Burr & Forman

05.4.2021   |   Blog Articles, Sales and Use Tax, South Carolina Tax, Tax Law Insights

Cigarette “Buydown” Payments to Retailers Excluded from South Carolina Sales Taxes

Tobacco manufacturers and distributors have long made refund/rebate payments to retailers for the retailer’s purchase of cigarettes and other tobacco products from the manufacturer, provided the retailer reduces the price of the cigarettes and other tobacco products sold to the retailer’s customers.

In 2020, the South Carolina Department of Revenue issued SC Revenue Ruling #20-3 (“Buydowns – Tobacco Company Payments to Retailers”), and related Information Letter #20-35, administratively determining that these “buydown” payments from the manufacturer/distributer should be subject to South Carolina sales tax when received by the retailer.

The South Carolina General Assembly statutorily rejected this administration position of the South Carolina Department of Revenue and South Carolina law now provides that buydown payments received by the retailer are excluded from sales tax.  The new statute provides that a “buydown” means an agreement between a retailer and a manufacturer or wholesaler in which the retailer receives a payment from the manufacturer or wholesaler that requires the retailer to reduce the sales price of the manufacturer’s or wholesaler’s product to the retail purchaser.

The South Carolina Department of Revenue recently issued SC Information Letter #21-12 acknowledging this new exclusion from sales tax and announcing that its prior and inconsistent administrative ruling has been withdrawn.


More Recent Posts

Subscribe to our Blog RSS Feed

Receive the latest Burr news and insights delivered straight to you.

Related Attorneys