South Carolina Corporate Income Tax
The South Carolina corporate income tax applies to businesses that earn money within the state and it depends on how much income your business has earned.3 min read
The South Carolina corporate income tax applies to businesses that earn money within the state. The amount of your tax liability will depend almost entirely on how much income your business has earned.
Corporate Income Tax Basics
One of the most important things to remember about taxes in South Carolina is that only income earned from operations in the state will be subject to taxation. So, if your business also operates in another state, income generated in that state will not be taxable in South Carolina.
Some amount of income earned by a corporation in South Carolina will be allocated to the company prior to application of the apportionment formula. Income subject to allocation includes:
- Personal services income.
- Gains and losses resulting from the sale of property.
A single factor apportionment formula is available for South Carolina corporations engaged in one of the following activities related to personal property:
This formula involves whatever net income is left after allocation. This income will be multiplied by a fraction to determine the income taxes owed. The gross receipts earned in South Carolina will be the numerator of the fraction, and the taxpayer's gross receipts are the denominator. A 5 percent tax rate will be applied to the result of this formula.
Here's an example to help you understand how to calculate your company's corporate income tax. Imagine that your business had total sales of $5 million, and $1 million of those sales occurred in South Carolina. To correctly apply the apportionment formula, you would divide $1 million by $5 million, which will show that 20 percent of your income is apportioned to South Carolina. So, you would multiply $5 million by 20 percent, and then by the South Carolina corporate income tax rate of 5 percent, resulting in owed taxes of $50,000. Additionally, you may carry forward net operating losses in South Carolina.