ORDERS:
ORDER AND DECISION
STATEMENT OF THE CASE
This matter comes before the Administrative Law Judge Division pursuant to S.C. Code Ann.
§ 12-60-460 (Supp. 1995) for a contested case hearing requested by Anonymous Taxpayer
("taxpayer") upon the determination by the Department of Revenue that he owes accommodation
tax for the period July 1, 1990 to July 1, 1995. The taxpayer exhausted his prehearing remedy
pursuant to S.C. Code Ann. § 12-60-450 (Supp. 1995). After notice to the parties, a hearing was
conducted on December 13, 1996. Based upon the evidence presented, the assessment of
accommodation tax upon the owners of the property located in Charleston County, South Carolina
is correct and the taxpayers are liable for $6,334.54 in taxes for the years 1990-1995.
Any issues raised in the proceedings or hearing of this matter that are not specifically
addressed in this Order are deemed denied. ALJD Rule 29.
FINDINGS OF FACT
I make the following findings of fact, taking into consideration the burden on the parties to
establish their cases by a preponderance of the evidence and taking into account the credibility of
the witnesses:
1. Taxpayer is a resident of Connecticut.
2. Taxpayer, with another family, purchased property on Kiawah Island, South Carolina
in 1986 as a vacation or retirement home.
3. The property, located at 432 Sea Lavendar Court, is a three bedroom, two bathroom,
1500 square foot cottage located within walking distance to the beach.
4. In 1987, taxpayer and the co-owners rented the property and continued to rent the
property on an informal basis.
5. Taxpayer entered into a leasing management agreement with a Realtor in South
Carolina to manage the rental of the property. The rental agreement did not contain any reference
to accommodations tax or the collection or remittance of tax to South Carolina.
6. After the agreement expired, taxpayer entered into a verbal management agreement
with a neighbor to manage the rental of the property. The income from the property was not reported
to this state and no accommodation taxes were reported or paid.
7. Income derived from the rental was reported by the taxpayer on his state
(Connecticut) and federal personal income tax forms.
8. Taxpayer continued to rent the property until it was sold on December 31, 1996.
9. Neither taxpayer nor the co-owner of the property had any retail license or paid any
taxes to South Carolina.
10. In November 1995, through a series of newspaper articles and by word of mouth,
taxpayer learned that the Department of Revenue was conducting audits of property owners in
Charleston County for the collection of accommodation taxes.
11. The applicable time period for the audits conducted by the Department was July 1,
1990 to August 24, 1995.
12. Taxpayer voluntarily contacted the Department to inquire about possible tax liability.
13. The Department conducted an audit of the property which revealed that between July
1, 1990 and August 1995, $80,638 was collected in rental income on the property which was subject
to accommodations tax.
14. Taxpayer had no actual notice of the requirement to pay accommodations tax for the
rental of the property.
15. The Department computed the tax owed as $6,334.54 and waived the assessment of
penalties and interest on the taxes.
DISCUSSION
The taxpayer argues that property owners, including residents of the state, who rent their
property on a seasonal basis have no knowledge of the requirement to pay accommodations taxes
in South Carolina. Allowing the Department to selectively audit for the collection of
accommodation taxes for a five year period is a disincentive for the Department to conduct audits
on a regular basis and to monitor collection of accommodation taxes. Further, the taxpayer argues
that the requirement to pay these taxes is not widely known because he was never informed that the
rental of his property may create a tax liability. Taxpayer was not informed at closing when he
purchased the property of any such requirement; he was not informed by real estate property
managers of the requirement; and he was not aware of any requirement for obtaining a retail license.
To rebut these arguments, the Department introduced copies of the South Carolina Non-Resident Personal Income Tax Returns for the years 1990-1995. In each form there is a provision
on Accommodations Tax which states in part, "Taxpayers who furnish accommodations to transients
for one week or less in any calendar quarter are required to remit the accommodations tax at the rate
of seven percent on the gross proceeds derived from the rental or charges for
accommodations....If...your rentals are in excess of one week a quarter, you are considered a
retailer...." The Department also introduced into evidence other information on business tax guides,
newsletters, pamphlets and brochures that discuss the accommodations tax and who may be required
to remit the tax.
