Business Taxes

Corporate Income Tax

State corporate income tax is based primarily on federal gross and taxable income. Companies engaged in multi-state activities will only pay taxes on the income derived from business activity conducted in South Carolina.

South Carolina has the lowest corporate income tax among the Southeastern states competing most frequently with South Carolina.

Calculating Corporate Income -The First Step in Lowering Tax Liability

The first step to maintaining low corporate income tax liabilities is the state’s formula for calculating corporate income. Annual corporate income is based on the following:

• Income allocated to South Carolina operations (interest, dividends, royalties, rents, property sale gains and losses, and personal services income); and
• Income apportioned to the operations (based on weighted payroll, property, and sales factors). South Carolina’s double weighting of sales reduces the amount of corporate income most companies apportion to the state.
  

A 5% corporate income tax rate is applied to the sum of these incomes. The resulting figure is the company’s state corporate income taxes.

Single Factor Sales Apportionment Formula

In 2007, South Carolina began moving towards a single factor sales apportionment formula. A company’s income will be apportioned to South Carolina by multiplying the net income remaining after allocation (described above) by a fraction, the numerator of which is the number of sales made in South Carolina and the denominator is the total number of sales of the taxpayer. This new formula eliminates property and payroll from the equation and is advantageous for a manufacturer whose majority of sales occurs outside the State of South Carolina. The new method is phased in over a five-year period with a 60% reduction of income attributable to South Carolina in 2009 and an additional 20% each year thereafter. In 2011, the new formula is fully applicable.

Corporate License Tax

All companies must pay an annual corporate license tax. The rate is $15.00 plus $1.00 for each $1,000 of capital stock and paid-in or capital surplus. For multi-state corporations, the license tax is determined by apportionment in the same manner employed in computing apportioned corporate income.

Sales Tax

South Carolina’s sales and use tax rate is 6 percent. Counties, by approval of a majority of county voters, may assess an additional one to two percent local option sales tax. Proceeds go towards infrastructure improvements or a rollback of property taxes. A variety of sales tax exemptions for companies are offered.  Greenville only has a local option sales tax on prepared food for recreational improvements.   All other sales tax rates are maintained at the 6 percent rate.

Property Tax

In South Carolina, only local governments may levy property taxes. A company’s property tax liability is a function of: Property Value x Assessment Ratio x Millage.

To determine Fair Market Value, real property is appraised, while tangible personal property is recorded at cost and then depreciated based on a statutory depreciation rate (for manufacturers) and income tax depreciation (for other businesses). The Fair Market Value is then assessed at rates established in the South Carolina Constitution. The local millage rate is applied to the assessed value to determine the property taxes. Millage rates in South Carolina are site specific and set annually by local government. A mill is equal to $0.001.

$10 Million investment x 10.5% assessment ratio x .2750 millage rate = $288,750 annual tax (before abatement)

Property Tax Exemptions may include inventories (raw materials, work-in-progress, finished goods), intangibles (stocks, dividends, interest) and pollution control equipment.  A partial Property Tax Exemption, called an abatement, may be made available to manufacturing, research and development, corporate headquarters, office and distribution facilities meeting certain requirements.