The South Carolina Department of Revenue (DOR) has issued guidelines to counties who are considering imposing, or are currently imposing, a transportation tax. The transportation tax is administered and collected by the DOR in the same manner that other sales and use taxes are collected.
The DOR will use these guidelines to assist in determining whether certain costs are considered a proper expenditure of local transportation tax revenue under the Transportation Act, S.C. Code Ann. § 4-37-30.
Permitted Projects Under the Transportation Act
The Transportation Act provides that the types of projects permitted to be funded with transportation tax revenues include:
- Highways
- Roads
- Streets
- Bridges
- Mass transit systems
- Greenbelts
- Other transportation-related projects and facilities
The ordinance imposing the tax must specify:
- The projects to be funded from the transportation tax
- The estimated capital costs of the projects
- Other information as specified in the statute
Eligible Costs
The guidelines explain what constitutes a “capital cost” (i.e., “eligible costs”), including direct costs, indirect costs, as well as certain operational costs relating to mass transit systems.
Direct Costs
Direct costs are expenditures for:
- Material
- Labor
- Financing for transportation-related projects
These costs would be properly chargeable to a capital asset account as distinguished from current expenditures and ordinary maintenance expenses.
Indirect Costs
Indirect costs are costs that benefit:
- The construction and improvement of authorized projects
- The construction and improvement of authorized projects and other county operations
Generally, only a portion of these are considered eligible costs.
Mass Transit Systems Costs
Mass transit systems costs include expenditures incurred for the:
- Acquisition
- Design
- Construction
- Equipping
- Operation
These costs are eligible provided they are consistent with:
- The public purpose of the Transportation Act
- The county’s imposition ordinance
- The referendum approved by voters
Examples and Ineligible Costs
The guidelines provide examples of:
- Each type of eligible cost
- Ineligible costs
Reference: South Carolina Revenue Ruling No. 22-2, 04/18/2022
Frequently Asked Questions
What is the purpose of the South Carolina transportation tax?
The transportation tax is designed to fund specific local transportation-related projects such as roads, bridges, highways, and mass transit systems. It is collected by the South Carolina Department of Revenue and allocated according to guidelines under the Transportation Act.
What types of projects can transportation tax revenue be used for?
Permitted projects include the construction and improvement of highways, roads, bridges, streets, greenbelts, and public mass transit systems, along with other transportation-related facilities as defined by the county ordinance.
How are eligible costs defined under the Transportation Act?
Eligible costs are defined as capital costs, including both direct and some indirect expenditures, such as material, labor, financing, and certain operational costs for mass transit systems that serve a public purpose.
Are operational expenses for transit systems covered by the transportation tax?
Yes, operational expenses for transit systems may be eligible if they are directly related to the acquisition, construction, or operation of mass transit and are consistent with the Act’s public purpose, the county ordinance, and the voter-approved referendum.
What costs are excluded from transportation tax funding?
Ineligible costs generally include ordinary maintenance, unrelated administrative expenses, and any expenditures not tied directly to the capital improvement or authorized transportation-related projects as outlined in the guidelines.