Wednesday, July 21, the Taxation Realignment Commission released its preliminary report on what it will recommend to the General Assembly in a full report to be made public later this year. Many of the recommended changes to the state’s tax code have to deal with sales tax exemptions that have been put into law over the years.

One of the more interesting changes is the imposition of the sales tax to some items purchased over the Internet. For years, Congress and state legislatures have debated taxing Internet goods and how a government would go about implementing and enforcing such a tax. In other moves, the sales tax would apply to automobiles, newspapers, festival concessions, and hearing aids, while a 2.5 percent sales tax would be added to public water service, prescription drugs, and groceries. Currently, there are nearly $700 million in sales tax exemptions for all manner of products and services.

For those wondering about sales tax holidays, it would be limited to a sales tax holiday for school supplies only in August, while eliminating the others.

There’s likely to be a fight over the proposed changes when the General Assembly reconvenes, though the commission points out that the changes it has given approval to will reduce the overall tax burden on South Carolinians while maintaining the same amount of revenue. When the legislation to create TRAC was making its way through the Legislature, there was a lot of debate over what constituted a raising of taxes and whether Act 388 should be considered. With Act 388 not included in the discussion, and the overall tax burden going lower, there may be a chance of the final product passing in 2011.

Speaker of the House Bobby Harrell, R–Charleston, said it may take the entire 2011–2012 session to push through the reforms. He added that it’s likely to not be an easy task, though there is a feeling in the General Assembly that something has to be done. State Rep. Nathan Ballentine, R–Irmo, said that something needs to be passed and that chances are increased because the proposal is revenue–neutral.