Thursday, January 14, 2021

Standardizing Business Licenses in 2021

After years of work and discussion about the complexity of collecting the business license tax levied by many cities and towns in South Carolina, the General Assembly passed the SC Business License Tax Standardization Act last September. The new law standardizes many of the elements of administering the tax — elements that were previously decided by each municipality. 

The law requires these standardization measures of cities and towns with the tax by January 1, 2022:
  • License periods beginning May 1 and ending April 30.
  • Calculating the tax based on a business’ gross income for the previous calendar year or its previous fiscal year.
  • Using the law’s definition of gross income. 
  • Accepting a standardized application approved by the SC Revenue and Fiscal Affairs Office. 
  • Using the law’s standardized class schedule. 
  • Allowing businesses to make license renewal payments through an online payment system hosted by the SC Revenue and Fiscal Affairs Office. 
  • Using the law’s standardized appeals process. 
  • Setting rates for the 2022 license year — May 1, 2022, to April 30, 2023 — to prevent any revenue windfall for the taxing jurisdiction during the first year of compliance. 

During 2021, cities and towns will need to adopt business license ordinances that comply with the new law. The Municipal Association strongly recommends cities and towns repeal their existing ordinances and then replace them the Association’s 2021 model business license ordinance, which will be available soon. 

Achieving compliance with the new law will require a phased approach. Throughout 2021, the Municipal Association’s staff will work to help municipal staff comply with the new requirements. Here are a few resources for getting started: