Columbia could lose $8.3 million a year if lawmakers approve a proposal to overhaul how cities collect fees from businesses.
Or the city could have to raise its business license fees by 53 percent to keep its revenue stream steady, Columbia City Council members were told Tuesday.
The Legislature is considering a pair of bills that would:
▪ Standardize the collection of business license fees in cities across the state.
▪ Grant exemptions to some businesses but not others.
▪ Take the power to manage business licensing away from municipalities and give it to the secretary of state’s office.
Those prospects drew groans from City Council members Tuesday.
“This is a major attack on local governments and small business in South Carolina,” said Councilman Howard Duvall, who also is former director of the Municipal Association of South Carolina, which is leading the pushback against the bills.
Business licenses are important sources of income for cities and towns. Columbia will take in about $23.9 million in business license fees this year. Of that, $11.5 million will come directly from about 9,700 businesses. Other fees are collected through the Municipal Association and disbursed to the city.
What started as an effort to simply streamline the process businesses have to follow to obtain licenses in different cities has “ended up going quite far afield,” said Kyle Michel, a State House lobbyist for the city.
To Michel, one of the most concerning aspects of H3650, the S.C. Business License Tax Standardization Act, is the “hodgepodge of exemptions” that could cost the city millions or put it in a tight spot by raising fees on small businesses.
For instance, businesses not headquartered in Columbia would pay a license fee based on 75 percent of their income, while a local business gets no exemption. Another exemption would benefit insurance companies. And another “sort of random” exemption, Michel noted, is a discount for child-care facilities that receive federal funding, but none for those that do not receive federal funding.
Besides the potential loss of revenue, city leaders also have concerns about the state possibly taking over the management of the business licensing process.
“We don’t have a very good track record of letting the state handle municipal affairs without taking it off the top,” Duvall said, referring to the perennially underfunded Local Government Fund.