COLUMBIA — A South Carolina House panel passed a bill Tuesday that would eliminate about two-thirds of the state’s 78 sales tax exemptions, but not before restoring several items that were on the list to be taxed.
The subcommittee restored exemptions on items like packaging used by manufacturers, telephone toll charges, newsprint and electricity used by television broadcasters and also put back in the bill rewards for retailers that pay sales taxes early before passing it on a 4-1 vote.
The measure would still begin charging sales tax on items such as portable toilets, textbooks and lottery tickets. It does not touch sales tax exemptions on groceries, water service, electricity and medicine because Republican Rep Tommy Stringer of Landrum, who has led the review, said charging sales taxes on those necessities would hurt most taxpayers.
House Republicans are pushing the bill, which moves on to the Ways and Means Committee. But its chances of passing this year are tenuous at best. Bills have less than two weeks this session to pass at least one chamber so they can more easily be considered by the other chamber. Also, the issue hasn’t gotten much traction in the Senate.
Supporters of the measure say the most important thing is to put the 78 sales tax exemptions on the block so they can each be reviewed on their own merits. Rep. Gary Simrill said the number of exceptions ballooned because often lawmakers would pass a new exemption without any consideration to what it did to South Carolina’s overall tax policy or the exemptions already in the law.
“I think what we are looking for is fairness,” the Rock Hill Republican said.
Sponsors said they will reduce the overall sales tax by the same amount raised by getting rid of the exemptions. Current estimates put that at about half a penny on the dollar.
More than a dozen representatives from groups whose sales tax exemptions were threatened spoke at Tuesday’s meeting. The remarks often followed the same script – thank the subcommittee for taking up such a tough issue, then talk about how losing the exemption would cost jobs and either move businesses out of the state or keep other firms from locating in South Carolina.
“These exemptions do more than just provide a tax break for our farmers and foresters, they often contribute to the difference between profitability and a loss,” said Jack Shuler, the president of the Palmetto Agribusiness Council, who convinced lawmakers to keep exemptions on containers for agriculture and dairy products and building materials for poultry houses and barns.
Publishers and others asking to maintain the exemption on newsprint and newspapers also added that the loss of jobs that would have to happen if their costs went up to pay sales tax would mean smaller communities in the state could lose the local paper, which is often the only source of news.
“The important thing is information not be taxed. Nobody buys the newspaper for the paper and ink,” said South Carolina Press Association Executive Director Bill Rogers.
The state’s broadcasters are in a similar spot. They convinced lawmakers to keep an exemption on their supplies, technical equipment, machinery and electricity. Rich O’Dell with the South Carolina Broadcasters Association estimates an average television station in the state spends at least $20,000 a month in power just to stay on the air and produce programming.
Members of the subcommittee said they want to make more tweaks in the bill before it advances any further, including trying to lump some of the exemptions they want to keep, like the ones concerning broadcasters and newspapers, into broader categories that will help the sales tax law make more sense.