Background
Watertoys, LLC, doing business as Tidalwave Watersports, challenged the South Carolina Department of Revenue’s assessment of admissions taxes on parasail rides. The merits question was whether those rides were taxable admissions or exempt boat tours offering excursions and sightseeing. The Administrative Law Court granted summary judgment to the Department and denied reconsideration.
Before appealing, Watertoys filed a document labeled “Appeal Bond & Personal Surety,” signed by two company principals, and placed funds representing the disputed principal tax in its lawyer’s trust account. The initial deposit omitted part of the principal and did not include accrued interest; Watertoys later corrected the amounts. The Department moved to dismiss because South Carolina Code section 12-60-3370 requires a taxpayer, before appealing an Administrative Law Court tax decision, either to pay all taxes determined due or to post a bond.
The Court’s Holding
The Court of Appeals dismissed the appeal without reaching whether parasailing is subject to admissions tax. Section 12-60-3370’s command is a prerequisite to appellate jurisdiction: the taxpayer must pay the tax or post an appropriate bond before filing the appeal. Depositing money into counsel’s Interest on Lawyer Trust Account did neither. An IOLTA account is a pooled client-funds account whose interest benefits the South Carolina Bar Foundation; it is not payment to the Department and is not one of the statutory methods for securing the debt.
The self-described personal surety also was not an adequate statutory bond. A proper surety arrangement secures payment if the taxpayer loses and ordinarily involves a regulated surety insurer responsible for the debt. The company’s principals’ promise, coupled with an attorney trust deposit, did not create the protection the legislature required. Later supplementation could not cure the failure because the statute expressly places the payment-or-bond requirement before the appeal.
The court distinguished Town of Mount Pleasant v. Roberts, which involved a different statute governing municipal-court appeals. That provision lacked the same temporal restriction and served to ensure an appellant’s appearance. Section 12-60-3370, by contrast, expressly requires action before appealing and secures the tax obligation itself. Because Watertoys did not perfect appellate jurisdiction, the court could not decide the tax exemption question.
Key Takeaways
- A taxpayer appealing an adverse South Carolina Administrative Law Court tax decision must strictly satisfy section 12-60-3370 before filing the appeal.
- Placing disputed funds in a lawyer’s IOLTA account is not payment to the Department of Revenue and is not a statutory appeal bond.
- A personal undertaking by company principals does not substitute for an appropriate surety bond that legally secures the tax debt.
- Adding omitted principal or interest after the notice of appeal cannot repair a jurisdictional defect created when the appeal began.
Why It Matters
South Carolina tax counsel should treat the payment-or-bond step as part of filing, not as a curable administrative detail. Before lodging an appeal, counsel should confirm the exact amount the Administrative Law Court determined to be due, including the components the governing statutes require, and arrange either actual payment or a compliant bond through an appropriate surety. Creative escrow arrangements risk forfeiting review of an otherwise substantial tax issue.
The consequence here was decisive: the court never reached whether parasailing qualified for the boat-tour exemption. Businesses and practitioners should build jurisdictional checklists for specialized statutory appeals because general appellate instincts may not capture prerequisites imposed by the tax code. That checklist should identify the triggering order, deadline, proper recipient of payment, principal and interest calculation, approved form of security, surety qualifications, and proof that each step occurred before the notice was filed.
The opinion also illustrates why labels do not control. Calling a paper an “appeal bond” and holding money in escrow did not supply the legal protections of a statutory bond. Counsel should review the actual instrument and the surety’s enforceable obligation, not merely confirm that the client has reserved enough cash. When the amount is uncertain, obtaining a ruling or calculation before the appeal deadline is safer than attempting a post-filing correction.