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:

  1. Dividends.
  2. Interest.
  3. Rent.
  4. Royalties.
  5. Personal services income.
  6. 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:

  • Distributing.
  • Manufacturing.
  • Selling.

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.

South Carolina has one of the lowest corporate income tax rates in the Southeast. If you're looking for low taxes, incorporating your business in this state can be a good idea. In addition to a method of calculating income taxes that is friendly to businesses, South Carolina also provides several tax credits that can work to lower corporate income taxes and, in some cases, eliminate them completely.

South Carolina corporations must pay federal income tax on top of state income tax. There are eight corporate tax brackets at the federal level based on the corporation's earnings. Federal tax brackets are different from personal tax brackets because they are not fully progressive. This means that the last tax bracket isn't actually the highest.

Business Income Tax Extensions

In South Carolina, you must file your corporate tax return by the third month and 15th day after your tax year has closed. For corporations that use the calendar year, this means that tax returns must be filed by March 15. If you are not going to be able to file your return by this deadline, you can request a business income tax extension.

With a business tax extension, you will have an additional six months to prepare and submit your corporate tax return. For those filing based on the calendar year, this would mean that your tax return would now be due on Sept. 15. An important fact to remember is that extending your filing date does not extend the due date of your tax payment. You are still required to pay your taxes by the original March 15 deadline. If your business fails to pay its taxes by this date, it may accrue penalties and interest.

South Carolina recognizes federal income tax extensions, which you can request by filing IRS Form 7004. If you have received a federal extension, and you do not owe any taxes in South Carolina, you will be automatically granted a state extension that is the same length as your federal extension.

If you owe taxes in South Carolina and need an extension on your tax return, you should file Form SC1120-T (Application for Automatic Extension of Time to File Corporation Tax Return). You should submit this form by the March 15 deadline, along with your tax payment. You can also request an extension and pay your taxes electronically through Department of Revenue ePay.

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