Research & development equipment sales tax exemption
South Carolina provides a sales and use tax exemption for qualifying machinery and equipment used directly and primarily in research and development. The exemption can reduce upfront costs for companies investing in product development, testing and other qualifying R&D activities in the state.
Qualifying purchases are exempt from South Carolina state and applicable local sales and use taxes.
Overview
The exemption applies to qualifying machines used directly and primarily in research and development.
Qualifying machinery may include:
- Machines used in experimental or laboratory research and development
- Parts, attachments and replacements necessary to the operation of qualifying machines
Research and development must relate to:
- Development of new products
- New uses for existing products
- Improvement of existing products
How the exemption works
To qualify, machinery must be used directly and primarily in research and development. More than 50% of the machine's total use must be for qualifying R&D activities.
Eligibility is based on how the machinery is used, not simply on whether a company conducts research and development activities.
Claiming the exemption
The South Carolina Department of Revenue (SCDOR) administers the sales and use tax exemption. Companies may use Form ST-8, Exemption Certificate, to document qualifying purchases.
The completed certificate is provided directly to the vendor and is not submitted to SCDOR. Companies are responsible for ensuring that purchases meet applicable exemption requirements.
SCDOR resources
Research and development machinery requirements and guidance
Why the exemption matters
Research and development machinery can represent a significant investment for companies developing and improving products. Exempting qualifying purchases from sales and use tax can:
- Reduce upfront costs for R&D equipment
- Support continued investment in product development and innovation
- Strengthen the business case for locating or expanding research-intensive operations in South Carolina
