The City of Landrum signed a resolution at the city council meeting on April 12 supporting the Business License Tax Standardization Act, or H5109, introduced in the South Carolina legislature in March.

 

H5109 will create a standard method of renewing business licenses in municipalities across South Carolina. If passed, it will take effect on Jan. 1, 2018. Introduced by Rep. Kenneth A. Bingham (R-Lexington), the bill is seen by Landrum as being a better alternative to the Business License Tax Compliance Act, H4967, also introduced in the legislature this year.

 

In one of three letters Shelly Spivey, Landrum city clerk and treasurer, penned to legislators in support of H5109, she wrote, “This bill is vitally important not only to the City of Landrum, but to other municipalities across the state. All municipalities that charge a business license tax depend on that revenue to provide essential city services.”

 

According to Spivey, a loophole in H4967 would allow businesses to establish post office boxes outside the city limits, which would cost Landrum $65,000 of their annual budget and two and a half jobs. Additionally, it would task the Department of Revenue with collecting the license tax.

 

Spivey explained, “In layman’s terms, if I have a business in Landrum and I don’t want to pay Landrum a business license tax, I’ll go get a P.O. box in Boiling Springs because that’s where my tax return address is so that’s where the Department of Revenue will pay.”

 

“The loss of this important revenue (generated from business license taxes) will force cities across the state to increase taxes on residents,” the city’s resolution details, “and shift the burden businesses place on city services onto the citizens.”

 

H4967 would additionally allow the Department of Revenue to withhold one percent of the taxes paid by businesses as operation fees.

 

Roughly 257 active businesses exist in Landrum, according to Spivey, and each business pays on average $75 to $125 in business license taxes annually. This revenue accounts for $65,000, or 1/13^, of Landrum’s annual budget.

 

“The Department of Revenue wants nothing to do with this H4967 bill because they would have to grow and hire more people and spend money on a website for businesses to file their taxes,” Spivey said. “Who wants more government? Nobody, I think.”

 

Spivey said because the city employs less than 20 people, this loss of revenue would limit city services.

 

“Other cities depend even more heavily on the business license tax and any major disruption of this revenue would cost many more jobs across the state,” Spivey explained in her letters to state representatives. “Parks, parking areas, police and fire services, street lights and countless other benefits are paid for through these revenues collected from the business license.”

 

Landrum Mayor Robert Briggs said his reasoning for supporting H5109 is twofold; it keeps the growth of government at bay and maintains a municipality’s ability to oversee their own city’s business licenses.

 

“I think it’s going to be good for all municipalities. The 4967 gives money to the Department of Revenue and our history of giving money to the South Carolina government hasn’t been that great,” Briggs said. “The 5109 bill will standardize business license tax rates no matter if you’re in Landrum or Myrtle Beach and does leave it up to each city, keeping things local and we do support that. There’s a big effort to not grow the government like 4967 will by putting more work on the Department of Revenue.”

 

Additional reasons for the city’s support of H5109 include that it would be revenue neutral, and that it would allow for cities to implement subclasses of licenses. Classes are derived from the North American Industry Classification System, or NAICS.

 

Another reason for the city’s support of H5109 is a provision for a standardized business license application and an online portal provided by the Municipal Association of South Carolina. Business owners who go online to pay their taxes will only be charged a convenience fee to do them online.

 

However, Spivey said business owners do not have to use the online portal and still are welcome to visit city hall to pay their business license taxes. The convenience fee will help maintain the portal run by the Municipal Association of South Carolina.

 

“At the end of the day, I cannot stress how business friendly we (the city) want to be to our businesses,” Spivey explained. “These businesses are our backbones and, regardless of which city a business owner decides to do business in, these will be the same rates across the board.”

 

In Landrum, business license taxes are calculated based on eight class rates and the gross income any business has generated before deductions in the last year. Business license taxes are currently due annually on April 15 in Landrum with business licenses renewing after every calendar year, according to Spivey.

 

If H5109 passes, the new due date will be April 30 with the business license renewing every May 1. Conversely, the H4967 bill establishes a due date of February 1, before tax returns are filed, for business license taxes and applies to profits generated by a business during the last calendar year. A vote by the S.C. legislature is expected to take place this week.