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Basic Business Taxes

Jobs tax credit:
An income tax or premium tax credit of $1,500 to $8,000 — depending upon the county of location — is provided for each new job created, according to specification, for five years. Credits taken may not exceed 50 percent of the state income tax liability in any year, but unused credits may be carried forward for 15 years. The credit is available to manufacturing, processing, warehousing, distribution, research and development, corporate office facilities, eligible tourism establishments, technology-intensive facilities, and insurance companies that pay premium tax in South Carolina.

Regional industrial park legislation allows companies locating in these parks to earn an extra $1,000 for each job.

Credit for investing in an economic impact zone:
Credits to corporate income taxes are permitted for qualified manufacturing and productive equipment properties that are placed in service during the taxable year in the economic impact zone. The amount of the credit for qualifying investments is 1 to 5 percent depending on whether the property is 3, 5, 7, 10, or 15 year based on the applicable recovery period for the property under Internal Revenue Code 168(e). The credit claimed is limited to $5 million for a taxpayer. This credit does not apply to any property to which other tax credits apply, unless the qualifying business waives such credits. Any unused credit may be carried forward for 10 years. Economic Impact Zones are 27 counties located within 50 miles of the boundaries of an "applicable federal military installation," and any other area the state determines is adversely impacted by the closing or realignment of the applicable federal military installation or applicable federal facility.

Infrastructure construction incentive:
Credits to corporate income taxes are permitted for corporate contributions to infrastructure construction or improvement. Credit is given for 50 percent of the expense, not to exceed $10,000, with a three-year carry-forward of unused credits.

Corporate headquarters tax credits:
Credit to corporate income taxes or corporate license fees is allowed for establishing, expanding or adding to corporate headquarters. To qualify, corporate headquarters must be the location where staff employees are physically employed; where the majority of the company's financial, personnel, legal, planning, or other functions are handled either on a regional or national basis; and must be the only headquarters within the region/nation. Credit is permitted for 20 percent of qualifying real property costs incurred (a) in the design, preparation, and development of either establishing, expanding, or adding to a headquarters; (b) for direct construction costs; and/or (c) direct lease costs during the first five years of operation. Qualifying corporations must invest $50,000 or more and create 40 permanent new full-time jobs with at least 20 classified as headquarters staff employees.

Credit is permitted for 20 percent of tangible personal property costs if the company meets the qualifications; if the property is capitalized as personal property for income tax purposes under the Internal Revenue Code; and is purchased for the establishment, expansion, or addition of a headquarters or a related R&D facility. To receive the credit, the jobs created must equal 75 or more and be new, permanent, full-time positions for those performing headquarters or R&D functions; have an average cash compensation level of more than one and one-half times the per capita state income; and have an average South Carolina employee cash compensation level for all employees in the state of more than twice the South Carolina per capita income.

Unused credits may be carried forward 10 years. This is extended to 15 years if qualifying corporations create 150 new jobs that meet the income criteria for personal property credits.

Child-care program:
Credits to state income tax, bank tax, or premium tax are permitted for costs incurred in establishing a child-care program for employees, with maximum credit equal to 50 percent of incurred expenditures, not to exceed $100,000. Unused credits may be carried forward 10 years.

Credit is also permitted for operating a child-care program with credits not to exceed $3,000 per employee.

Exporters income deferral:
Tax on income attributable to the increase in gross income from foreign trade may be deferred for whichever occurs first: the taxpayer intentionally ceases exporting property, or after three taxable years with no gross income from foreign trading receipts.

Deferrals are available if:
• • The base amount by which the gross income from foreign trade in the applicable tax year exceeds a base amount equal to the average of annual gross income from foreign receipts over the three prior years, and does not exceed $5 million;
• • Annual interest is paid on the aggregate deferred tax at the base period T-bill rate. The interest is due on the date the taxpayer must file the annual return required without regard to any extension; no interest is due on amounts deferred for less than an entire taxable year

Other income tax incentives:
Expenses incurred in renovating buildings to permit easier access for physically handicapped persons can be deductible from gross corporate income.

A corporate income tax credit against taxable income is allowed for minority businesses holding state government contracts. The credit is equal to 4 percent of payments to minority subcontractors, up to $25,000 annually, and can be carried forward five years. A taxpayer is eligible to claim the credit for six consecutive taxable years, beginning with the taxable year in which the credit is first claimed.

Sales and use taxes:
A 5 percent sales tax is imposed on gross receipts from retail sale or lease of tangible personal property, unless specifically exempted, and certain services. Wholesale sales are exempt from sales tax.

A 5 percent use tax is levied on the use, consumption, or storage of personal property and certain services. Items subject to, or exempt from, the sales tax are not subject to use taxation.

Counties have the ability to impose 1 percent sales tax in return for rolling back property taxes or infrastructure improvements.

Industrial machinery and equipment:
Sales and use tax exemptions are allowed for machinery used in manufacturing, processing, or compounding tangible property and machinery used in mining, quarrying, or farming activities. Also exempt are certain machinery, technical equipment, and supplies purchased by television or radio stations; railroad rolling stock and barges and vessels; and motor vehicles, boats, recreation vehicles, and semi trailers. The maximum sales tax per motor vehicle purchased in-state is $300.

Industrial fuels and raw materials:
Exempt from sales and use taxes are materials for component parts, certain gasoline and motor fuels, containers, labels and wrapping materials, electricity used in the manufacturing of tangible personal property for sale, pollution-control equipment, certain ship supplies, and raw materials used to assemble missiles for the armed forces.

Businesses receive a discount for on-time payments of both sales and use taxes.

Property tax:
All real and personal property, unless specifically exempted, is subject to local property tax. There are no state real or personal property taxes.

No inventories or intangible personal property are taxed at the state or local level.

The fair market value of manufacturers' machinery and equipment may be depreciated up to 90 percent of original cost.

There is no state property tax, but the South Carolina Tax Commission has the responsibility for assessment, appraisal, and equalization of taxable values of real and personal property for manufacturing, corporate headquarters, corporate offices, and distribution facilities.

Separate taxing provisions apply to mines, processors of primary forest products, public utilities, and airline companies.

Property tax abatement:
All new and expanding manufacturing and research and development establishments that invest at least $50,000 in capital expenditures in the state are eligible for an exemption from county ordinary property taxes for five years. This exemption also applies to corporate headquarters, corporate office, and distribution facilities with a minimum of 75 full-time jobs. Municipal taxes may also be exempted by local ordinance.

Job development credit:
Under the state's Rural Development Act of 1996, all of South Carolina is designated as an enterprise zone, making available state funds for eligible project costs and retraining. Under enterprise zone legislation, the job development credit allows approved companies to retain a portion of state withholding taxes for a period of up to 15 years for permissible expenditures made at the qualifying facility.

Fee in lieu of taxes:
Industries investing $5 million or more are eligible to negotiate a "fee-in-lieu" of property taxes. Under the fee-in-lieu program, a company investing $5 million can negotiate an assessment ratio of 6 percent for a period of up to 30 years.

Pollution-control equipment:
Air, water, and noise pollution-control equipment is exempt from property and sales taxes.