Registration Requirements in South Carolina
Most businesses with activity in South Carolina are required to register with the South Carolina Department of Revenue. Some businesses are also required to register with the Secretary of State. South Carolina has a guide you can follow, found here.
S-Corporation Income Tax
South Carolina recognizes the federal S-election, and South Carolina S corporations are not required to pay tax to the state. However, individual S corporation shareholders will owe tax on their share of the corporation’s income.
S corporations are subject to the corporate license fee, explained below.
LLC/Partnership Income Tax
LLCs and partnerships are not required to pay income tax to South Carolina. Instead, income from the business is distributed to individual LLC members or partners, who then pay South Carolina income tax on that amount with their personal return.
Corporate License Fee
South Carolina’s corporate license fee, which applies to C corporations and S corporations, is a tax based on net worth. The fee is based on capital stock and paid-in capital or capital surplus, at a rate of $1 for every $1,000, plus a flat additional charge of $15. There is a minimum license fee of $25.
S corporations, partnerships, and LLCs that have two or more nonresident individuals may file a composite return. Composite returns allow businesses to compute and report South Carolina income and tax to the electing individuals on a single return.
Individual Income Tax
South Carolina has a static conformity with the Internal Revenue Code as it existed on December 31, 2018.
The starting point for computing South Carolina's personal income tax liability is the federal taxable income.
South Carolina's standard deduction conforms with the federal standard deductions. Here are the 2020 amounts.
$12,400 for single taxpayers
$12,400 for married taxpayers filing separately
$18,650 for heads of households
$24,800 for married taxpayers filing jointly
$24,800 for qualifying widow(er)
You do not have the option of using a state itemized deduction. If you itemized on your federal return, this will already be included in the starting point of computing the state taxable income and is not modified.
You can claim personal and dependent exemptions of $4,190 (2019) for each qualifying individual.
South Carolina does not conform to the Internal Revenue Code (IRC) section 199A, also known as the QBI deduction.
Individual income tax varies by taxable income and filing status from 0%-7%. Tax tables can be found in the individual income tax booklet.
CARES Act Guidance
South Carolina conforms to most CARES Act provisions but specifically decouples from the IRC Section 172 of the CARES Act regarding business net operating loss (NOL) provisions. Instead, South Carolina will retain its treatment of business NOLs, not allowing any carryback and allowing only an indefinite carryforward.
S corporation and partnership returns are due on the 15th day of the third month following the close of the tax year. For calendar filers, the due date is March 15th.
Composite and individual income tax returns are due on the 15th day of the fourth month following the close of the tax year. For calendar year filers, the due date is April 15th.
Businesses and individuals who can reasonably expect to owe $100 or more at the end of the tax year will be required to make estimated tax payments.
Filing an Extension
S corporations can request up to a 6 month extension to file with the South Carolina Department of Revenue using Form SC1120-T.
Partnerships can request up to a 6 month extension to file using Form SC8736.
Composite and individual filers can request up to a 6 month extension using Form SC4868.
Failure to file may result in a 5% penalty of the unpaid tax for each month the return is late, up to a maximum of 25%.
If your business was formed or is located in another state, but generates income in South Carolina, it may be subject to South Carolina taxes. The rules for taxation of multistate businesses, including what constitutes nexus with a state for the purpose of various taxes, are complicated. If you run such a business, you should consult with a tax professional.