SC Supreme Court Rules on Tax Exemptions in Bodman v. South Carolina

Above photos: Burnie Maybank, Rick Reames III and Jim Rourke

Close to a year and a half after hearing oral arguments in Bodman v.South Carolina, the South Carolina Supreme Court has upheld the “sevencaps” and “eighty seven exemptions” found under the State’s sales tax.(Op. No. 27248 filed May 8, 2013).

The plaintiff in the case sought to invalidate the sales tax exemptionscheme as a whole, arguing that the sheer number of exemptions and capshas rendered the sales tax statute arbitrary and thus unconstitutional.The Court determined that Bodman’s challenge, like a similar challengeten years earlier in Ed Robinson Laundry & Dry Cleaning, Inc. v.South Carolina Department of Revenue, 256 S.C. 120, 588 S.E.2d 97(2003), dealt only with the size and volume of the exemptions, and notwith the actual content of the exemptions. Because Bodman expresslydeclined to offer proof as to the basis underlying any classificationscreated by these exemptions, the Court was precluded from determiningwhether the classifications violated equal protection.

However, despite the clear win for the State, the Court, in both themajority and concurring opinions, left open the specter of subsequentchallenges by emphasizing that nothing in the opinion would preclude achallenge to a specific exemption or cap based on the content of theexemption or cap itself. More specifically, citing the South CarolinaTaxation Realignment Commission (TRAC) Report in her concurrence, ChiefJustice Jean Toal cited the $300 sales tax cap on motor vehicles as an“arbitrary and capricious exception to the sales tax” that has “outlived its intended purpose of making South Carolina competitive withneighboring states with regard to the motor vehicle market.” However,due to the nature of Bodman’s argument, the Court was unable to exercise an individual review of each exemption.

Editor note: Nexsen Pruet filed an amicus (friend of the court)brief on behalf of the South Carolina Manufacturers Alliance.Additionally, Burnie Maybank, who was Chairman of the TRAC, is a Member (partner) of the firm. Maybank, Rick Reames III and Jim Rourke make up Nexsen Pruet’s State and Local Taxation (SALT) team in Columbia.