The South Carolina Department of Revenue recently issued a “draft” revenue ruling to address various aspects of the state’s bank franchise tax law.
The ruling is currently in draft form, with comments are being accepted through September 22, 2016. Among the guidance items provided by the draft ruling are the following.
The draft ruling clarifies how banks are to apportion their income to South Carolina. Because banks do not sell tangible personal property, they apportion their income using a gross receipts factor. The numerator of the factor is gross receipts from within South Carolina, and the denominator is everywhere gross receipts.
The draft ruling addresses how specific types of bank-related receipts are sourced. For example, income from loans is sourced to the place where the borrower is located. For banks that issue credit cards, interest paid by credit card users is sourced to the location of the credit card customer. Similarly, yearly credit card fees and late fees charged to customers are sourced to the location of those customers because the production of that income is most significantly associated with the customer. Credit card swipe fees—fees that merchants that are charged each time a credit card is “swiped”—are sourced to South Carolina if the merchant is located in South Carolina.
For more information, contact a tax professional with KPMG’s State and Local Tax practice:Tracy Graham | +1 704 654-5477 | firstname.lastname@example.org
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