BEAUFORT, S.C. (Jan. 29, 2020) – Proposed legislation that would change how cities in South Carolina charge for business licenses would have a severe impact on the City of Beaufort’s budget, according to Finance Director Kathy Todd.
How this legislation would impact City Budget
At Regular Session Jan. 28, City Council passed a resolution opposing House Bill 4431, which is now being considered by a House subcommittee.
In Beaufort, as is the case for other South Carolina cities or towns, an annual license is required for any business, occupation, service or profession that is operating within the City. Under current state law, the amount charged is determined by the business’s gross income.
Under the proposed legislation, which is opposed by the Municipal Association of South Carolina and other municipalities across the state, the business license tax would be based on net income, not gross income. Additionally, non-resident businesses, such as chain stores and restaurants, would be charged a low flat fee of $100 compared to resident businesses, and the tax would be collected by the State of South Carolina, not municipalities.
Revenue from business licenses make up 12% of the City’s General Fund, Todd said. In fiscal year 2019, business licenses contributed $2.1 million to the City’s $17.6 million General Fund. Currently, both resident and non-resident businesses pay less than one-half of one percent of their gross income for a business license. “This is the lowest annual tax burden borne by any business,” Todd said in her presentation to City Council Tuesday.
Under the proposed legislation, the City of Beaufort would lose at least $1.6 million annually in business license revenue. Some legislators have suggested that cities adjust their rates to compensate for the loss, but that would impact resident businesses unfairly, Todd said. A local restaurant that makes $1 million a year and now pays $3,000 annually for a business license would have an estimated payment of $22,000 to compensate for the change, her analysis showed.
State law restricts how municipalities can generate revenues to operate, and there would be no easy way to replace the lost revenue, Todd said in her presentation.
The proposed legislation would also stipulate uniform standards statewide, including an April 30 payment due date, definition of gross income, and ordinance language, all of which the City of Beaufort has adopted.
Councilman Stephen Murray, who owns two small businesses in Beaufort, said that the check he writes to pay for the licenses is minimal and that the revenue it generates is “critical to the way we offer services.”
“This (change) really shifts the burden from large corporate interests to the backs of small businesses,” he added.
Council members asked the public to consider notifying local legislators to tell them this legislation would harm the City of Beaufort.
Shannon Erickson, District 124
Tom Davis, District 43
George “Chip” Campsen, District 46