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Restaurants
admit sales tax mistake
Pending
refunds, local stores could be subject
to S.C. Department
of Revenue penalties
November
28, 2006
By MIKE
ROSIER
Index-Journal
staff writer
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| The first wave of “sales tax
holiday” shoppers eagerly enters Kmart early Black
Friday morning in Greenwood.
| An illegal tax or
not?
Such was the question facing area businesses this past
weekend after the special one-time “sales tax holiday” went
into effect beginning at midnight Nov. 24.
A
question-and-answer section at the South Carolina Department
of Revenue Web site (http://www.sctax.org/) said
Friday that: “There is no need to publish a list of items
exempt from the state sales and use tax during ‘sales tax
holiday’ set for November 24th and November 25th of 2006. This
one-time ‘sales tax holiday’ applies to all purchases, except
for purchases of accommodations or the payment of additional
guest charges subject to the sales tax under Code Section
12-36-920.”
The exempted section speaks only of hotel
charges for accommodations for transients, such as in-room
movies or room service.
Calls made to The Index-Journal on
Friday, as well as others on Monday, indicated several local
businesses — including three McDonald’s restaurants, a Pizza
Inn and the Furusato Japanese restaurant — charged the normal
7-percent sales tax during the tax holiday.
McDonald’s
ownership and management confirmed this information Friday
afternoon, admitting the tax was continuing to be collected at
all Greenwood KB Mac Inc., McDonald’s locations (three
stores), as well as one location in Abbeville.
Ken
Whittington, owner of the local McDonald’s stores, told The
Index-Journal on Friday that to his knowledge the “sales tax
holiday” did not apply to quick-serve restaurants.
However,
that claim was refuted on Monday by the South Carolina
Department of Revenue.
“The food was still sales-tax exempt
and that (tax) should not have been charged,” Adrienne
Fairwell confirmed. Fairwell is the Department of Revenue’s
press secretary.
“If they did that then (the restaurants)
are in violation of the law. They may have been thinking of
the sales-tax free weekends corresponding with back-to-school
events. Those (sales-tax exemptions) do not apply to them.
This weekend was different.”
Contacted again on Monday,
Whittington admitted making the mistake, saying the stores
altered the practice in time for the second day of the “sales
tax holiday.”
“We changed it for the second day,”
Whittington said. “It was confusing. We went back and looked
at it (after being contacted by The Index-Journal) and tried
to get it straightened out. We assumed that we were doing what
we should have been doing.”
Whittington said the extra
sales tax revenue will be sent to the Department of
Revenue.
“We will send it to the state anyway, that’s the
only thing that we can do,” he said. “We have had customers to
come in with a receipt and we have refunded those customers,
but we’ll send in the money just like we normally would.
“I
really feel bad and am sorry that it happened, but it was
confusing. We’ll contact (the Department of Revenue) and see
what we need to do. There was no malice or intent on our part.
We would have done it on the first day had we thought that it
applied to us.
“For anyone with a receipt (from Friday) we
would be happy to give them their money back.”
Whittington
estimated the amount of tax collected erroneously on Friday to
be $200 per McDonald’s store.
McDonald’s wasn’t the only
local restaurant to make the mistake.
On Monday, receipts
obtained by The Index-Journal also implicated the Pizza Inn
and Furusato Japanese Restaurant, both off Highway 72 Bypass
in Greenwood.
“We found that out today and we’ll be giving
the money back to the customers that have their receipt,” said
Kazuhiro Sato, owner of Furusato. “We didn’t know. It’s the
first time for us. We called the Department of Revenue and
they told us (the tax holiday) was for everybody. We’re very
sorry.”
Pizza Inn ownership was not available for comment
on Monday, but store management did admit to having charged
the full 7-percent tax throughout the weekend.
Fairwell
says these establishments — and others that were not reported
— will be given the “good faith” opportunity to refund the
money to customers. Violating establishments that do not issue
refunds will be subject to penalties levied by the S.C.
Department of Revenue.
The department Web site says, “The
department may revoke any and all licenses issued by the
department and held by a retailer if the retailer passes on
sales taxes that are not legally due. In addition, the
retailer may be held liable for a penalty equal to one hundred
fifty percent of the amount of tax collected that exceeds the
amount authorized or required to be collected from the
purchaser under the sales tax or use tax. (Act No. 386 of
2006, Section 2.).”
“They are supposed to do what they can
to rectify the situation and refund the customer,” Fairwell
said. “If they don’t try to do that then they could be subject
to penalties, including up to 150 percent of the amount of tax
that was taken in.
“The local hospitality tax or local
option tax still applies (a 2-percent tax in the City of
Greenwood), but the (5-percent) state sales tax does not. If
they’re not willing to issue a refund they could be held
liable for the penalty.”
Fairwell said she could not
confirm or deny the problem was a widespread one across the
Palmetto State.
“I can’t say whether or not we have had a
lot of calls on this issue,” she said. “The customers would
need to have their receipt, but we give (businesses) the
opportunity in good faith to make that refund to customers,
due to say, a lack of knowledge.”
Fairwell added consumers
with receipts should return to the store and request a refund
from management.
“Contact the store manager and see about a
refund,” Fairwell said. “Consumers may also contact our sales
tax division for additional information, or to report
businesses that were charging the tax.”
For information,
visit http://www.sctax.org/, or
contact the S.C. Dept. of Revenue Sales Tax Division at (803)
898-5788. The office is open daily until 5 p.m.
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