivers Are Subject to South Carolina Sales Tax

The South Carolina Court of Appeals upheld the imposition of sales tax on sales of optional “waivers,” which were sold to renters and relieved them from liability of damaged or stolen rental property. Rent-A-Center East, Inc. and Rent Way, Inc. (collectively, the “Taxpayers”) operated retail stores in South Carolina from which customers could rent-to-own durable consumer products. In conjunction with the rentals, taxpayers could purchase waivers that released the customer of its liability if the property was damaged, lost, or stolen. The Taxpayers collected sales tax on the rentals of the consumer products, but not on the sales of the waivers. The Court found that the waivers were part of a bundle subject to sales tax under the “true object” test. Specifically, the waivers were subject to sales and use tax because the waivers and rental fees were “merely incidental” and “inextricably linked” to the sales of the taxable rentals. Rent-A-Center East, Inc., v. Dep’t of Revenue, No. 2016-001210 (S.C. Ct. App. Jan. 16, 2019).