Usually, companies land themselves in hot water with taxing authorities for waiting too late to take action. But it’s actually possible to get into trouble for acting too quickly. Just ask retailing giant Target: a Target store found itself under the microscope in South Carolina for allegedly implementing a new sales tax a month early.
Under state law, South Carolina imposes a 6% sales tax on the sale of goods and certain services. Counties can tack on an additional one percent (1%) local sales tax if voters in that county approve the tax. In the case of Richland County, that’s already happened with tax rates sitting at 7% before the application of a new tax, referred to as the “Transportation Penny Tax” which was slated to take effect on May 1, 2013. The tax, which has survived an appeal to the state Supreme Court (downloads as a pdf), is to be used for “enhanced transportation services” and a “long list of projects including improvements to highways, roads (paved and unpaved), streets, intersections and bridges including related drainage system improvements, and improvements to pedestrian sidewalks, bike paths, intersections, and greenways.”
That penny tax brought the total sales tax charged in Richland County to 8% (downloads as pdf) once the tax took effect. Richland joined four other counties in the state (Bamberg County, Hampton County, Lee County, and Marion County) which saw a jump in tax on May 1, consisting of either a 1% Capital Projects Tax or a 1% Transportation Tax. Such a bump isn’t unusual, according to South Carolina Public Information Director Samantha Cheek, who explained that six counties in the state had approved an additional tax to take effect so far in 2013; the sixth county, Orangeburg, re-upped their existing 1% tax as of April 1.
With so many taxes to juggle, Target appears to have jumped too soon in Richland County, imposing the extra penny tax beginning on April 1, and not May 1.
It’s unclear how many customers paid the extra tax before Target corrected the error. Customers who might have paid too much are encouraged to contact the store, not the Department of Revenue, if they believe that they were affected. If you’re not sure, check the sales tax rate printed on your receipt: the receipt should reflect a rate of 7% through April 30, 2013, and 8% on or after May 1, 2013.
Target clearly regrets the mistake. Target spokesperson Amy Reilly offered this statement for customers:
At Target, we take our role in collecting sales tax at the correct rate seriously. As soon as we discovered the error we corrected it. If guests have questions about the sales tax they paid on an item, we would encourage them to go to Guest Services located in the store or call 1-800-440-0680.
That’s exactly what the Department of Revenue recommends, too. Any sales tax that might have been collected in error isn’t due to Revenue and the retail giant can’t simply keep the money. According to Cheek, “It is the responsibility of the retailer to reimburse the taxpayer or consumer for any tax that is improperly collected.”
The Department of Revenue was alerted to the potential error by local TV station WISTV, which provided copies of receipts showing the erroneous tax on its web site. Cheek told me that the Department takes all matters like this seriously and communicates with the retailer when there might be a problem. In this case, however, Cheek did stress that the Department had not received any specific complaints from individual customers. While it is ultimately the responsibility of the retailer (in this case, Target) to address the issue, the Department of Revenue will investigate complaints initiated by consumers.
There’s no indication that Target stores in other counties with a penny bump were similarly affected. Richland County is the second-most populous county in South Carolina and is the home of the state capital, Columbia. It’s also the home of the University of South Carolina, my brother’s alma mater (Go Gamecocks!).
The matter has since been resolved with the store now charging the appropriate amount of tax. The debacle, however, has been a perfect example of exactly how confusing state and local taxes can be for both taxpayers and those charged with collecting the tax. If you’re a long time reader of the blog, you may remember a similar issue – and one of my favorite stories – involving K-Mart and the infamous toilet paper tax.
And although the issue at stake here – like with K-Mart and the toilet paper tax – is really pennies on the dollar, the larger impact on retailers and consumers can be felt as taxing authorities continue to make changes to rates and scope of tax. It does give one pause as we consider the impact of a federal mandate to collect internet tax across not just state lines – but counties and townships, too.
