SOUTH CAROLINA REVENUE AND FISCAL AFFAIRS OFFICE
S
TATEMENT OF ESTIMATED FISCAL IMPACT
WWW.RFA.SC.GOV • (803)734-3793
This fiscal impact statement is produced in compliance with the South Carolina Code of Laws and House and Senate rules. The focus of
the analysis is on governmental expenditure and revenue impacts and may not provide a comprehensive summary of the legislation.
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H. 3800
Fiscal Impact Summary
This bill amends Section 12-36-2120(74), which exempts durable medical equipment (DME) and
related supplies from sales tax. To qualify for the exemption, the DME must be purchased
directly by funds of South Carolina or the United States under the Medicaid or Medicare
programs, and the programs must prohibit the payment of sales or use tax. Further, the items
must be sold by a provider who holds a South Carolina retail sales license. This bill removes the
current requirement that the principal place of business of the seller must be located in this state.
This sales and use tax exemption was enacted in FY 2007-08 but ruled unconstitutional by the
South Carolina Supreme Court on June 26, 2024, due to the phrase “whose principal place of
business is located in this state.” Therefore, this bill amends the existing exemption to remove
the phase that was ruled unconstitutional. This bill takes effect upon approval by the Governor.
The Department of Revenue (DOR) anticipates that this bill will have a minimal impact on
expenses as the department can administer the changes with existing resources.
Revenue and Fiscal Affairs (RFA) estimates that this bill will reduce state sales and use tax
revenue by approximately $18,949,000 beginning in FY 2025-26 by exempting DME and related
supplies. Of this total, General Fund revenue would be reduced by $12,633,000, the Education
Improvement Act Fund (EIA) would be reduced by $3,158,000, and the Homestead Exemption
Fund (HEX) would be reduced by $3,158,000.
Local sales tax revenue will be reduced by approximately $5,021,000 beginning in FY 2025-26
due to the exemption. This estimate is based on applying an average local tax rate of 1.59
percent. The impact on each local jurisdiction will depend on local option sales taxes in effect for
the various entities.
Explanation of Fiscal Impact
Introduced on January 28, 2025
State Expenditure
This bill amends Section 12-36-2120(74), which exempts DME and related supplies from sales
tax. This bill removes the requirement that the principal place of business of licensed retail sales
providers who sell DME and related supplies must be located in this state. This sales and use tax
exemption was enacted in FY 2007-08 but ruled unconstitutional by the South Carolina Supreme
Bill Number: H. 3800 Introduced on Januar
y 28, 2025
Subject: Sales Tax Exemptio n
Requestor: House Wa ys and Means
RFA Analyst(s): Daigle
Impact Date: February 24, 2025
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H. 3800
Court on June 26, 2024, due to the phrase “whose principal place of business is located in this
state.” Therefore, this bill amends the existing to remove the phrase which was ruled
unconstitutional.
Because of the Supreme Court ruling, currently all sellers are required to pay sales tax on their
sales of DME and related supplies in the state regardless of if the equipment is paid directly by
the funds of South Carolina or the United States under the Medicaid or Medicare programs.
Medicare and Medicaid transactions are subject to the state’s sales tax, and therefore, sellers of
DME within this state who are paid partially or fully by Medicaid or Medicare must remit sales
taxes on the sales of DME, regardless of whether Medicaid or Medicare will reimburse the tax.
DOR anticipates that this bill will have a minimal impact on expenses as the department can
administer the changes with existing resources.
State Revenue
This bill states that in order for the purchase of durable medical equipment and related supplies
to be exempt, the following conditions must be met:
1) The purchase must be paid directly by funds of South Carolina or the United States under
the Medicaid or Medicare programs,
2) State or federal law or regulation authorizing the payment must prohibit the payments of
the sales or use tax, and
3) The durable medical equipment and related supplies must be sold by a provider who
holds a South Carolina retail sales license.
1, 2
Currently, pursuant to Section 12-36-110(j), retail sales subject to sales tax include only the net
amount reimbursed by Medicare and Medicaid if the vendor is prohibited by law from charging
the purchaser the difference between the retail sale and the amount reimbursed. For information,
providers and suppliers who accept payments directly from Medicare agree to accept the
payment amount approved by Medicare and to not bill patients for any amount in excess of
deductible or coinsurance amounts.
3
Furthermore, once a provider has accepted a beneficiary as
a Medicaid patient, the provider must accept the amount established and paid by the Medicaid
program as payment in full and is not allowed to bill the beneficiary, beneficiary’s family,
guardian, or legal representative for any difference between the Medicaid allowable amount and
the provider’s charge.
4
Therefore, the net amount reimbursed by Medicare and Medicaid for
DME and related supplies is currently subject to sales tax and would be exempt by this bill.
