South Carolina Issued Guidance for Service Tax Refunds
Eligible service providers can apply for annual sales tax refunds starting with the 2026 tax year.
Updated on Oct. 5, 2026 in Taxes
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The South Carolina Department of Revenue has released Information Letter No. 26-22, clarifying the administration of a tax exemption for service providers. Qualified businesses may now seek annual refunds on state and local sales taxes paid for business-related supplies and equipment beginning in 2026.
Why it matters
This guidance establishes a formal process for providers to recoup costs on essential operational expenses like machinery and electricity. The clarification ensures businesses can properly navigate the exemption requirements to offset state and local tax liabilities.
The state has established a $10 million annual total refund cap for all qualified providers across South Carolina. This applies to sales and use taxes paid on supplies, equipment, machinery, and electricity starting in tax year 2026.
The players
South Carolina Department of Revenue
The state agency responsible for tax administration, policy guidance, and the processing of refund applications for businesses and residents.
The details
Providers must apply for refunds of state and local sales and use taxes through the process detailed in Information Letter No. 26-22. The exemption covers specific operational inputs including machinery, equipment, supplies, and electricity. Because the total refund pool is capped at $10 million annually, eligible businesses should ensure their applications are complete and submitted by the annual deadline to be considered.
Timeline
October 1, 2026: Information Letter No. 26-22 was issued.
2026: The first tax year covered by the new exemption.
January 31: The annual deadline for submitting tax refund applications.
Money Landscape
This guidance marks the official operational launch of the Service Provider Tax Exemption in South Carolina. It fits into a broader cycle of state-level tax policy updates aimed at reducing operational costs for service-based businesses.
Service providers should review their records of state and local sales taxes paid on electricity, machinery, and supplies to determine their potential refund eligibility. If you believe your business qualifies, consult with a tax professional to ensure your documentation aligns with Information Letter No. 26-22 requirements.
The takeaway
The state has created a structured refund pathway to lower the tax burden on business operational costs. Business owners should mark January 31 as their annual deadline for filing these refund claims to remain within the state's $10 million annual payout limit.
What happens next
Applicants must prepare to submit their tax refund documentation by January 31 of each year to comply with the deadline for the preceding tax year.
Further reading
For more information on state tax rules and compliance, visit our Taxes section.
Source note: This article includes information reported by Bloombergtax.
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