In what business advocates say would be a giant leap forward, Columbia and other municipalities in South Carolina are eyeing a single, mandated way of issuing business licenses.
Businesses large and small complain that nearly each of South Carolina’s 270 cities and towns – and a few counties – use differing classifications, due dates, government forms and rates to issue licenses that allow them to operate in municipalities, according to advocates for a statewide, uniform law.
“It’s one of the most business unfriendly things we do,” said Ted Pitts, the director of the S.C. Chamber of Commerce, which backs one business licensing law across the state.
The mishmash of local laws cost the state an estimated $300 million in 2013, said Melissa Carter, lobbyist for the Municipal Association of South Carolina, citing a legislative fiscal impact assessment.
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Business licenses are important sources of income for cities and towns. In Columbia, for example, City Hall collected $11.1 million in the fiscal year that ended June 30 from 9,738 businesses. City budget officials project the figure will reach $11.5 million during the year that ends next June.
For Richland County, among a handful of counties that require business licenses, the comparable-year figures are $6.6 million and $7 million, according to Richland’s chief financial officer. The county adopted a licensing law in 2006 that is similar to what’s being considered statewide.
Jeff Palen is Columbia’s chief financial officer. He and other city staffers have been working with the municipal association toward a statewide system.
“In general, we support the whole idea,” Palen said. “It helps the (business) customer.”
Business licenses are more than revenue generators. They also are a means of tracking the kinds of businesses that open their doors and serve as a way to monitor code enforcement.
Lexington County doesn’t require a license. In 2000, Tin Products in Red Bank spilled toxic chemicals that killed fish, poisoned wells, damaged Cayce’s water plant and forced rate increases for some 12,000 Cayce customers to cover repair costs. All told, the contamination affected nearly a quarter of 209,000 residents Lexington County had at the time.
County officials didn’t know Tin Products was operating or violating pollution laws, in part because the plant was not licensed by the county.
Business leaders, municipal officials and legislators have been talking for five years in an attempt to write a uniform licensing law that is customer friendly and satisfies competing interests.
Some are optimistic that might happen in the legislative session that begins in January. Others are skeptical that a solution is close.
“There is no agreement among stakeholders about what exactly needs to be done,” the chamber’s Pitts said. “But there is agreement that something has to be done.”
The Municipal Association’s Carter is more optimistic that a consensus is close. “I will tell you, cities are completely on board,” she said.
A bill has not been written yet, but advocates are hopeful they have a champion in Rep. Bill Sandifer, a Republican from Oconee County and a committee chairman.
Scott Slatton, the association’s field director, sees the chances of a law this way: “There is enough agreement between the parties that something is going to get done.”
Key elements of a standardized law
The bottom line, he said, is “to take the hassle factor out” of getting licenses.
The key components of any standardized business license law include:
▪ One due date for all businesses
▪ One application for all
▪ An agreed upon definition of gross income, which is how license tax is calculated.
▪ Substantially shrinking the number of business classifications – perhaps to eight – to make it easier to determine the kinds of licenses needed. Columbia has 139 of them.
▪ Create a centralized computer-driven system where companies to submit applications to do work anywhere they chose in the state. The software would use companies’ protected financial information to calculate how much businesses would pay each city.
▪ Cities and towns could not get a revenue windfall the first year the new system goes live.
The association wants to become the clearinghouse for the computer system through a third-party vendor. The chamber suggests the S.C. Secretary of State’s office.
“Cities are adamantly opposed” to state agencies running the clearinghouse, which advocates are calling the “portal,” Slatton said. Who would run the portal is a key sticking point.
Jim Hester owns a commercial drywall business that operates in the Carolinas and Georgia and has annual revenues the said amount to between $20 million and $30 million.
Hester said he had not heard of the push for a standardized system until a reporter called. But he said he’s open to a simplified way of getting licenses – and a clearinghouse doesn’t bother him.
“I wouldn’t have any anxiety about uploading that information,” Hester said.
“I’m pulling licenses all over the state,” he said. “I’m paying all these license fees, and some are high and some are low. I don’t mind paying my fair share.”
Rock Hill’s experience
A version of what the Municipal Association considers a “model law” was adopted in Rock Hill in 2009.
That city’s chief financial officer, Anne Harty, said city officials did a lot of advance work and adjusted rates so that businesses overall were not hit hard.
“In our transition, we made it relatively invisible,” she said, adding she cannot recall a single complaint from any business owner.
In the years since its adoption, lawyers, doctors and accountants have seen the cost of their license dip because their profit margins aren’t as large. Technology firms, however, have been paying more, Harty said.
Some licenses cost more because businesses have grown, which raises their gross incomes and, in turn, what they pay for a license.
The chamber’s Pitts captured the conflict facing city and business leaders. “All businesses would like to pay less in taxes,” he said. “But you’re not going to get local government to agree with that.”
Columbia’s business license income
Columbia has collected about $50.2 million in the past five years in business license taxes. Here’s an annual breakdown.
Fiscal year 2011-12: $8,601,656
In Richland County
Richland County adopted a business license law similar to the proposed state law in 2006. Here’s is a sampling of what the county has collected.
Fiscal year 2005-06: $5,721,076
More recently, the annual totals have been:
FY 2014-15: $6,665,959
Current FY: $7,027,114
Sources: Chief financial officers of Columbia and Richland County