As of January 1, 2022, SC Code Section 6-1-400 (e)(1) will specifically define the term “gross income” for any city, town or county that levies a business license tax. For most businesses, gross income “means the gross receipts or gross revenue of a business, received or accrued, for one calendar or fiscal year collected or to be collected from business done within a taxing jurisdiction.”
Definitions for most businesses
For a business located within a municipality, the license tax will be based on the entirety of its gross income, with the tax paid to the municipality in which it resides. The business may deduct from its gross income any income on which it pays a license tax to another jurisdiction.
For a business located within a municipality, the license tax will be based on the entirety of its gross income, with the tax paid to the municipality in which it resides. The business may deduct from its gross income any income on which it pays a license tax to another jurisdiction.
For a business not located within the city where it does business, the license tax will be based upon and paid only on the income it earns from work that takes place within that city.
The law also allows businesses to deduct other types of funds from their reported gross income. Examples include “taxes collected for a governmental entity, escrow funds, or funds that are the property of a third party.”
Businesses with unique definitions
There are several industries in the state for whom longstanding definitions of “gross income” are unique and included within Act 176:
- Real estate agents and brokers have a unique definition of gross income.
- Insurance companies, manufacturers and telecommunications companies all have their own definition of gross income as well.
These industries’ gross income definitions were previously found in various sections of state law and local ordinances. Act 176 consolidates them into one section of state law for easy reference.
Verifying gross income
Occasionally, a business’s reported gross income must be verified by a taxing jurisdiction. Perhaps the business’s gross income is higher than in previous years, or the business is not claiming all of the deductions allowed under the law. In those cases and others, Act 176 allows the city, town or county to inspect a business’s records to ensure the accuracy of its reported gross income. According to Act 176, taxing jurisdictions may review “returns and reports filed with the Internal Revenue Service, the South Carolina Department of Revenue, the South Carolina Department of Insurance, or other governmental agencies.”
Learn more
- The Municipal Association of SC website has a seven-step process to simplify the standardization process.
- The Association’s City Quick Connect podcast has episodes that delve into many of the critical issues of business license standardization.
- Each month in 2022, the Association’s Local Revenue Services will host “Business Licensing Essentials,” a series of webinars to explain critical elements of the business license administration process. The first session on January 12 will detail the process of sending out renewals.