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DME is No Longer Exempt from Sales Tax in South Carolina

Published in Government Relations on August 02, 2024

DME providers in South Carolina (SC) have been exempt from paying sales tax to the state of SC since 2007, provided that the items received by a patient 1) are paid for by either the funds of Medicare of South Carolina Medicaid, 2) are sold by a provider who holds a South Carolina retail sales license and 3) are provided by a supplier whose principal place of business is located in South Carolina, and 4) meet the definition of DME. The language of that tax exemption can be found in S.C. code 12-36-2120(74).

In a June 26, 2024 ruling, the Supreme Court of South Carolina determined that the provision which exempts DME from being subject to sales tax in SC to be unconstitutional, arguing that the language of the original sales tax exemption was unfair and discriminatory against interstate commerce. Under the existing exemption language, out-of-state providers were required to pay sales tax while in-state providers were not. The Court found that the existing exemption language violated the Commerce Clause, and therefore should be stricken and removed altogether from the current code.

Some important takeaways for providers who offer products and services in South Carolina include:

  1. DME sales after June 26, 2024 are subject to sales tax, and all providers, in state or out of state, will need to collect and/or remit sales tax (6%) to the state on the DME sales transactions in South Carolina which occur after that date.
  2. The SC Supreme Court said they are open to allowing a new sales tax exemption to be passed and implemented in the state, it would just have to be worded differently than the previous language that was just voided. Working alongside SC providers and other industry stakeholders, VGM can certainly assist in drafting new tax exemption language in the hopes of getting it through the legislative process and ultimately passed and implemented. That process will take some time (possibly 1-2 years).
  3. Providers who are based outside of South Carolina, and who have been paying taxes all along, could be eligible for a refund from the state of SC. In their ruling and subsequent informational letter, the SC Supreme Court affirmed a circuit court’s previous decision to issue refunds to out-of-state providers who had paid sales tax into the state on their DME sales. Providers interested in requesting a refund can use Form ST-14 to initiate that process.

The removal of the tax exemption for DME will certainly impact DME providers who do business in South Carolina. We will strive to get a new exemption established going forward. In the meantime, providers can certainly have discussions with their payer sources, including Medicaid, Medicaid MCOs, private payers, etc. regarding what the removal of the exemption means to their business and what needs to happen to offset the impact of this change. If providers can’t afford to absorb the additional costs incurred by this change, they may need to request a fee schedule or process adjustments to offset these additional costs.

VGM will continue to monitor this change and will update you regarding any additional changes or information that comes to light regarding the removal of the sales tax exemption for DME in South Carolina. Additional information regarding this topic can also be found in Informational Letter 24-10.

TAGS

  1. billing & reimbursement
  2. dmepos
  3. regulatory
  4. vgm government

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