Could a South Carolina county or city calculate a business license tax from gross income?

Plain-English summary

A legislator asked whether local business-license “fees” could be based on gross receipts instead of a business's net income. The Attorney General explained in 2012 that the county and municipal provisions called these charges business license taxes and expressly required gross income as the measure. That differed from income tax: the license tax was imposed on the privilege of doing business and used gross income to calculate its amount.

The opinion drew a separate distinction for a county business registration fee. Under the 2012 provision it quoted, that administrative fee could not be based on business income and was in lieu of the county business license authorized by the other provision. It also noted statutory reductions to gross income already taxed by another county or municipality.

Currency note

This opinion was issued in 2012. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: Did a city have to base its business license tax on net profit? A: No. The AG said the 2012 municipal statute authorized a business license tax on gross income, and the county statute required the same measure for its license tax.

Q: Was a business license tax the same as an income tax?
A: The opinion said no. It described the license tax as a tax on the privilege of doing business, with gross income used as the measure.

Q: Could a county registration fee also be based on gross income? A: No. The AG distinguished the then-effective administrative registration fee, which the statute said must not be based on business income.

Q: What if the same income was already taxed by another local government? A: The provisions quoted by the AG required reducing the gross-income base by income taxed for a business license in another county or municipality where it was earned.

Background and statutory framework

The opinion quoted the county and municipal business-license powers and their gross-income language. It also quoted the registration-fee provision to explain why the requester's word “fee” mattered. Its answer depended on which statutory charge the local government imposed under the 2012 law.

Citations and references

Statutes: Section 4-9-30; section 5-7-30; section 12-37-135.

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/april-23-2012/
• Original PDF: https://www.scag.gov/wp-content/uploads/2012/04/hart-c-r-os-9433-4-23-12-counties-municipalities-business-license-fees.pdf

Original opinion text

ALAN WILSON

A TIORNEY GENERAL

April 23, 2012

The Honorable Christopher R. Hart
Representative, District 73
432-A Blatt Building
Columbia, South Carolina 29211
Dear Representative Hart:
You have inquired whether counties and municipalities may impose business license "fees" based upon gross income, rather than net income. You remark that " state and federal taxes are assessed on the net income of a business, not its gross income." The statutory authorizations for county and municipal business license taxes require that such taxes be based upon gross income. Section 4-9-30 of the South Carolina Code (1986 & Supp. 201 1) provides in relevant part: Under each of the alternate forms of government 1isted in § 4-9-20 . .. each county government within the authority granted by the Constitution and subject to the general law of this State shall have the following enumerated powers which shall be exercised by the respective governing bodies thereof:

(12) to levy uniform license taxes upon persons and businesses engaged in or intending to engage in a business, occupation, or profession, in whole or in part, within the county but outside the corporate limits of a municipality .... The license tax must be graduated according to the gross income of the person or business taxed .
. . . If the person or business taxed pays a license tax to another county or to a municipality, the gross income for the purpose of computing the tax must be reduced by the amount of gross income taxed in the other county or municipality.

REMBERT

c. D ENNIS B UILDING • POST OFFICE Box l 1549 • C OLUMBIA, SC 29211 -1549 • T ELEPHONE 803-734-3970 • FACSIMILE 803-253-6283

The Honorable Chri stopher R. Ha11
Page 2
April 23 , 2012

(Emphasis added). Similarly, section 5-7-30 of the South Carolina Code (2004 & Supp. 2011) provides in relevant part:

Each municipality of the State, in addition to the powers conferred to its specific form of government, may enact regulations, resolutions, and ordinances, not inconsistent with the Constitution and general law of this State . .. including the authority to . . . levy a business license tax on gross income . . .. If the person or business taxed pays a business license tax to a county or to another municipality where the income is earned, the gross income for the purpose of computing the tax must be reduced by the amount of gross income taxed in the other county or municipality. For the purpose of providing and maintaining parking for the benefit of a downtown commercial area, a municipality may levy a surtax upon the business license of a person doing business in a designated area in an amount not to exceed fifty percent of the current yearly business license tax upon tenns and conditions fixed by ordinance of the municipal council. (Emphasis added). These statutory requirements are presumptively valid. See, e.g., Clarke v. SC. Public Service Authority, 177 S.C. 427, 181 S.E. 481 , 485 ( 1935) (" It is the theory and intent of the Constitution of South Carolina that the powers vested in the General Assembly include all powers not specifically reserved by the Constitution."); State v. Moorer, I 52 S.C. 455, 150 S.E. 269, 279 (1929) ("Under our form of government the Legislature is given plenary power in the matter of taxation, subject, of course, to express constitutional limitation." (quoting Cooley, Constitutional Limitations 986 (8th ed.))). As we explained in a recent opinion of this Office: Because a business license tax is not a tax upon the income itself, income that is exempt from income tax will not necessarily be exempt from use in calculating a license tax. Cf Hay v. Leonard, 2 12 S.C. 81, 97, 100, 46 S.E.2d 653, 660, 66 1 (1948) (" [T]he tax is not on the property itself; it is on the privilege of dealing with it. The value of such privilege is measured by the gross receipts therefrom . . .. "); Thomson Newspapers, Inc. v. City of Florence, 287 S.C. 305, 338 S.E.2d 324 (1985) (newspaper did not satisfy its burden to show a license tax was unconstitutional simply by showing that the newspaper's classification for purposes of the license tax differed from its classification for the purposes of income and ad valorem taxation); Letter to Joseph H. Earle, Jr., Op. S.C. Att'y Gen. No . 82-56 (Aug. 18, 1982) (explaining that an exemption from ad valorem taxation would not automatically exempt an entity from a business license tax).

The Honorable Christopher R. Hart
Page 3
April 23 , 2012

Letter to Joshua A. Gruber, Op. S.C. Att'y Gen. (Apr. 2, 2012). In sum, a business license tax imposed by a county or municipality must be calculated using gross income. 1 Very truly yours,
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Dana E. Hofferber
Assistant Attorney General
REVIEWED AND APPROVED BY:

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Robert D. Cook
Deputy Attorney General

You have used the term "fee"-rather than "tax"- in your request. Accordingly, we note that a business registration fee imposed pursuant to section 12-37-135 of the South Carolina Code (Supp. 2011) may not be based on income: A county governing body may require a business registration throughout the entire county area and may impose an administrative fee not to exceed fifteen dollars. The fee is an administrative fee and must not be based upon business income. . . . This registration, if adopted, is in lieu of any business license which is authorized pursuant to Section 4-9-30( 12).