Opinion ID: 1253251
Heading Depth: 1
Heading Rank: 4

Heading: Wholesale v. Retail

Text: Tax Commission contends that Taxpayer's sales are retail rather than wholesale since its capacity and facilities are being used and consumed by the carriers in servicing their customers rather than being resold. We disagree. Wholesale sales are not subject to sales tax. S.C.Code Ann. § 12-36-120 (Supp. 1993), defines wholesale as follows: Wholesale sale and sale at wholesale mean a sale of: (1) tangible personal property to licensed retail merchants, jobbers, dealers, or wholesalers for resale, and do not include sales to users or consumers not for resale; (2) tangible personal property to a manufacturer or compounder as an ingredient or component part of the tangible personal property or products manufactured or compounded for sale; (3) tangible personal property used directly in manufacturing, compounding, or processing tangible personal property into products for sale; (4) materials, containers, cores, labels, sacks, or bags used incident to the sale and delivery of tangible personal property, or used by manufacturers, processors, and compounders in shipping tangible personal property. To determine if a transaction is wholesale or retail, the threshold consideration is whether the buyer purchased for resale or for its own use. Slater Corp. v. S.C. Tax Commission, 270 S.C. 405, 242 S.E.2d 439 (1978). In Slater, the Court held that the sale of food to colleges for resale in cafeterias was wholesale. The Court noted that: (1) the students bought the food from the college, not Slater; (2) the college charged more per meal than it paid Slater for the food; (3) the students contracted with the college, not Slater; and (4) the college refunded students if necessary and determined who was entitled to purchase meals. See also ARA Services v. S.C. Tax Commission, 271 S.C. 146, 246 S.E.2d 171 (1978), cert. denied 439 U.S. 1048, 99 S.Ct. 725, 58 L.Ed.2d 707 (sale of meals to charities was not wholesale since the meals were donated, not resold, to indigent children); Stanton Quilting Co., Inc. v. S.C. Tax Comm., 281 S.C. 133, 314 S.E.2d 844 (Ct.App.1984) (sale of quilts to churches for resale in fund-raising projects is a wholesale sale). Here, as in Slater, supra, the purchaser (carrier), not the Taxpayer, contracts with the customer. The carrier purchases the telecommunication services from Taxpayer in bulk and then resells to the individual customer in smaller increments. The customer is charged more for the telecommunication service than what was paid by the carrier. Taxpayer has no contact with or responsibility to the customer. Accordingly, we find reasonable evidence supporting the trial court's finding that Taxpayer's sale of services to the carriers is wholesale and, therefore, exempt from sales tax. We affirm the judgment rendered to Taxpayer for a tax refund.