Law exempts eligible internet and communications providers’ purchases from sales tax

The law exempts covered purchases from sales tax and treats internet and communications providers as manufacturers for this purpose. Covered purchases include supplies, technical equipment, machinery, and electricity sold to internet and communications service providers. Providers must use the purchases to produce, broadcast, or distribute internet or communications services. The exemption follows the sales-tax rules referenced in Section 12-36-2120. Data centers meeting the law’s definition cannot use the exemption. The law took effect on May 19, 2026, and applies to tax years beginning after 2025.

Providers must apply to the South Carolina Department of Revenue for refunds of state and local sales and use taxes paid on covered items. Refunds cover taxes paid by eligible internet and communications providers on items covered by the exemption. If qualifying claims exceed $10 million in a year, each refund is reduced proportionally to keep the total within that limit. Data centers meeting the law’s definition cannot receive these refunds. Each year, the Department of Revenue must calculate qualifying claims by May 1 and pay refunds by June 1. The law applies to tax years beginning after 2025.

Data centers meeting the law’s definition cannot claim or use either the tax exemption or the refund. The definition covers South Carolina facilities mainly storing, retrieving, or transmitting data, including connected groups of facilities under one electricity supply agreement. Facilities owned or operated by a telecommunications company, or mainly supporting telecommunications services or network operations, are excepted. Peak demand comes from the electricity contract. Temporary use above 50 megawatts does not qualify a center whose contracted peak demand is below 50 megawatts. The exclusion applies only to centers that become customers of an electric service provider after December 31, 2026.