State Tax Reform

In 2000 the South Carolina Small Business Chamber of Commerce (SCSBCC) was formed with one of its top issues being to establish parity with big business on state income tax rates. Under the tax code at that time, small businesses (sole-proprietors, partnerships, LLC’s and S-corporations) were paying 40% higher state income taxes compared to C-corporations. The SCSBCC began a first-of-its kind campaign to reduce the income tax rate for small businesses from 7% to 5%, to equal the rate paid by bigger businesses.

On April 14, 2005, after a significant legislative battle with the SCSBCC leading the charge, this goal was finally achieved. Starting in 2006,small businesses in South Carolina saw the state income tax on the pass-through profit from their businesses reduced by 1/2 percent a year for four years until a 5% rate was reached.  Small business owners saved about $129 million in state income taxes each year after this new rate was fully implemented making this tax reform SCSBCC’s signature achievement up to that date.

In 2012 the South Carolina General Assembly again reduced the state income tax on small business pass-through profits with the passage of legislation to reduce the tax from 5% to 3%phased in over three years.

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