Thursday, March 25, 2021

Adopting the 2022 Model Business License Ordinance

When the General Assembly passed Act 176, the SC Business License Tax Standardization Act, it created new standardization requirements for the cities and towns that administer this tax. It created action items that they need to undertake by January 1, 2022, even if they have made business license changes in recent years. 

The law requires that these taxing jurisdictions now all use a single due date — April 30 — and a standard license year period of May 1 to April 30. Other licensing practices must be standardized as well, including the method of calculating a business’s gross income, the setting of rate classes, as well as acceptance of a standard license application and acceptance of payments from a statewide online payment center. 

The Municipal Association of SC has created a seven-step process that cities and towns can use as a guide to comply with the law. Some critical early steps include converting to the standard license year, reviewing data and rebalancing rates to prevent a revenue windfall. 

Repeal and replace 

Once cities and towns complete the previous steps, they will have laid the necessary groundwork to tackle Step 5 in the process: repeal the existing business license ordinance and replace it with the revised model business license ordinance created by the Municipal Association to address the new law’s requirements. Because of the law’s complexities, the Association strongly encourages municipalities to repeal their existing ordinances, rather than altering and correcting those ordinances. Adoption of business license ordinances that comply with Act 176 must take place by January 1, 2022. 

The new model ordinance includes the current standard business license class schedule required by law, which cities and towns must update at the end of every odd-numbered year. It also contains a comprehensive definition of a business’ gross income as required by Act 176. 

Here are some other business license issues covered by the model ordinance: 
  • Applicability to businesses lacking an established location in the municipality 
  • Requirements for display or carrying of a license
  • Inspections 
  • Audits 
  • Assessments 
  • Penalties for nonpayment 
  • Denials, suspensions and revocation of licenses
  • Violations 

Cities and towns can obtain the model ordinance and the standard class schedule by contacting their business license standardization liaison at the Association. The City Quick Connect podcast has a new episode featuring the Association’s Manager for Collections Programs Caitlin Cothran and General Counsel Eric Shytle discussing the purpose and importance of the model ordinance.