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South Carolina: Business License Tax Standardization Act Enacted

Listen to a brief overview of state tax developments this week, including South Carolina, or read full South Carolina development below.

Detailed District of South Carolina Development

House Bill 4431, entitled the “South Carolina Business License Tax Standardization Act,” was signed into law by Gov. McMaster on September 30, 2020.  The bill makes a number of reforms to South Carolina’s local business license taxes, which are imposed by certain counties or municipalities for the privilege of doing business in the jurisdiction. Specifically, under House Bill 4431, a county or municipality that levies a business license tax must comply with the provisions of the bill. Certain of the mandates relate to filing periods; for example, a business license must be issued to a taxpayer for a twelve-month period beginning May 1 and ending April 30 each year. The tax must be computed based on gross income for the calendar year preceding the due date, for the business’s twelve month fiscal year preceding the due date, or on a twelve month projected income based on the monthly average for a business in operation for less than one year. Taxpayers are entitled to refunds if they submit a tax payment that is greater than the amount owed. “Gross income” means the gross receipts of a business, received or accrued, for one calendar or fiscal year collected or to be collected from business done within a taxing jurisdiction. The bill provides a method for apportioning gross receipts earned by a business in the jurisdictions where it is domiciled and other jurisdictions where the business has gross receipts and paid a business license tax.

For the reporting and payment of business license taxes, a taxing jurisdiction must provide taxpayers with access to a business license portal hosted and managed by the state Revenue and Fiscal Affairs Office. In addition to allowing payments through the business license portal, a taxing jurisdiction must also allow a taxpayer to file and pay its business license tax in person, by telephone, by mail, or through an online payment system that was previously in existence and operated by the taxing jurisdiction. Taxing jurisdictions may contract by ordinance with a third-party individual or firm to assist with the collection of property or business license taxes. A private third-party may only assist in collecting business license taxes by identifying, through publicly available records, businesses that are operating within the jurisdiction without a business license; to provide that identification to a taxing jurisdiction; to communicate with those businesses identified to determine whether any business license taxes are due and owing; and to assist those businesses with paying any taxes due. A private third-party entity is prohibited from assessing business license taxes or requiring a business to remit confidential business license data to that private third-party. If a business requests in writing that the third-party entity cease communication with the business, then the third-party entity is strictly prohibited from further contact. Taxing jurisdictions are permitted to compensate third-party entities through contingency fees based on a percentage of taxes collected. Taxing jurisdictions may not share any information with any third party entity other than to acknowledge whether or not a business has paid the jurisdiction’s business license tax for a relevant year. The bill also prohibits third parties from harassing businesses, such as continuing to contact a business after the business has informed the third-party entity in writing to cease communication.  House Bill 4431 generally takes effect on January 1, 2022. The portions of the bill relating to private third parties assisting with the collection of business license taxes will take effect upon the Governor’s approval.  Please contact Jeff Cook at 816-802-5225 with questions. 

This Week's Developments

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Featured Speaker

Sarah McGahan

Sarah McGahan

Managing Director, State & Local Tax, KPMG US