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When it comes to service contracts, there`s often confusion about whether they`re taxable or not. In South Carolina, the general rule is that service contracts are subject to sales tax.

Under South Carolina law, a service contract is defined as “a contract or agreement that obligates a person to maintain or repair tangible personal property or to perform services in connection with the tangible personal property.” This can include everything from extended warranties on electronics to maintenance agreements for vehicles.

The state of South Carolina imposes a 6% sales tax on the sale of tangible personal property and certain services. This includes service contracts that meet the definition outlined above. However, there are a few exceptions that may apply.

One exception is for service contracts that are sold as part of a product. For example, if you purchase a new car and the dealership offers an extended warranty as part of the sale, that warranty may not be taxable. This exception only applies if the warranty is included in the sale of a product and is not separately stated on the invoice.

Another exception is for service contracts that cover real property. For example, if you purchase a service contract for maintenance on your home`s HVAC system, that contract may not be taxable.

It`s important to note that not all service contracts are subject to South Carolina sales tax. For example, service contracts for personal services (such as haircuts or massages) are not subject to sales tax.

If you`re unsure whether a service contract is taxable in South Carolina, it`s best to consult with a tax professional or the South Carolina Department of Revenue. They can help you determine whether sales tax applies and how to properly collect and remit any tax owed.

In conclusion, service contracts are generally taxable in South Carolina unless they meet certain exceptions. It`s important to understand the rules and consult with a professional to ensure compliance with state law.