Time Is Running Out for Business License Standardization

The SC Business License Tax Standardization Act, Act 176, sets January 1, 2022, as the date by which every local government across the state that levies a business license tax must begin administering that tax the same way. The compliance deadline is almost here, and time is running short for those cities and towns that haven’t yet taken the necessary steps to comply with the law.

The Municipal Association of SC developed a seven-step process to simplify the standardization process that must be underway now if a city or town is to meet the compliance deadline at the end of this year.

The most time-consuming step involves rebalancing business license tax rates to ensure that the process of adopting the state-mandated business license class schedule does not result in a revenue loss or windfall for the city or town in the 2022 business license year. 

Given the significant amount of work involved to rebalance each city’s business license tax rates to achieve revenue neutrality, cities and towns that request rebalancing assistance from the Association must enter into a queue. The amount of time a city or town remains in the queue is growing as the end of 2021 draws closer. Therefore, jurisdictions that need the Association’s assistance to rebalance must provide the required business license data to the Association no later than October 15, 2021. Cities and towns that miss this deadline might not receive assistance from the Association.

Cities and towns should also adopt the Association’s model business license ordinance that complies with Act 176’s numerous requirements and avoid updating their existing business license ordinances since the multiple changes needed to comply with the law could escape scrutiny. The Association has prepared adoption language that clarifies the new ordinance supersedes a municipality’s existing business license ordinance. 

Jurisdictions should also immediately communicate with their local business owners and operators. Complying with Act 176 will move some businesses into new rate classes, which might change the amount of business license tax they pay. Other changes mandated by Act 176, like the tax’s April 30 due date, will affect every business that pays the tax. Cities and towns should notify all of their business license-holders of these and other forthcoming changes.

Finally, municipalities need to work now with the Municipal Association to begin the process of using the online Local Business License Renewal Center, which will allow businesses to renew their business license online. As with rebalancing, setting up each municipality to use the online renewal system will be a time-intensive task, and cities and towns can only get set up once they have rebalanced and adopted the new business license ordinance.