SC Department of Revenue
Filing Requirements


Withholding Tax

Filing Requirements

If you will be employing others to work in your business, you will need to withhold payroll taxes for the federal government, FICA and the State of South Carolina.

South Carolina requires withholding from:

• Wages
• Prizes
• Royalties
• Winnings
• Nonresident contractors (contracts exceeding $10,000.00)
• Rental payments made to nonresidents who own five or more residential units or one or more commercial properties in South Carolina
• Net proceeds going to nonresident sellers of real estate and associated tangible personal property located in South Carolina

Wages are taxed in the state in which they are earned unless the employee is working in a state that does not withhold state income tax. If the employee is working in South Carolina, regardless of where he is a resident, the income earned in South Carolina is taxed by South Carolina.

If the employee is a South Carolina resident and is working in a state that does have state income taxes, the income is taxed by the other state. If the other state does not have state income tax, you should withhold South Carolina tax. Florida, Texas and Tennessee are examples of states that have no state income tax. If a South Carolina resident is working in one of these states, then SC taxes would be withheld. This is covered in the South Carolina Code of Law Section 12-8-520©.

2008 Illegal Immigration Reform Act (Filing Requirements for nonemployees with missing TIN or SSN):

Effective June 4, 2008, for South Carolina withholding tax purposes, a withholding agent must withhold at a 7% rate on any funds paid to a person when such funds are reported, are to be reported or should have been reported, on a Form 1099 if the person receiving the funds:

1)  Failed to provide the withholding agent with a Taxpayer Identification Number (TIN) or Social  Security Number (SSN); or

2)  Supplied the withholding agent with an incorrect TIN or SSN; or

3)  Provided the withholding agent with a TIN issued by the IRS for nonresident aliens.

This duty to withhold does not apply if the person provides a false or incorrect SSN or TIN so long as the false or incorrect SSN or TIN appears to be correct and the withholding agent does not know or should not have known based on a reasonable investigation that the SSN or TIN was false or incorrect. A withholding agent who fails to properly withhold under this provision will be liable for the taxes that were not withheld unless:

1)  The agent is exempt from federal withholding for the person receiving the compensation; and

2)  The agent otherwise meets the exemption requirements of the law.

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