Taxes

Corporate Income Tax

Every corporation organized to do business in the state of South Carolina is required to pay corporate income taxes. The tax is levied on net taxable income from South Carolina businesses only. The basis for state income tax is the company’s federal taxable income.

South Carolina has no tax on worldwide profits. Foreign manufacturers (those located outside the state) and those conducting business both in-state and out-of-state are subject to a four-factor apportionment formula used to determine the taxable portion of business.

  • A “single sales factor” apportionment method (based on sales) for taxpayers whose principal business in South Carolina is dealing in tangible personal property.  This method is typically used by businesses that manufacture, sell, or rent tangible personal property.
  • A “gross receipts” apportionment method for taxpayers not dealing in tangible personal property.  This method is typically used by financial businesses and service businesses, including businesses that install or repair tangible personal property, and contractors.
  • A “special” apportionment method provided in South Carolina Code 12-6-2310 for certain companies, such as railroad companies, telephone companies, pipeline companies, airline companies, and shipping lines.
  • An individualized apportionment method tailored to a particular taxpayer (a) because the standard method for that taxpayer does not fairly represent the extent of the taxpayer’s business in South Carolina, or (b) as an economic incentive allowed the taxpayer.

The portion of income to be taxed is based upon the ratios of income earned within the state to total company operations.

A South Carolina business that is subject to the four-factor apportionment formula can have a significant tax savings opportunity due to South Carolina not having a “throwback rule”.  Sales in states that do not tax the corporation (as a result of Public Law 86-272) are not added back to the South Carolina sales in the apportionment formula. This can result in a significant amount of “no where” sales not taxed by a state.

In South Carolina, only the state has the authority to tax corporate income. At 5%, South Carolina has the lowest corporate income tax rate in the Southeast and one of the lowest in the nation.

Sales and Use Tax

South Carolina imposes a 6% sales tax on the gross proceeds of sales of every person engaged in the business of selling tangible personal property at retail as well as intangible items such as laundry and dry cleaning, electricity, and certain communication service.  South Carolina also imposes a 6% use tax on the sales price of tangible personal property purchased at retail for storage, use, or other consumption in South Carolina, regardless of whether the retailer is engaged in business in South Carolina.  These taxes also apply to tangible personal property manufactured within South Carolina or brought into South Carolina by its manufacturer for storage, use, or consumption in South Carolina by the manufacturer.

Out-of-State Sales

South Carolina exempts sales tax on the gross proceeds of the sales of tangible personal property where the seller, by contract of sale, is obligated to deliver to the buyer, or to an agent or donee of the buyer, at a point outside of the state or to deliver it to a carrier or to the mails for transportation to the buyer, or agent or donee of the buyer, at a point outside the state.

Out-of-State Purchases

South Carolina provides a credit to the use tax on sales and the use tax on purchases of tangible personal property purchased in another state if the state in which the property is purchased and the sales and use tax paid allows substantially similar tax credits on tangible personal property purchased in this state. If the amount of the sales or use tax paid in the other state is less than the amount of use tax imposed in South Carolina, the user shall pay the difference to South Carolina.

Property Tax

Real property is subject to property taxes.  Personal property used in business and certain personal property used for personal purposes, such as motor vehicles, boats, and airplanes, are also subject to property taxes.  Property taxes are generally assessed and collected by local governments.  South Carolina assesses and collects some property taxes and assists in the administration of property taxes by overseeing all property tax assessments to ensure equitable and uniform assessment throughout the state.  The assessed value of real and personal property for business classifications, including manufacturing, distribution, corporate headquarters and corporate office facilities, is determined by the South Carolina Department of Revenue. Each class of property is assessed at a ratio unique to that type of property.

Type of Property & Assessment Ratio

Manufacturers’ real and personal property

10.5% of fair market value

All other businesses’ or individuals’ real property (except primary residences)

6% of fair market value

All other businesses’ or individuals’ personal property

10.5% of fair market value

Primary residences

4% of fair market value

Utility property

10.5% of fair market value

Railroads and private carlines

9.5% of fair market value

Airlines and pipelines

9.5% of fair market value

Agriculture (privately owned)

4.0% of fair market value

The assessment ratio is applied to the fair market value of the property to determine the assessed value of the property. Each county, municipality, school district and other tax district then applies its millage rate to the assessed value to determine the tax due. The millage rate is equivalent to the tax per $1,000 of assessed value. Millage rates are set annually by local government tax authorities. Charleston County has tax credit factors which may apply due to local option sales tax collected.

Formula:

  • Appraised Value (fair market value) of property X Assessment Ratio = Assessed Value
  • Assessed Value X (millage rate/1000) = Preliminary estimated property tax
  • Tax credit factor (if applicable) X Appraised value = Credit
  • Preliminary estimated property tax - Credit = Estimated annual property tax

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