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What to Know About Business License Tax Administration After Act 176

Many requirements of the South Carolina Business License Tax Standardization Act, or Act 176, become effective January 1, 2022. The law requires a standard business license year among all taxing jurisdictions around the state, standard deadlines for payment due dates and refunds, acceptance of a standardized license application, a standard class schedule, appeals process, and a requirement that cities and towns accept renewals through the new Local Business License Renewal Center.

Even though cities and towns must comply with Act 176, some differences to ongoing business license policy and administration will remain at their discretion in 2022 and beyond.

What does Act 176 mean for city or town council decisions?
After Act 176’s January 1, 2022, effective date, elected councils will maintain the authority to
  • enact their own business license ordinances governing how they administer the licensing in their municipality, although the Municipal Association strongly recommends use of its model business license ordinance; 
  • set business license tax rates and nonpayment penalty rates; and 
  • create license subclasses for economic development. 
The law preserves any current agreements and provides for future agreements that cities create with a certain business for the calculation of business license tax.

Cities and towns may also continue to contract with third-party companies to identify businesses that do not comply with business license tax ordinances, but Act 176 restricts third parties’ contact with those noncompliant businesses. The June 2021 issue of Uptown details the restrictions now placed on third-party companies. 

What does Act 176 mean for business license staff in 2022 and afterward?
Because Act 176 likely changes many jurisdictions’ business license deadlines, municipal staff should adjust their internal administrative practices. 

Applications 
All taxing jurisdictions must now accept the statewide standard business license application. Municipalities may still use their own application, but must also accept the standard application. 

Class schedules and rates
When first setting up a business license, cities and towns must assign the business a six-digit North American Industry Classification System code, or NAICS code. Act 176 establishes a standard class schedule, where businesses are placed into classes using the latest edition of NAICS based on profitability. The class schedule is mandated by law and approved by the SC Revenue and Fiscals Affairs Office. In previous versions of the Municipal Association’s model business license ordinance, there was a standard Class 1 through 7, with all subclasses grouped together under Class 8. Now only the business types specified by state law will fall under Class 8, and all special subclasses established by the municipality will fall under Class 9. 

Cities and towns must calculate the business license tax using the business’s gross income for the previous calendar year or its previous fiscal year.

Renewals 
Business license staff must now make the Local Business License Renewal Center available as a payment option for businesses. The renewal center allows businesses to renew their licenses with every jurisdiction in the state. The entire taxpayer payment goes directly to the municipality. Businesses that pay with a credit card will be charged a small convenience fee by the credit card processor. Cities and towns can only use their own grandfathered online payment system if the software was in place before January 1, 2018. 

The standard license year of May 1 to April 30 means that licensing officials should issue renewal notices in January or February — earlier than in the past. This is necessary to ensure cities and towns have their business’s information to load into the renewal center software. 

Appeals  
Act 176 outlines a standard appeals process which includes deadlines for appeals and responses. The appeals hearing must take place within 30 days of the city receiving the appeal form. Businesses may appeal decisions made by the city or town only to the Administrative Law Court.

Learn more about Act 176.