Beaufort News

Lawsuit takes aim at SC sales tax

COLUMBIA -- Republican lawmakers spent the summer talking tax reform, taking testimony from various groups as they plan strategy for an effort to change state tax laws during the legislative session that begins in January.

But a former newspaper reporter turned personal injury attorney is trying to push through some tax reform of his own, and he has found a powerful audience: the S.C. Supreme Court.

Matthew Bodman's lawsuit challenges as unconstitutional the 78 exemptions to the state sales tax, as approved by the state legislature. Bodman is a former reporter for The Greenville News, who now is a Columbia lawyer. One of Bodman's lawyers is Dick Harpootlian, the chairman of the state Democratic Party.

Bodman's suit also has attracted the attention of some of the state's most powerful Republican politicians.

House Speaker Bobby Harrell and Senate President Pro Tempore Glenn McConnell, both Charleston County Republicans, have filed a joint brief with the Supreme Court, saying a "decision by this court (in Bodman's lawsuit) would likely have a substantial impact on the budgeting process."

"Any tax restructuring that is done in South Carolina should be performed in the halls of the General Assembly with careful consideration and input from the many affected businesses and industries in South Carolina and not pursuant to the sole input of one single resident of South Carolina," Harrell and McConnell write in their brief.

Besides, Bodman doesn't need to file a lawsuit, Harrell and McConnell argue. Lawmakers and Gov. Nikki Haley already have said they plan to reform the state's tax code, proving "both the legislative and executive branches have the appetite to take up the complicated issue of tax reform and to perform it in a timely and responsible manner."

South Carolina's sales tax currently is 6 percent of sales before any local-option sales taxes. At $2.2 billion a year, sales taxes account for 42 percent of the state's income, according to a report from the S.C. Taxation Realignment Commission. But lawmakers have exempted 78 activities from the sales tax, ranging from sales of sweetgrass baskets to professional services. In fact, the state exempts more sales from sales taxes than the sales that are subject to the tax, according to the commission's report.

Bodman, who filed his suit this summer, argues those sales tax exemptions violate the state Constitution's equal protection clause, contending the exemptions are "merely the result of patching and filling by the General Assembly" and have no rational basis.

Bodman also argues the sales tax exemptions amount to "special legislation," or laws that only affect a few people. Such laws are banned under the state's Constitution.

Harrell and McConnell dismiss those claims. They say Bodman is trying to circumvent the legislative process to push through his own version of tax reform.

"The court must recognize that (Bodman's) argument is not legal but rather political," McConnell and Harrell write. "The appropriate place for (Bodman) to make his case is not the courthouse, but rather at the ballot box."

Harpootlian insists the suit is not political but about fairness.

In part, he is relying on a dissenting opinion that Supreme Court Chief Justice Jean Toal wrote in a 2003 decision, suggesting Toal thinks the large number of sales tax exemptions has become a "tyrannical exercise of arbitrary power."

The court has set no date to hear Bodman's suit, but Harpootlian expects it to be on the court's agenda early next year.