Research & development equipment sales tax exemption
South Carolina offers a sales and use tax exemption for qualifying research and development machinery and equipment purchased for use in the state. This exemption is part of the state’s suite of sales tax incentives designed to support innovation, investment and industrial growth.
The exemption eliminates state and local sales tax on eligible purchases, reducing upfront costs for organizations engaged in qualifying research and development activities.
What the exemption covers
The R&D Equipment Sales Tax Exemption applies to:
- Machinery and equipment used directly in research and development operations
- Parts, attachments and replacements for such machinery and equipment
These items are exempt from South Carolina sales and use tax when they are used in qualifying research and development activities.
How the exemption works
When qualifying research and development equipment is purchased in South Carolina for use in research activities:
- Sales and use tax is not charged at the time of purchase
- Both state and local portions of the tax are exempt when the sales qualify under South Carolina law
Purchasers typically provide an exemption certificate to vendors at the time of purchase to document that the equipment is intended for qualifying use.
Qualifying use of equipment
The exemption is intended for equipment used directly and primarily in research and development. State tax policy defines this as equipment used mostly in experimental or laboratory work related to:
- Development of new products
- Creation of new uses for existing products
- Improvement of existing products
To qualify, the equipment’s direct R&D use must exceed 50% of its overall use. Equipment used primarily for administrative, teaching or non-experimental purposes does not qualify.
Examples of qualifying purchases
Qualifying research and development equipment may include:
- Laboratory instruments used in experimental research
- Prototyping machinery directly tied to product development
- Specialized testing and analytical machines
- Custom R&D systems purchased for experimental use
Equipment that has significant non-R&D usage may not qualify for the exemption.
Why the exemption matters
South Carolina’s exemption for research and development equipment reduces capital cost barriers for organizations investing in innovation.
This support helps:
- Lower the cost of scientific and experimental equipment
- Encourage higher levels of private and institutional R&D activity
- Strengthen the state’s competitiveness as a destination for technology development and innovation
Qualifying expenditures that bypass sales tax can improve financial outcomes for research-intensive facilities and companies.
Frequently asked questions
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