South Carolina Business Taxes at a Glance
South Carolina has been reducing its individual income tax rates, and it offers a lower rate for active business income earned through pass-through entities. Corporations pay income tax and a separate annual license fee. Property tax depends on whether a home is your legal residence. In coastal areas, tourism brings additional local taxes. BOMCAS helps South Carolina individuals and businesses manage these rules.
Individual Income Tax
South Carolina taxes residents on all income and nonresidents on South Carolina-source income. The Legislature has reduced the top rate in steps in recent years, and further changes have been debated. The return starts from federal taxable income with South Carolina adjustments.
South Carolina offers a retirement income deduction, a deduction for people age 65 and older, a military retirement deduction, and no tax on Social Security. We prepare South Carolina returns and apply these deductions correctly.
Reduced Rate on Active Business Income
Owners of partnerships, S corporations, and sole proprietorships can elect to have their active trade or business income taxed at a lower flat rate, separate from their other income. The election can save tax for owners whose business income would otherwise be taxed at the higher rate. Not all income qualifies. Passive investment income and certain other items are excluded, and the owner must be actively involved.
We review whether the election helps, calculate the qualifying income, and prepare the related schedules.
Corporate Income Tax and Annual License Fee
Corporations active in South Carolina owe corporate income tax on the portion of income apportioned to the state. They also pay an annual license fee, which is based on capital stock and paid-in surplus apportioned to South Carolina, with a minimum. The license fee is paid with the corporate return, and new corporations file an initial license fee return. Utilities and certain other industries have special rules.
S corporations file returns and pay the license fee, and may need to withhold on nonresident shareholders. South Carolina has an optional entity-level tax for partnerships and S corporations. We prepare corporate and entity returns, compute the license fee, and evaluate the PTE election.
Sales, Accommodations, and Hospitality Taxes
South Carolina's sales and use tax combines a state rate with local option taxes in many counties. Some big-ticket items, such as motor vehicles and boats, are subject to a capped fee or tax instead of the regular rate.
Tourism areas add further layers:
- State accommodations tax on short-term lodging
- Local accommodations tax imposed by counties and cities
- Local hospitality tax on prepared food and beverages, often collected by the city or county directly
A beach rental or restaurant in Myrtle Beach, Charleston, or Hilton Head may need to file with the state and with one or more local governments. We help register, file, and reconcile these taxes.
Property Tax: Legal Residence Assessment
South Carolina assesses an owner-occupied legal residence at a lower ratio than other residential property, such as second homes and rentals. The difference is significant. Homeowners need to apply for the legal residence assessment with the county, and moving out or renting the home can change it. Business personal property is assessed at a higher ratio and reported each year. We help clients track these classifications and keep fixed asset records.
Vehicle and Boat Property Taxes
South Carolina counties tax vehicles, boats, and some other personal property every year, separate from the tax on a home. New residents must register vehicles in South Carolina and pay the county tax before getting state plates. Business-owned vehicles and equipment are also reported for property tax. We help households and businesses keep these bills in their records.
Payroll and the SC W-4
South Carolina employers withhold state income tax and report unemployment insurance to the Department of Employment and Workforce. Employees complete South Carolina's withholding form. We handle payroll runs and state reports and tie both back to the accounting records.
Auto Plants, Ports, Military Bases, and the Grand Strand
- Manufacturing and automotive: inventory, fixed assets, and the corporate license fee
- Tourism and hospitality: accommodations and hospitality taxes and seasonal payroll
- Ports and logistics: apportionment and inventory accounting
- Construction and real estate: job costing and property tax classification
- Agriculture and forestry: farm reporting and agricultural exemptions
Retiring to the Coast or the Upstate
South Carolina does not tax Social Security benefits, exempts military retirement income, and allows a retirement income deduction that is larger for taxpayers age 65 and older. Retirees buying a primary home should apply for the 4% legal residence assessment with the county, since the lower ratio is not automatic. In the year of the move, a part-year return covers income from the date residency begins.
Books for Local Hospitality and Accommodations Returns
South Carolina bookkeeping should separate active business income for the reduced rate election, track capital and paid-in surplus for the license fee, and record lodging and food sales for local taxes. We set up the chart of accounts and month-end close to provide each figure.
Next Steps With BOMCAS in South Carolina
Owners using the reduced rate on active trade or business income, beach rental owners filing accommodations taxes, and new retirees can contact BOMCAS for a remote review. Over time, this section will hold pages for specific South Carolina cities and services. Return to the BOMCAS home page or see our United States services. This overview is general information; your own filings depend on your facts.
Talk to BOMCAS About Your South Carolina Taxes
Have a question about your South Carolina filings, payroll or bookkeeping? Contact BOMCAS or use the contact form below, and we will get back to you as soon as possible. You can also browse all United States services.