1
Medicare does not reimburse separately for sales tax. Source: Nordian Medicare Health Care Solutions, Sales Tax,
September 23, 2022, https://med.noridianmedicare.com/web/jddme/claims-appeals/claim-submission/sales-tax
2
Medicaid does not reimburse sales tax. Source: South Carolina Department of Health and Human Services,
Healthy Connections Medicaid: Durable Medical Equipment Services Provider Manual, page 44, July 1, 2024,
https://provider.scdhhs.gov/internet/pdf/manuals/dme/Manual.pdf
3
Medicare.gov, Durable Medical Equipment (DME) Coverage, Retrieved February 20, 2025,
https://www.medicare.gov/coverage/durable-medical-equipment-dme-coverage
4
South Carolina Department of Health and Human Services, Healthy Connections Medicaid Provider
Administrative and Billing Manual, page 29, Retrieved February 20, 2025,
https://www.scdhhs.gov/internet/pdf/manuals/Provider%20Administrative%20and%20Billing%20Guide.pdf
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H. 3800
RFA estimates that this bill will reduce state sales tax revenue by approximately $18,949,000
beginning in FY 2025-26. Of this amount, General Fund revenue will be reduced by
$12,633,000, EIA revenue will be reduced by $3,158,000, and HEX revenue will be reduced by
$3,158,000. The revenue impact was determined as follows.
Based on Centers for Medicare and Medicaid Services (CMS) data for South Carolina, in 2022
the total Medicare allowed amount for DME and related supplies was approximately
$174,804,000 in the state.
5,6
DME and related supplies include diabetic supplies and prosthetic
devices that are already exempt from sales tax pursuant to Section 12-36-2120(28). In South
Carolina in 2022, the total Medicare allowed amount for diabetic supplies and prosthetic devices
was approximately $23,922,000, and therefore, the total amount paid by Medicare for DME and
related supplies not currently exempt from sales tax was approximately $150,882,000. Based on
United States total Medicare and Medicaid payments for DME, approximately 40.6 percent of
the total was from Medicaid in 2022.
7
Therefore, we estimate the amount paid by Medicaid for
DME and related supplies, excluding diabetic supplies and prosthetic devices, in South Carolina
for 2022 as approximately $103,258,000. Thus, we estimate the total amount of DME and related
supplies paid for by Medicare and Medicaid as $254,140,000 in South Carolina in 2022.
Utilizing annual projections for United States Medicare and Medicaid payments for DME from
the Office of the Actuary in the Centers for Medicare and Medicaid Services, we estimate that
the total Medicare and Medicaid payments for DME and related supplies in South Carolina,
excluding diabetic supplies and prosthetic devices, will be approximately $304,538,000 and
$327,096,000 in 2025 and 2026, respectively, and therefore, $315,817,000 in FY 2025-26.
8,9
Applying the 6 percent sales tax rate to the fiscal year total yields approximately $18,949,000 in
exempt state sales tax revenue in FY 2025-26. Of the exempt state sales tax revenue, General
Fund revenue will be reduced by $12,633,000, the EIA will be reduced by $3,158,000, and the
HEX will be reduced by $3,158,000.
5
Centers for Medicare & Medicaid Services: Data.CMS.gov, Medicare Durable Medical Equipment, Devices &
Supplies – by Geography and Service¸ Retrieved February 19, 2025, https://data.cms.gov/provider-summary-by-
type-of-service/medicare-durable-medical-equipment-devices-supplies/medicare-durable-medical-equipment-
devices-supplies-by-geography-and-service
6
Total Medicare allowed amount is the total amount paid by Medicare and includes the amount that Medicare pays,
the deductible and coinsurance amounts. Source: Centers for Medicare and Medicaid Services: Data.CMS.gov,
Medicare Durable Medical Equipment, Devices & Supplies – by Geography and Service Data Dictionary 2022,
January 15, 2025, https://data.cms.gov/resources/medicare-durable-medical-equipment-devices-supplies-by-
geography-and-service-data-dictionary-2022
7
Centers for Medicare & Medicaid Services: CMS.gov, National Health Expenditure Data, NHE Projections
Tables: National Health Expenditures by Type of Service and Source of Funds: Calendar Years 1960 to 2032,
Retrieved February 19, 2025, https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-
expenditure-data/projected
8
Centers for Medicare & Medicaid Services: CMS.gov, National Health Expenditure Data, NHE Projections
Tables: National Health Expenditures by Type of Service and Source of Funds: Calendar Years 1960 to 2032,
Retrieved February 19, 2025, https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-
expenditure-data/projected
9
The fiscal year estimate is determined by averaging the total amounts from each calendar year.
__________________________________
Frank A. Rainwater, Executive Director
DISCLAIMER: THIS FISCAL IMPACT STATEMENT REPRESENTS THE OPINION AND INTERPRETATION OF THE
AGENCY OFFICIAL WHO APPROVED AND SIGNED THIS DOCUMENT. IT IS PROVIDED AS INFORMATION TO
THE GENERAL ASSEMBLY AND IS NOT TO BE CONSIDERED AS AN EXPRESSION OF LEGISLATIVE INTENT.
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H. 3800
Local Expenditure
N/A
Local Revenue
This bill would also reduce local sales tax revenue because of the exemption. Based upon the
analysis included under the State Revenue section and applying an average local tax rate of 1.59
percent, local sales tax revenue would be reduced by approximately $5,021,000 in FY 2025-26.
The impact on each local jurisdiction will depend on the local option sales taxes in effect for the
various entities.