S.C. Code Ann. § 12-36-920(A) (Supp. 1995) provides in part,
A sales tax equal to seven percent is imposed on the gross proceeds
derived from the rental or charges for any rooms, campground spaces,
lodgings, or sleeping accommodations furnished to transients by any
hotel, inn, tourist court, tourist camp, motel, campground, residence,
or any place in which rooms, lodgings, or sleeping accommodations
are furnished to transients for a consideration. This tax does not apply
where the facilities consist of less than six sleeping rooms, contained
in a single building, which is used as the individuals place of abode .
. . .
This section clearly imposes a tax on the rental of sleeping accommodations furnished to transients
by a residence. The law applies to owners of residences such as taxpayer. Although one can
sympathize with the taxpayer's position, everyone is charged with or presumed to have knowledge
of the law. It is a long standing proposition that ignorance of the law is no excuse to its enforcement.
Gregory v. Gregory, 292 S.C. 587, 358 S.E.2d 144 (Ct. App. 1987); Benn v. Camel City Coach Co.,
162 S.C. 44, 160 S.E. 135 (1931); 31A C.J.S. Evidence § 147 (1996). Perhaps, the Department may
engage in discussions with the real estate industry as well as the tourism industry to help publicize
information to property owners about these requirements.
The operation, management and administration of the Department of Revenue is vested in
its governing authority. S.C. Code Ann. § 1-30-10(D) (Supp. 1995). The Department is charged
with enforcement of many types of taxes. Continual monitoring of every type of tax in addition to
the other responsibilities of the Department would require far more manpower than is presently
allocated. It is reasonable for the Department to conduct audits and use concerted efforts to enforce
provisions of the tax code when there is a problem or when the circumstances dictate such action.
The Department acted properly in conducting audits relating to the enforcement of the
accommodations tax.
CONCLUSIONS OF LAW
Based upon the Findings of Fact, I conclude as a matter of law:
1. The Administrative Law Judge Division is authorized to hear contested cases pursuant
to Chapter 23 of Title 1 of the 1976 Code, as amended. S.C. Code Ann. § 12-60-2540 (Supp. 1995).
2. S.C. Code Ann. § 12-36-920 (Supp. 1995) provides in part,
(A) A sales tax equal to seven percent is imposed on the gross
proceeds derived from the rental or charges for any rooms,
campground spaces, lodgings, or sleeping accommodations furnished
to transients by any hotel, inn, tourist court, tourist camp, motel,
campground, residence, or any place in which rooms, lodgings, or
sleeping accommodations are furnished to transients for a
consideration. This tax does not apply where the facilities consist of
less than six sleeping rooms, contained in a single building, which is
used as the individuals [sic] place of abode. The gross proceeds
derived from the lease or rental of sleeping accommodations supplied
to the same person for a period of ninety continuous days are not
considered proceeds from transients. The tax imposed by this
subsection (A) does not apply to additional guest charges as defined
in subsection (B).
(E) The taxes imposed by this section are imposed on every
person engaged or continuing within this State in the business of
furnishing accommodations to transients for consideration.
3. Before engaging in business in the state, every retailer must obtain a retail license for
each branch or location and pay a license tax for each license. S.C. Code Ann. § 12-36-510(A)(1)
(Supp. 1995). A retail license is not required of persons "furnishing accommodations to transients
for one week or less in any calendar quarter; however, accommodations taxes must be remitted
annually, on forms prescribed by the [department], by April 15 of the following year." This item
does not apply to rental agencies or persons having more than one rental unit. S.C. Code Ann. § 12-36-510(B)(3) (Supp. 1995).
4. Under the provisions of these two statutes, taxpayer was engaged in the business of
furnishing accommodations to transients requiring a retail license and the collection, reporting and
remitting of accommodations tax.
5. As a general rule, all persons are presumed to know, and are bound to take notice of,
the general public laws of the state in which they have their residence or do business. 31A C.J. S.
Evidence § 147 (1996). Ignorance of the law will not relieve a person from the legal consequences
of wrongful acts. The question of knowledge is immaterial; a person's conduct has such legal effect
as the law prescribes regardless of knowledge or ignorance. 31A C.J.S. Evidence § 148a (1996).
6. The Department acted appropriately in the enforcement of the accommodations tax
and in assessing the tax against this taxpayer for the period beginning July 1, 1990.
ORDER
Based upon the foregoing Findings of Fact and Conclusions of Law, it is therefore,
ORDERED, that the Department of Revenue shall assess accommodations tax in the amount
of $6,334.54 against the taxpayer.
AND IT IS SO ORDERED.
ALISON RENEE LEE
Administrative Law Judge
May 23, 1997
Columbia, South Carolina |
