On June 10, the S.C. Supreme Court ruled against Sonoco Products Co. in a case involving the taxation of two of the company’s properties, which not only are separated by a public access road but also function separately.
The court rejected Sonoco’s 1997 claim that its office building and order call center should be taxed at the lower 6 percent commercial rate, rather than at the industrial tax rate of 10.5 percent.
The Hartsville manufacturing operations are a small part of Sonoco’s worldwide production, which includes 330 plants in 35 countries. All those operations are supported by the corporate headquarters in Hartsville. The Hartsville plant and the headquarters operate independently, performing separate and distinct functions.
State law gives manufacturers a break on property taxes on office buildings that are “used or leased for purposes clearly unrelated to manufacturing,” the court said. The high court, however, said several instances in state law explicitly state that an intersecting road does not separate two pieces of property owned by the same person or company.
The ruling, if it is upheld on appeal, would make “it extremely difficult for Sonoco to consider expanding its Hartsville operations because of the punitive tax structure that the company faces,” Sonoco Staff Vice President Roger Schrum said.
We’re certain the lawmakers who enacted this legislation had no intention of discouraging economic development in South Carolina.
The interpretation of the law by state Supreme Court, as well as by the state Revenue Department, shows this law must be reworked to make the language of the legislation clearer and to avoid stifling growth by homegrown global companies.
Adjusting the law isn’t likely to open the floodgates to other industries in the state seeking to take advantage of a possible tax loophole.
In fact, it appears Sonoco is the only company in the state to find itself in this predicament.
Sonoco is not, by any stretch of the imagination, a poor corporate citizen. The company has demonstrated time and time again its commitment to the well-being of the Pee Dee and of South Carolina.
But it seems the 109-year-old packaging company, which was founded in Hartsville, has been unfairly singled out in this instance.
And it’s likely that economic growth in the Pee Dee, and elsewhere in the state, could suffer for it.
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