Could a South Carolina town calculate its business license tax from gross income instead of net profit?

Plain-English summary

In 2006, the South Carolina Attorney General answered a legislator's question about Holly Hill's business license tax. A constituent said the town used business gross income rather than net earnings, unlike nearby municipalities. The opinion concluded that the state municipal powers statute authorized gross income as the tax base and appeared to require it for a municipal business license tax.

The statutory passage quoted by the opinion also excluded some businesses from the tax under specified circumstances, including a wholesaler without a warehouse or mercantile establishment inside town limits and a real-estate lender without premises there. The opinion did not calculate any taxpayer's assessment or decide whether a particular business qualified for an exclusion.

Currency note

This opinion was issued in 2006. 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: Could Holly Hill use gross receipts rather than net profit for its business license tax?
A: Yes. The Attorney General said the governing provision authorized a tax based on gross income and appeared to mandate that basis.

Q: Did the opinion say every business owed the tax?
A: No. The statute it quoted contained exclusions for specified wholesalers, real-estate lenders, and otherwise exempt entities or their affiliates.

Q: Did the constituent's financial hardship change the statutory answer?
A: The request described hardship, but the opinion rested its conclusion on the statute's express gross-income language.

Background and statutory framework

The office treated municipalities as having only powers granted by law or fairly implied from those grants. It read the 2004 version of South Carolina Code section 5-7-30 and cited Southern Bell for the rule that municipal licensing power must be strictly construed and exercised within the terms of its grant.

Citations and references

The linked original opinion quotes the relevant portion of section 5-7-30 and the licensing-power cases.

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/may-26-2006/
• Original PDF: https://www.scag.gov/wp-content/uploads/2011/03/06may26gilda.pdf

Original opinion text

H ENRY M CMASTER
AlTORN EY GENERAL

May 26, 2006

The Honorable Gilda Cobb-Hunter
Member, Rouse of Representatives
309-C Blatt Building
Columbia, South Carolina 29211
Dear Representative Cobb-Hunter:
We received your letter requesting an opinion regarding a mw1icipality's authority to levy a local business license tax. You informed us: According to one of my constituents, the town of Holly Hill ' s business license tax is based on the business' gross income, instead of what the business nets. This method of computation differs from other municipalities in the area and places a serious hardship on business in Holly Hill. Accordingly, you request an opinion as to whether "the municipality of Holly Hill has the Authority to tax business licenses based on the business' gross income, and if so, from what statute does its authority derive"?

Law/Analysis
"A municipal corporation is a creature of statute and has only the powers expressly granted it, those which are necessarily or fairly implied in or incident to the express powers, or those powers essential to the accomplishment ofits purpose." Piedmont Pub. Serv. Dist. v. Cowart, 3 19 S.C. 124, 131, 459 S.E.2d 876, 880 (Ct. App. 1995). Article vm, section 9 of the South Carolina Constitution ( 1976) provides, in part: "The structure and organization, powers, duties, functi ons, and responsibil ities of the munici palities shall be established by general law . . .. " Tn section 5-7-30 of the South Carolina Code (2004), the Legislature confors numerous powers upon municipalities, including the power to levy a business license tax on gross income, but a wholesaler delivering goods to retail ers in a muni cipality is not subject to the business license tax unless he maintains within the corporate limits of the municipality a warehouse or mercantile establishment for the

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The Honorable Gilda Cobb-Hunter
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May26, 2006

distribution of wholesale goods; and a business engaged in making loans secured by real estate is not subject to the business license tax unless it has premises located within the corporate limits of the municipality and no entity which is exempt from the license tax under another law nor a subsidiary or affiliate of an exempt entity is subject to the business license tax ....

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(emphasis added). Furthermore, our Supreme Court has stated: "the licensing power of municipalities is to be strictly construed and exercised in strict conformity with the terms of its grant." Southern Bell Tel. and Tel. Co. v. City of Aiken, 279 S.C. 269, 272, 306 S.E.2d 220, 222 (1983). In accordance with the authorities cited above, it is our opinion that not only would Holly Hill be authorized to tax business licenses based on gross income, section 5-7-30 of the South Carolina Code appears to mandate this basis for taxation of business licences by a municipality.

Very truly yours,

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CydneYM. Milh-rjg
Assistant Attorney General
REVIEWED AND APPROVED BY:

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Robert D. Cook
Assistant Deputy Attorney General