S.C. House advances small business tax proposal

South Carolina lawmakers are continuing to look for ways to make the state a more supportive place for small businesses, including proposals that would lower taxes and reduce paperwork.  

At the same time, legislators are considering changes to current tax and business rules that would affect how small businesses and corporations are taxed and regulated in the state. 

Small business tax structure in S.C. 

South Carolina’s property tax system includes a wide range of exemptions, but small businesses are still required to pay taxes on much of the property they use to operate. Certain types of property such as household furniture and some business inventories are exempt; however most small businesses must still pay property taxes on common business supplies like computers, office furniture, tools, and equipment.  

Under current law, businesses must report their taxable property every year between January 1 and March 1. The law specifically requires reporting of real property sold or transferred since the previous filing and all real property owned or controlled as of December 31. Business personal property is also subject to annual reporting under existing law. Even when a business owes very little in taxes, it is still required to track, depreciate, and report each item annually. 

Businesses may receive limited relief if a facility has been inactive for at least a year, but all personal property must be listed each year and clearly marked as inactive. For many small business owners, this system creates ongoing paperwork and compliance costs that feel disproportionate to the tax owed.  

House proposed small business tax exemption 

The State of South Carolina Small Business Tax Cut of 2026 or H.5006, aims to reduce this burden by no longer taxing small businesses on the first $10,000 of items such as office exempting the first $10,000 of the net depreciated value of business personal property owned by a qualifying small business from property taxation.  

To qualify, a business must be independently owned and operated, have ownership comprised of taxpayers who pay income taxes in South Carolina, and either employ fewer than 100 full-time workers or earn less than $10M in annual sales.  

Businesses claiming exemption would still be required to certify each year that they meet the eligibility requirements, ensuring accountability. The bill also requires businesses to submit property information to the South Carolina Department of Revenue, allowing local governments to continue determining and collecting the tax owed. Supporters argue that this change could simplify reporting and create more consistency across counties.  

Small business owners' testimony 

During committee hearings, small business owners and advocates expressed strong support for the proposal. Testimony highlighted that under the current law, businesses are taxed on items as small as replacement doors and company vehicles, often based on historical cost rather than current value.  

Under existing South Carolina law, business personal property is reported at original cost but assessed for taxation based on depreciated value using legally defined depreciation tables. H.5006 does not change this valuation method but reduces the amount of property subject to tax by creating an exemption for qualifying small businesses.  

Others noted that similar taxes do not exist for small businesses in neighboring states, placing South Carolina small businesses at a disadvantage. Supporters from the hearing argue that the $10,000 exemption would allow their small businesses to reinvest savings into growth, hiring, or wage increases, while reducing paperwork and compliance costs.  

The bill passed the House last week and now awaits consideration by the Senate Finance Committee.  

Cameron Rumpp is a research intern for the South Carolina Policy Council. 

This report may be republished in whole or in part, provided that proper credit is given to the author(s) and the South Carolina Policy Council.