Businesses could pay less in fees — and transfer the cost to taxpayers

Cities and towns are sounding notes of alarm as legislation in the S.C. House of Representatives could reduce a main source of municipal revenue — business fees.

“It’s very simple,” Myrtle Beach Mayor John Rhodes said. “You take away our source of income, then we have two options: raise taxes or cut services.”

The bills — H. 3650 and H. 3651 — would change the way fees for business licenses are collected. Myrtle Beach and North Myrtle Beach officials said that the changes would cost them millions.

Cities typically calculate fees based on a business’s gross revenue inside its borders. Under the new legislation, businesses that are headquartered elsewhere would only have to count 75 percent of the revenues inside a city when calculating their fees.

The provision would benefit larger businesses with several locations, city representatives said. A sponsor of one of the bills, Rep. Mike Ryhal, R-Horry, could not be reached by phone or email Monday.

“We feel like the bill that is presented at this time is not fair as far as for small businesses,” North Myrtle Beach Mayor Marilyn Hatley said. “What happens is your large businesses like your Wal-Marts will be paying a whole lot less, and very possibly, the small businesses would end up paying a whole lot more (to compensate).”

George DuRant, of the North Myrtle Beach Chamber of Commerce, also said the current form of the bill could hurt small businesses.

But, he said, “Until the final bill is drafted, it’s kind of a moot point.”

The measures would also stop cities from charging higher rates to businesses headquartered outside their borders. Cities say the differential is necessary to compensate for these businesses’ use of infrastructure and public services, because they don’t pay property taxes.

Hatley said all the of the changes proposed in the bills could cost North Myrtle Beach $1,769,880, or the equivalent of five mills in property taxes. In Myrtle Beach, Chief Finance Officer Mike Shelton said at a Feb. 14 city council meeting that for the top 10 biggest businesses alone, the 25 percent exemption would cost $200,000. Across the whole city, the inability to charge different rates for outside businesses would cost an additional $2.6 million.

Reba Campbell, deputy executive director for the Municipal Association of South Carolina, said cities and towns across the state might take in 30 to 60 percent of their revenues from business licenses. Hatley said about a third of North Myrtle Beach’s revenues come from business fees. Shelton could not be reached Monday for follow-up questions about how much of Myrtle Beach’s revenues come from business licenses.

Campbell’s group supported business license reform, but, she said, MASC was blindsided when the current bills were introduced.

“The whole concept behind business license legislation was to standardize processes across cities so that small businesses in part … would have an easier time in the business license process,” she said.

The legislation would also strip MASC of some of its current function of collecting some fees across the state and then disbursing them to cities, and move some authority over licenses to the S.C. Secretary of State.

“I can’t get my arms around the specifics of why they think this would be a problem since we have been doing this for years,” Campbell said.

The bills both passed the S.C. House’s Labor, Commerce and Industry committee earlier this month. City officials said they have contacted Ryhal and Rep. Heather Ammons Crawford, R-Horry, both of whom sit on the committee. Crawford also was unavailable for interview by phone Monday.

“If this is what the people in Columbia think is the best thing to do, then they’re going to have to suffer the consequences at the polls,” Rhodes said. “It’s gonna come back on them. It has to.”

This story was originally published February 20, 2017 at 5:48 PM with the headline "Businesses could pay less in fees — and transfer the cost to taxpayers."