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Subcommittee backs tax exemption for broadband providers, adopts clarification to $10 million cap
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Summary
The subcommittee adopted an amendment clarifying a $10 million annual cap on refund claims and gave House Bill 5,122 a favorable report to the full committee; industry testimony said the exemption would level the playing field for internet and communication providers and accelerate broadband deployment.
The Sales and Use Tax and Income Tax Legislative Subcommittee adopted a clarifying amendment and gave a favorable report to House Bill 5,122, a measure that would exempt internet access and communication service providers from sales and use taxes on equipment and supplies used to deliver services.
Staff told the panel the bill would classify eligible providers as manufacturers for tax purposes, require providers to apply to the Department of Revenue for refunds by Jan. 31 of the following year, and cap the total refunds at $10,000,000 annually, with prorated reductions if claims exceed the cap. The committee adopted an amendment described as tightening language that the refund cap resets each year and then forwarded the bill to the full committee.
Terrence Ford, who was identified in the record as representing AT&T, testified the company faces rising costs as legacy copper networks reach end of life and that South Carolina’s current application of sales and use tax to broadband machinery and equipment places communication service providers at a competitive disadvantage with neighboring states that do not impose such taxes. "A percentage of every dollar invested goes to taxes instead of being invested into the networks," Ford said, arguing that an exemption would accelerate deployment and allow private capital to extend service into unserved areas.
Ford also told the subcommittee that cable and satellite providers currently receive similar exemptions, and he described South Carolina as disadvantaged relative to states such as North Carolina and Tennessee. That characterization was presented as industry testimony and not independently verified at the hearing.
The amendment, identified by the Chair as coming from Representative Crawford and described by the committee as clarifying the annual $10 million cap, was adopted by voice vote. Staff then recorded that House Bill 5,122 received a favorable report to the full committee.
The committee did not take additional votes on the measure at this meeting; staff called the roll for the committee and the Chair closed the item.
