In a recent private letter ruling, the South Carolina Department of Revenue held that software subscription services are tangible personal property subject to sales and use taxes. A software company that provides a cloud-based business management and billing platform for medical equipment suppliers requested the letter ruling to determine whether its subscription charges were subject to the state’s sales and use taxes. Applying South Carolina’s statutory definition of taxable “tangible personal property,” which includes services such as communication services, and the Department’s regulations, which provide that database access transmission services and on-line information services are taxable communications services, the Department concluded the company’s software subscription services are taxable. Specifically, the Department found the company to be an “application service provider,” a company that provides its customers access or use of software on the company’s website, and concluded the company’s subscription services were similar to those found subject to tax in the Department’s prior administrative rulings.

SC Private Letter Ruling No. 20-1.