Chapter 4

Exemptions and Refunds

The South Carolina cigarette and tobacco products taxes contain several exemptions and a refund provision. The following briefly describes these exemptions and the refund provision.
A. Out-of-State Sales or Dispositions – Exemption

Cigarette Tax

The cigarette tax is not due on cigarettes shipped outside of South Carolina to a wholesaler, retailer or user or consumer by a wholesaler or retailer who is liable for the cigarette tax (i.e., the wholesaler or retailer who first received the untaxed cigarettes in South Carolina).1

Note: Cigarettes shipped out-of-state by any other person are subject to the cigarette tax (e.g., a retailer not liable for the tax or an individual who purchased the cigarettes for use or consumption).

Tobacco Products Tax

The tobacco products tax is not due on tobacco products shipped outside of South Carolina to a wholesaler, retailer or user or consumer by a wholesaler or retailer who is liable for the tobacco products tax (i.e., the wholesaler or retailer who first received the untaxed tobacco products in South Carolina).2

Note: Tobacco products shipped out-of-state by any other person are subject to the tobacco products tax (e.g., a retailer not liable for the tax or an individual who purchased the tobacco products for use or consumption).

Note: Another provision allows a refund for cigarettes and tobacco products sold and shipped to a regular dealer in such articles in another state. The South Carolina seller is entitled to the refund if the South Carolina seller provides to the Department (1) an affidavit that the cigarettes or tobacco products were so sold and shipped to an out-of-state dealer and (2) a written statement from the out-of-state retail dealer (including the name and address of the out-of-state retail dealer) that he has received the cigarettes or tobacco products and stating the amount of South Carolina tax paid on the cigarettes or tobacco products. This refund may only be claimed by the person legally liable for the cigarette or tobacco products tax and must be made by using Form L-1025 – Application for Tobacco Tax Refund.

B. Sales to the United States Government – Exemption

The following sales of cigarettes and tobacco products are exempt from the cigarette and tobacco products taxes:
(1) sales to the United States Government;
(2) sales to a United States Government instrumentality for Army, Navy, Marine or Air Force purposes and delivered to a place lawfully ceded to the United States; and
(3) sales to a United States Government instrumentality for Army, Navy, Marine or Air Force purposes and delivered to a ship belonging to the United States Navy for distribution and sale to members of the military establishment only.
C. Sales to Other Licensed Wholesalers or Licensed Retailers

Sales of cigarettes and tobacco products are exempt when sold by a South Carolina wholesaler or retailer licensed to purchase, sell and distribute cigarettes and tobacco products to another South Carolina wholesaler or retailer licensed to purchase, sell and distribute cigarettes and tobacco products.
D. Sales to Ships Regularly Engaged in Foreign or Coastwise Shipping – Exemption

Sales of cigarettes and tobacco products are exempt when sold and delivered to ships regularly engaged in foreign or coastwise shipping between points in South Carolina and points outside of South Carolina.
E. Leaf Tobacco – Exemption

Sales of unprocessed leaf tobacco (i.e., tobacco not prepared in a manner suitable for chewing or smoking) are not subject to the tobacco products tax.

For example, whole leaf tobacco, or decorative tobacco hands and decorative tobacco braids made of whole leaf tobacco, sold for ceremonial purposes are not subject to the tobacco products tax. However, if the person purchasing the whole leaf tobacco, or decorative tobacco hands and decorative tobacco braids made of whole leaf tobacco, processes such tobacco for sale in South Carolina, then such person is liable for the tobacco products tax.

F. Damaged Cigarettes and Tobacco Products - Refund

The cigarette tax and the tobacco products tax paid on cigarettes and tobacco products “which by reason of damage become unfit for sale and are destroyed by the dealer or returned to the manufacturer” may be refunded. However, the refund request must be filed with the department by the person legally liable for the cigarette tax within three years of the time the tax return was filed and must be made by using Form L-1025 – Application for Tobacco Tax Refund