Indicates Matter Stricken

Indicates New Matter

 

Committee Report

April 21, 2026

 

H. 5208

 

Introduced by Reps. B. Newton and Moss

 

S. Printed 4/21/26--H.

Read the first time February 18, 2026

 

________

 

The committee on House Ways and Means

To whom was referred a Bill (H. 5208) to amend the South Carolina Code of Laws by amending Section 12-36-2120, relating to exemptions from sales tax, so as to provide that certain unprepared foods, that, etc., respectfully

Report:

That they have duly and carefully considered the same, and recommend that the same do pass:

 

B.W. BANNISTER for Committee.

 

 

statement of estimated fiscal impact

Explanation of Fiscal Impact

State Expenditure

This bill amends the current sales and use tax exemption for unprepared food in Section 12-36-2120(75) to specify that the exemption remains applicable to any foods that cannot be purchased with food coupons for a limited time due to a demonstration project pursuant to USDA regulations. DOR anticipates that this bill will result in a minimal expenditure impact in order to update forms, the department website, and perform system changes. DOR indicates that the changes can be administered with existing staff and appropriations.

 

State Revenue

This bill amends the current sales and use tax exemption for unprepared food in Section 12-36-2120(75) to specify that the exemption remains applicable to any foods that cannot be purchased with food coupons for a limited time due to a demonstration project pursuant to USDA regulations. Based on conversations with DSS and USDA publications, the Food Choice Program, as prescribed by the approved waiver from the USDA FNS is effective for 2 years beginning August 31, 2026. Therefore, this bill would require eligible food items exempt from sales tax currently to remain exempt in FY 2026-27 after the waiver is effective. Food items that are scheduled to become ineligible for purchase with food coupons include candy, soda, energy drinks, and sweetened beverages.

Pursuant to 12-36-2120(75), the sales tax exemption on unprepared food includes food that may lawfully be purchased with USDA food coupons. This exemption is applicable for the 5 percent state sales tax, of which 4 percent is credited to the General Fund and 1 percent is credited to the EIA Fund. For information, the additional 1 percent sales tax credited to the HEX Fund is also separately exempt from unprepared food that may be lawfully purchased with the USDA food coupons pursuant to Section 12-36-1110, which is not addressed in this bill.

This bill may not impact sales tax revenue because the impact of the waiver is uncertain. DOR has advised that it is currently conducting additional research before making a determination on the applicability of sales tax on food items that are temporarily ineligible for SNAP for each of the different state and local sales taxes and how this would be administered by retailers. Therefore, the potential impact on sales tax revenue without the bill may be subject to change pending DOR's final determination. However, if sales tax is applicable on these items, RFA estimates that sales tax applied to purchases of candy, soda, energy drinks, and sweetened beverages would increase total state sales tax revenue by approximately $56,380,000 beginning in FY 2026-27. Of this amount, $37,586,000 would be credited to the General Fund, $9,397,000 would be credited to the EIA, and $9,397,000 would be credited to the HEX. The table below outlines the increase in fund revenue due to sales tax on purchases of soda, candy, sweetened beverages, and energy drinks.

 

Estimated Potential State Revenue from

Sales Tax on Soda, Candy, Sweetened Beverages, and Energy Drinks without H. 5208

($ in millions)

Unprepared Food Exemption	Applicable Tax Rate	Total Estimated State Revenue Impact	Fund
			Estimated General Fund Revenue Impact (4%)	Estimated EIA Revenue Impact (1%)	Estimated HEX Revenue Impact (1%)
Section 12-36-2120(75)	5%	$47.0	$37.6	$9.4	NA
Section 12-36-1110	1%	$9.4	NA	NA	$9.4
Total	6%	$56.4	$37.6	$9.4	$9.4

NA - not applicable

 

The following is an explanation of the analysis utilized to estimate the impact of sales tax on candy, soda, energy drinks, and sweetened beverages.

Based on the 2023-2024 U.S. Bureau of Labor Statistics (BLS) Consumer Expenditure Survey (CE), consumer units in the South Region spent approximately $5,445 on food at home annually. The median household income in South Carolina in 2024 was $76,780, or approximately 84 percent of the average income for consumer units in the South Region reported in the BLS CE of $91,824. Therefore, by applying an adjustment factor of 84 percent, we estimate that consumer units in South Carolina spend approximately $4,553 on food at home annually. Based on the BLS CE, the average number of people reported in a consumer unit for the South Region was 2.4, and dividing South Carolina's 2024 resident population of 5,478,831 by 2.4 yields approximately 2,282,846 consumer units in the state. Multiplying $4,553 on food at home spending by 2,282,846 consumer units yields approximately $10,393,610,728 spent on food at home by South Carolina residents.

Based on data and an analysis published by the USDA, we estimate that approximately 9 percent of food at home spending is attributed to candy, soda, energy drinks, and sweetened beverages. Therefore, multiplying $10,398,610,728 by 9 percent yields approximately $939,656,000 in spending on candy, soda, energy drinks, and sweetened beverages in the state. Applying the total state sales tax rate of 6 percent yields approximately $56,380,000.

 

 

Frank A. Rainwater, Executive Director

Revenue and Fiscal Affairs Office

 

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A bill

 

TO AMEND THE SOUTH CAROLINA CODE OF LAWS BY AMENDING SECTION 12-36-2120, RELATING TO EXEMPTIONS FROM SALES TAX, SO AS TO PROVIDE THAT CERTAIN UNPREPARED FOODS, THAT MAY BE PURCHASED WITH FOOD COUPONS WHICH ARE EXEMPT FROM TAXES, ARE NOT LIMITED TO CERTAIN FEDERAL REGULATIONS.

 

Be it enacted by the General Assembly of the State of South Carolina:

 

SECTION 1.  Section 12-36-2120(75) of the S.C. Code is amended to read:

 

    (75) unprepared food that lawfully may be purchased with United States Department of Agriculture food coupons, without regard to any demonstration project pursuant to United States Department of Agriculture regulations that would limit the use of food coupons on otherwise eligible items for a limited period of time.  However, the exemption allowed by this item applies only to the state sales and use tax imposed pursuant to this chapter;

 

SECTION 2.  This act takes effect upon approval by the Governor.

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