Rent-A-Center E., Inc. v. S.C. Dep't of Revenue, 824 S.E.2d 217

Rent-A-Center East, Inc. and Rent Way, Inc. operate rent-to-own stores; customers sign Rental Agreements for durable goods and may optionally pay an added fee for an "Optional Liability Waiver" (Waiver) that limits liability for certain loss events if periodic payments (including the Waiver fee) are current.
Waiver: optional, cancellable by either party, described as "an additional part of the Rental Agreement," billed as a line item and calculated as a percentage of the term payment; cannot be purchased separately from a Rental Agreement.
Department of Revenue audited the companies and assessed unpaid sales tax on Waiver fees for multi-year audit periods; taxpayers paid assessed amounts under protest and sought ALC review.
The ALC found the Waiver and Rental Agreement were "fundamentally interconnected," that the Waiver was incidental to the rental, and ordered additional sales tax.
On appeal, taxpayers argued the ALC misapplied statutory construction, that no imposition statute reaches Waivers, that the measure-of-tax statute was wrongly invoked, that Waiver proceeds are not "gross proceeds," and that the Waiver might be an intangible/service not subject to sales tax.

Issue	Plaintiff's Argument (Taxpayers)	Defendant's Argument (Department)	Held
Whether §12-36-910(A) was applied correctly	ALC failed to apply plain-meaning rule and no imposition statute taxes Waivers	§12-36-910(A) taxes persons selling tangible personal property; applies here	ALC did not err; statute applies to sellers and is unambiguous
Whether measure-of-tax §12-36-90 could be used	Measure statute irrelevant absent imposition statute specifically taxing Waivers	§§12-36-910(A) and 12-36-90 read together: define gross proceeds to include proceeds from rentals	Court: sequential reading appropriate; §12-36-90 relevant after imposition statute applies
Whether Waiver and Rental Agreement are a single transaction (true object test)	Waivers optional, separately stated, cancellable — thus distinct and not taxable as rental gross proceeds	Waiver integral: billed together, enforceable only if payments current, fee tied to term payment, cannot be purchased alone	Substantial evidence supports ALC: Waivers incidental to rental under true object test
Whether Waiver proceeds are "gross proceeds" taxable	Waiver proceeds not value of rental of tangible personal property; may be intangible/service exempt	Because Waivers are incidental to rentals, their value accrues from the rental and is included in gross proceeds	Court affirmed: Waiver fees are part of gross proceeds of the Rental Agreements and taxable

Duke Energy Corp. v. S.C. Dep't of Revenue, 415 S.C. 351 (2016) (statutory interpretation principles; plain meaning rule)
Hodges v. Rainey, 341 S.C. 79 (2000) (courts must give tax statutes their plain and ordinary meaning)
Alltel Commc'ns, Inc. v. S.C. Dep't of Revenue, 399 S.C. 313 (2012) (ambiguities in tax statutes resolved for taxpayer)
Cooper River Bridge, Inc. v. S.C. Tax Comm'n, 182 S.C. 72 (1936) (substantial doubt in tax application favors taxpayer)
Dunton v. S.C. Bd. of Exam'rs in Optometry, 291 S.C. 221 (1987) (agency construction entitled to respectful consideration)
Travelscape, LLC v. S.C. Dep't of Revenue, 391 S.C. 89 (2011) (gross proceeds include fees obtained without deduction for cost of services)
Meyers Arnold, Inc. v. S.C. Tax Comm'n, 285 S.C. 303 (1985) (fees "but for" a sale can be gross proceeds of that sale)
Boggero v. S.C. Dep't of Revenue, 414 S.C. 277 (Ct. App. 2015) (true object test framed as mixed question; substantial-evidence review)
Fraternal Order of Police v. S.C. Dep't of Revenue, 332 S.C. 496 (1998) (sales incidental to a transaction are not exempt)
Lincoln Parish Sales & Use Tax Comm'n v. Rent-A-Center East, 60 So.3d 95 (La. App. 2011) (real-object test: waivers incidental to rental are taxable)
Enter. Leasing Co. of New Orleans v. Curtis, 977 So.2d 975 (La. App. 2007) (damage waivers sold with vehicle rentals were taxable as incidental to rental)