S.C. Supreme Court hears arguments on sales tax exemptions

Legal fight questions $2.7 billion in exemptions

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COLUMBIA — The South Carolina Supreme Court heard arguments Tuesday in a case that challenges the state’s $2.7 billion in sales tax exemptions on things ranging from portable toilets to sweetgrass baskets.

State lawmakers have stitched together a patchwork of sales tax caps and exemptions so large that it undermines the statute that is supposed to fund education and brings in only $2.2 billion in revenues, argued attorneys seeking to end the practice.

“We have a state sales tax statute for education and then we have exemptions that have nothing to do with education,” attorney Camden Lewis argued. Such “special legislation” is considered illegal in South Carolina, Lewis argued.

But attorneys for the state argued the Legislature acted properly in approving such exemptions.

“These are policy matters for the General Assembly. These are political questions,” said Assistant Deputy Attorney General Emory Smith.

Smith and lawmakers who joined in to argue against the suit said the case is a political maneuver and not a legal matter for the high court to decide.

All of the justices joined in repeatedly questioning attorneys arguing against the exemptions, asking whether there was any legal standing to even bring such a case.

Chief Justice Jean Toal queried the state’s attorneys why sales from the state’s 300-year-old tradition of making sweetgrass baskets were exempt, but not the pottery made by the state’s Catawba Indians.

Another justice wondered why one of the attorney’s arguing against the exemption only pays a $300 sales tax on his “six-figure car” because of a cap, while his legal secretary pays the same $300 tax on a vehicle that costs less than $20,000.

“These exemptions are constitutional,” insisted attorney Milton Kimpson. Every exemption has a rational basis and for the court to find otherwise would intrude upon the Legislature’s lawmaking role, he added.

The exemptions exist on items like prescription drugs, residential power and water bills, groceries, guns, lottery tickets, and the sale or rental of portable toilets.

Lewis argued that since the law was set up to fund education, only exemptions that deal with education would be proper – such as for textbooks. The General Assembly has the prerogative to set a proper system of tax laws and specific exemptions to those laws, but it has chosen not to do so, Lewis said.

Noting that House Speaker Bobby Harrell, who joined in against the suit, was sitting in the courtroom, Lewis said, “He can do that if he has enough nerve.”

Harrell, speaking to reporters outside the courtroom after the arguments, called the suit a backdoor ploy by the Democratic Party to raise taxes.

Dick Harpootlian, who sat next to Lewis and helped bring the lawsuit, said his position as chairman of the Democratic Party in the state had nothing to do with his work as an attorney on the case.


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