CarMax Units Must File Combined Tax Returns in South Carolina

CarMax Auto Superstores Inc. and its related entities must file combined income tax returns in South Carolina to properly account for their income taxable in the state, a South Carolina administrative law judge held Friday.

CarMax’s intercompany transactions “artificially and significantly reduce” one unit’s taxable income so that the state’s standard separate reporting and apportionment methods “shelter intercompany transactions that abuse the state’s tax scheme,” Judge Ralph King Anderson III wrote for the South Carolina Administrative Law Court.

However, Anderson sent the case back to the department to recalculate its assessment of more than $2.22 million. The department should divide ...