Efforts to standardize the Palmetto State’s business license renewal processes is moving ahead with some analysis and advice from the CPA community.
Members of the General Assembly, the Municipal Association of S.C. and a number of business organizations have been working toward developing a single, mandated way of renewing business licenses to counter the challenges businesses face because nearly all of South Carolina’s 270 municipalities – and a few counties – use differing classifications, due dates, government forms and rate schedules to issue licenses that allow them to operate in the municipalities.
MASC Deputy Executive Director Reba Hull Campbell said the Association’s Business Licensing Task Force asked CPAs to become involved in the effort to assist with the calculation of gross revenue, which isn’t specifically defined in state law.
Campbell said a group of four CPAs sat with the task force, representatives from the S.C. Chamber of Commerce, the National Federation of Independent Business (NFIB), other business interests and legislators to talk through the complexities. “Our big picture goal is streamlining to make the process of business licensing more user-friendly for businesses and more cost effective for cities to collect,” Campbell said.
SCACPA member Kenneth H. Bauknight, CPA, managing shareholder of Bauknight Pietras & Stormer, PA. said MASC reached out to the firm for assistance in determining the definition of income used in the calculation of the business license tax. “Rep. Rick Quinn had proposed using net income as the basis for the business license tax computation so a business with a net loss, for example, would not have to pay the tax.” Bauknight said. “Historically, gross income has been used.”
Ultimately, the group determined that continuing to use gross income made the most sense. “It was going to be complicated to define ‘net income’ since net income for a sole proprietor is reported differently on the business owner’s return than net income reported by C corporations for instance – this would require taking income and deductions from various parts of the tax returns to compute a similar net income for each type of business entity,” Bauknight explained. “Our role was to do the analysis, point out the facts and explain the issues the MASC was going to run into using net income.”
According to data from the Office of Revenue and Fiscal Affairs, which compiles the information from the Local Government Finance Report, the following amounts were collected in business license taxes in FY13:
The key components being discussed for a standardized business license law include:
- One due date for all businesses
- One application for all
- An agreed upon definition of gross income, which is how license tax is calculated.
- Substantially shrinking the number of business classifications – perhaps to eight – to make it easier to determine the kinds of licenses needed. Columbia, for example, has 139 of them.
- Create a centralized computer-driven system where companies submit applications to do work anywhere they chose in the state. The software would use companies’ financial information to calculate how much businesses would pay each city.
- Cities and towns could not get a revenue windfall the first year the new system goes live.
Rep. Bill Sandifer, (R – Oconee County), chairman of the Labor Commerce and Industry Community, where the bill will live, is working on the bill’s language and will introduce it soon.
Learn more about the proposed business licensing bill at: http://www.masc.sc/Pages/legislative/Business-Licensing.aspx