Local cities oppose business license bills
By Samantha Lyles, Staff Writer, slyles@newsandpress.net
Two bills currently under consideration in the South Carolina House of Representatives could cause total revenue losses of almost $800,000 for the cities of Hartsville and Darlington.
S.C. House Bill H.3650, the S.C. Business License Tax Standardization Act, could exempt 25 percent of a business’ income collected outside of the municipality where the business maintains its principle place of business.
In communication sent to state municipalities, the Municipal Association of South Carolina (MASC) explains this main exemption thusly: “Imagine Walmart with its headquarters in Arkansas paying a business license tax on only 75 percent of its income when the small business owner struggling to compete with the industry giant is paying on 100 percent.”
Combined with proposals from Bill H.3651, the state could require business license tax exemptions for life, accident, fire, and health insurance premiums, and exempt 25 percent of day care providers’ income collected from the South Carolina Child Development Program or the South Carolina Department of Social Services SC Voucher Program.
MASC also warned that these bills will “grant exemptions to certain business types forcing city officials to choose between increasing business license rates for all other businesses or reducing city services, strip the authority of cities and towns to manage business licensing, and move the insurance and telecommunication collection programs from the Municipal Association, governed by city officials, to a state agency.”
During Labor, Commerce and Industry Committee debate on Feb. 9, Rep. Bill Sandifer (R – Oconee and Pickens Counties) characterized the bills as revenue neutral because municipalities could raise business license rates to make up for lost income. Both bills were reported out from committee to the full house for consideration and debate.
At Hartsville City Council’s February 14 meeting, City Manager Natalie Zeigler said these bills could potentially cost the town $500,000 in annual revenues and could “dramatically impact Hartsville’s budget.”
“It’s a little scary for us. We’re trying to pull the numbers and figure out what this is going to cost us,” said Zeigler.
She explained that if these bills pass, the city would lose income from large-scale retailers like Walmart, because those businesses would only be required to pay 75 percent of their current license fees.
“It’s exempting the big businesses, probably the ones that have lobbyists,” Zeigler noted, adding that the city would be forced to raise business license fees by 75 percent to offset the legislature’s actions.
Darlington City Manager Howard Garland shares these concerns, noting that the city also stands to lose substantial revenue if these bills become law.
“It’s troubling for us. What we’re worried about in the City of Darlington is that passage of these bills could result in almost $300,000 in direct budget cuts for us. That’s a little more than five percent of our budget,” says Garland.
Garland says that most of this loss would come from the 25 percent reduction in business license taxes and fees charged to large retailers. In order to make up this revenue, the city would have to consider cutting services, cutting employees, or raising business license fees. Also, the bills could disrupt municipalities’ budgeting processes by altering current methods of business license tax reimbursement.
“The biggest issue that we have would be from a cashflow standpoint – when would the Secretary of State send the money to municipalities. We usually get the bulk of our business licenses in January, February and March. If they plan to distribute the funds at a different time of year, we’ll have to learn to adjust to a new cashflow pattern,” Garland explains. “We depend on that cashflow coming in to pay our bills and pay our employees.”
Members of Darlington City Council and Mayor Gloria Hines were informed of these bills earlier in the month and asked to register any concerns with the local legislative delegation.
At their Feb. 14 meeting, Zeigler asked members of Hartsville City Council to be proactive and contact state legislators to register their concerns about these bills.
“We still have time to try to stop this. They need to hear from you,” she said.