Business License Tax Standardization Act Goes into Effect: What this Means for South Carolina Businesses in 2022

First, all local business licenses must now be issued for the same 12-month license period (May 1 to April 30) across the State. During this period, businesses may renew their licenses upon payment of the business license tax, which is based on gross income for the calendar year preceding the due date, or, for a new business, estimated gross income for the balance of the license year. As defined in the Act, a business’s “gross income” is a business’s gross receipts or gross revenue received or accrued for one calendar year. However, determining which taxing jurisdiction it is owed to can be a little more difficult to establish. The appropriate taxing jurisdiction depends on whether the business operates out of a physical location or remotely. Usually, businesses operating out of a physical location must pay the business license tax to the locality in which the business resides. On the other hand, businesses selling products remotely must pay the tax to the locality to which goods are shipped.

Second, the Act imposes a requirement for taxing jurisdictions to accept, and for businesses to use, a standard business license application form as provided by the South Carolina Revenue and Fiscal Affairs Office. Taxing jurisdictions must also allow business license taxes to be paid through an online portal. However, taxpayers may continue to utilize traditional, mail-based payment methods if they so choose.

Third, the Act allows a taxing jurisdiction to contract with a third-party entity to collect delinquent business license taxes. Businesses are not required to provide confidential information to the third-party entity. Additionally, the Act allows businesses to opt out of third-party communications by sending a written request to the taxing jurisdiction.  

Fourth, the Act allows a business to bring a private cause of action against a third-party entity that engages in conduct that harasses the business. The remedy for this violation is recoupment of actual monetary loss or a sum of $500.00, whichever is greater. If the court finds that the violation was “willful[] or knowing[],” the injured business may recover up to three times the actual monetary loss resulting from the violation.

Given these changes, South Carolina businesses should note the following for the upcoming year and beyond:

• Businesses contacted by third parties seeking tax payment information should be aware of the confidentiality and communication rights provided for in the Act. Businesses should speak with an attorney before offering any information to a third-party inquiring about tax payment.
• Businesses should be aware of the private cause of action afforded to them if harassed by a third-party entity under contract with the relevant taxing jurisdiction, as there is a possibility to recoup damages as a result of the harassment.
• Businesses should be aware of the new licensing period that runs from May 1 to April 30 and the ability to pay taxes via an online portal to avoid the potential delays and errors that may accompany hardcopy payment methods.