Steps to Pay Your South Carolina Small Business Taxes
Paying taxes isn’t usually one of the fun parts of running a business, but it’s essential to keep your South Carolina business legally compliant. If your business doesn’t pay taxes, the state can revoke the business’s licenses and place tax liens on the business’s property. It can hold you individually responsible for costly penalties and interest, even if you own a corporation or LLC. Fortunately, we’re here to help. This guide will walk you through the South Carolina small business taxes you might face and when they are due. We will also discuss how we can help make the process go more smoothly.
When you use our Worry-Free Compliance Service, we’ll keep your business documents together on your dashboard and send you reminders for important deadlines. You’ll get access to our team of experts, who will be there for you from start to finish.
If you’re looking for information about federal taxes, head over to our page on federal taxes for small businesses.
Step 1: Establish your South Carolina business’s corporate income tax obligations
The South Carolina business tax rate depends on the structure of the business. Corporations pay a flat-rate corporate income tax of 5% on taxable income allocated to South Carolina. Corporations (including S corporations) will also pay an annual license fee. You’ll calculate the license fee as 0.1% of capital and paid-in surplus, plus $15. The minimum license fee is $25.
Pass-through businesses, including partnerships, S corporations, sole proprietorships, and limited liability companies (LLCs) that don’t elect corporate taxation don’t pay corporate income taxes. Instead, the tax liability “passes through” to the individual owners, who pay taxes for the business’s income or loss on their individual income tax returns. Owners pay the individual rate, between 0% and 7%, depending on their income level. South Carolina offers an alternative income tax method for pass-through businesses. The owners can elect for the business to pay a 3% tax for its “active trade or business income.” In that case, owners can exclude the business income from their return.
Estimated Tax Payments
South Carolina requires all corporations, electing pass-through businesses, and individual owners who expect to owe more than $100, to make quarterly estimated tax payments. If your estimated tax payments are less than your annual tax liability calculated on your return, you may owe a penalty for underpayment. Corporations must make quarterly installments by the 15th day of the 4th, 6th, 9th, and 12th months of the tax year (typically April 15, June 15, September 15, and December 15). Calendar year taxpayers other than corporations will pay by April 15, June 15, September 15, and January 15.
Annual Tax Returns
Corporations and LLCs taxed as corporations will file an annual return by April 15 (or the 15th of the fourth month after the end of your business year). Partnerships, LLCs taxed as partnerships, and S corporations will file an entity-level return by March 15 (or the 15th day of the third month following the end of the business’s taxable year). Individual returns are due by April 15. If you don’t file or pay the total amount on time, you can face a maximum penalty of 25% of the tax due, plus interest. South Carolina offers online filing and payments through its free tax portal, MyDORWAY. You can file by mail or in person so long as you owe less than $15,000.
Step 2: Determine your South Carolina business’s employment taxes
If your business hires employees, you must have a federal Employer Identification Number (EIN) and pay withholding taxes. You can register for withholding taxes online or by mail. Each of your employees will complete an SC W-4 (SC Employee’s Withholding Allowance Certificate) to determine their tax exemptions. Then, you will find the amount to withhold from each paycheck on the SC Withholding Tax Tables. The tax rates range from 0% up to a high of 7%. Finally, you will pay withholding taxes to the state. Typically, you will pay withholding taxes quarterly, but some employers will pay monthly or annually. You must file a withholding tax return by your due date, even if you don’t have employees for that period.
It’s also important to know that although pass-through entities don’t withhold income tax from distributions to resident owners, they must withhold 5% of taxable income distributed to non-resident owners. The business will report this withholding on its annual tax return.
Step 3: Establish your South Carolina business’s additional state tax obligations
Business taxes in South Carolina include taxes for certain business activities. If South Carolina requires your business to pay these taxes, you must register for a license before conducting the business activity. It’s also important to check with your county and municipality to see if they require any licenses and taxes.
Sales and Use Taxes
South Carolina requires all businesses that sell tangible personal property (and certain services) to obtain a retail license. The license allows the business to collect a 5% sales tax (and any applicable local tax) to remit to the state. The state requires businesses to file returns by the 20th of each month, even if they didn’t make sales. In addition, if the business purchases tangible personal property for its use from outside the state and doesn’t pay sales tax, it must pay a 5% use tax to South Carolina. Finally, businesses without a physical presence in the state (such as online businesses) that make more than $100,000 from sales into the state must file for a retail license and pay sales tax.
South Carolina requires every business with employees to register with the Department of Employment and Workforce and pay unemployment taxes. When you file your wage report online using the South Carolina State Unemployment Insurance Tax System (SUITS), it will automatically calculate your unemployment tax. You can also file by mail if your payment is postmarked by the deadline. The unemployment tax deadlines are April 30, July 31, October 31, and January 31.
When you register to pay unemployment taxes, the state will assign your business a tax class between one and 20. You can calculate your total tax rate as the base rate for your class, plus a solvency surcharge and a Departmental Administrative Contingency Assessment (DACA). The state determines your class using your projected benefit costs for the year based on your industry and past claims. The base rate ranges from 0.000% to 5.400%. For 2021, the solvency surcharge is zero, and the DACA is 0.06%. Therefore, the 2021 unemployment tax rates range from 0.060% to 5.460%.
Other states charge franchise taxes on businesses for the privilege of doing business in the state. South Carolina doesn’t charge a franchise tax.
Excise taxes are taxes on sales of certain items or services. South Carolina doesn’t charge “excise taxes,” but it does require specific businesses to pay additional taxes. For example, South Carolina has taxes for businesses with income from admissions, beer, cigarettes and tobacco products, deed recording, electric power, forest renewal, liquor, liquor by the drink, and wine.
Step 4: Prepare to file and pay your South Carolina business taxes
When your tax date approaches, you may wonder how to file small business taxes in South Carolina. The easiest way to file and pay your business taxes is to go online. The South Carolina Department of Revenue (SCDOR) offers a free online tax portal called MyDORWAY. If your South Carolina tax liability exceeds $15,000, SCDOR requires you to file and pay electronically. If you owe less than $15,000, SCDOR prefers that you file online, but you may file by mail.
To prepare for tax filing, you will need to get all your legal and financial documents in order. To calculate your taxable income, you’ll need all your receipts, invoices, and accounting records. If this sounds daunting, we can help. When you use our ZenBusiness Money App, we’ll help you keep track of invoices and manage your business finances right from your phone or computer.
Do I need an accountant?
A professional can be a big help for a business owner. Because taxes are complex, most small businesses need professional accounting help to ensure their taxes are done correctly. A professional accountant will understand your business and the credits you can take. Hiring a professional can take that weight off your shoulders. They can help you avoid the expensive consequences of not filing or making errors in your filings.
Not sure how to stay compliant? Learn more about legal compliance for small business owners.
How we can help
Taxes can be complicated. Fortunately, our team of business experts understands South Carolina small business taxes and deadlines. We also offer a way to collect invoices and manage your finances directly from your phone or computer with our ZenBusiness Money App.
We know business, and we’re here to help.
Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
- How much can a South Carolina small business make before paying taxes?
Every South Carolina business will pay taxes, regardless of the size.
- What percentage does a South Carolina small business pay in taxes?
Your business’s tax percentage depends on the business structure and its business activities. A corporation’s minimum tax rate is 5%.
- How does a South Carolina small business pay taxes?
Through South Carolina’s online tax portal MyDORWAY, you can pay using a credit card or electronic check.
- Do I have to file taxes for my small business in South Carolina?
Yes, your small business will file a tax return if it conducts business in the state.