South Carolina's aggressive incentives reward industries for growth. The state has a national and international reputation as a superior business location due in part to its positive economic climate that helps companies maintain low operating costs and increase their return on investment.
Also, South Carolina’s performance-based tax incentives reward companies for job creation and investment. The state’s pro-business policies are demonstrated by the following:
- Numerous ways to potentially eliminate your entire corporate income taxes;
- A wide range of sales tax exemptions that will reduce start-up costs as well as annual operating costs;
- Property tax incentives that can be tailored to meet your company’s needs;
- A statewide Enterprise Zone Program, the Job Development Credit, that provides qualifying, approved companies a rebate of new employee’s personal income taxes for 15 years to help the capital costs of projects.
SC State Incentive Summary
Corporate Income Tax
SC has one of the lowest corporate income tax rates in the Southeast and businesses are only taxed on the portion of income derived from their in-state operations. Below is the process for determining the taxable income:
- Allocated income - certain corporate income is allocated to the corporation for SC tax purposes before apportionment is applied.
- Apportioned income - this formula is based on the Uniform Division of Income for Tax Purpose Act (UDITPA), which has been adopted by the majority of states where corporate income is based on a three-factor formula with double-weighted sales.
Corporate License Fee (Franchise Tax)
All corporations must pay an annual fee to the Department of Revenue. The rate is one mill per dollar ($0.001) of a proportion of total paid-in-capital and paid-in-surplus, plus $15. Earned surplus (retained earnings) is not included in the base when calculating this tax. For corporations doing business outside the state, the license fee is determined by apportionment—the same way SC corporate income tax is computed. The minimum corporate license fee is $25.
Jobs Tax Credits
A valuable financial incentive that rewards new and expanding companies for creating jobs in SC. To qualify, companies must create and maintain a certain number of net new jobs in a taxable year. The number of new jobs is calculated as the increase in the average from one year to the next.
These types of businesses qualify:
- Manufacturing and processing, warehousing and distribution, research and development and qualifying technology intensive facilities that create 10 net new jobs.
- Corporate office facilities housing a majority of the headquarters functions, that create 10 net new jobs.
- Tourism-related companies creating 10 net new jobs; hotels/motels must create 20 net new jobs
- Qualified service-related facilities must meet this criteria: Pickens County (Tier 2)
250 new jobs
- 125 jobs with an average salary 1.5 times the county’s per capital income
- 75 jobs with an average salary 2 times the county’s per capital income
- 30 jobs with an average salary 2.5 times the county’s per capita income
The credit value ranges from $1,500 to 8,000 per net new job for five years, depending on the county.
Multi-County Industrial Park
A county may also join with another county to form a multi-county industrial park where a county agrees to share the property taxes with a partner county. This partnership raises the value of the credits by $1,000 per job, meaning credits from $2,500 to 9000 per job may be available for qualifying companies.
Pickens County has participated in a number of multi-county industrial parks.
Corporate Headquarters Tax
In an effort to offset the costs associated with relocating or expanding a corporate headquarters facility, SC provides an income tax credit to partially reimburse the company for real or personal property expenditures associated with the creation of new headquarters-related jobs.
Child Care Program Tax Credit
SC offers companies a credit against state corporate income tax, bank tax, or premium tax for child care expenses. Companies may claim tax credits to partially reimburse the costs associated with the start-up and long-term operation of a daycare facility.
R&D Tax Credit
To reward companies for increasing research and development activities in a taxable year, SC offers a credit equal to 5 percent of the taxpayer’s qualified expenditures for R&D in the state as defined in section 41 of the IRS code.
Sales & Use Tax
The sales and use tax rate in SC is 5 percent. Some counties assess a local option sales tax and/or a capital project sales tax. Proceeds go toward infrastructure improvements or a rollback of property taxes. In Pickens County, a 1 percent local option tax is used to rollback property taxes.
This tax applies to all retail sales, leases and rentals of tangible personal property, including the value of property purchased at wholesale and then used or consumed by the purchaser. The use tax is based on the sales price of such property.
- Out-of-state sales
SC exempts sales tax on the gross proceeds of the sales of tangible personal property where the seller, by contract of sale is obligated to deliver to the buyer, an agent of the buyer or a donee of the buyer at a point outside of the state.
- Out-of-state purchases-use tax credit
SC provides a credit to the use tax for sales and use taxes on purchases of tangible personal property paid in another state, if the state in which the property is purchased and the sales and use are taxes paid allows substantially similar tax credits on tangible personal property purchased in SC.