The House Labor Commerce and Industry Committee unanimously gave approval, as amended, to H.4431 (Reps. Jordan, Fry, Rose, Atkinson and others), the “South Carolina Business License Tax Standardization Act,” on Tuesday, Feb. 18.
This follows the activity of Thursday, Feb. 13, when the House Labor Commerce and Industry Business License Fees Ad Hoc Subcommittee unanimously gave favorable approval to H.4431. The bill as it appeared Feb. 13 can be read here.
The bill now goes to the full House of Representatives for consideration.
The business community has long argued that South Carolina’s current system is complex, costly and lacks transparency. In South Carolina, 231 municipalities and nine counties have a business license tax, which creates confusion and adds costs to small businesses trying to comply. While most states assess flat license fees, South Carolina business tax laws allow cities to assess the tax based on a business’ gross receipts instead of net income. Filing in multiple jurisdictions has also created problems.
After five years of discussions, stakeholders are finalizing a compromise agreement. Businesses will still pay based on gross receipts. However, businesses operating in multiple jurisdictions will pay the tax based on the gross income within that jurisdiction, but the tax must be reduced by the amount of the gross income tax in other counties or municipalities. Each taxing jurisdiction must accept a standard business license application as established by the state Revenue and Fiscal Affairs Office (RFA).
The South Carolina Municipal Association will transfer the business license portal it has developed to the state RFA Office, which will oversee the standardized portal through a contract with the vendor. Businesses will renew their license annually by May 1 through the portal based on the gross income for the calendar year. Businesses not wanting to utilize the portal may file in person, by telephone or by mail. The portal offering will be subject to the availability of funding to the RFA.
Private third-party entities are prohibited from assessing or collecting taxes and are restricted from accessing business financial information. The bill also provides a mechanism for appeals, and the taxpayer may request a hearing before the Administrative Law Court.
The bill would take effect Jan. 1, 2021.