Author: J. William Strickland, CPA, J.D. | Member since 2016
This article originally appeared in the Summer 2026 issue of the South Carolina CPA Report
South Carolina tax practitioners face a shifting landscape this year, with significant legislative (in-)activity, pivotal court decisions, and administrative guidance reshaping the compliance environment. From a conformity standoff with federal law to marketplace facilitator rulings, understanding the latest developments is essential for accurately advising clients and preparing returns. Below is a summary of the most consequential updates from the current South Carolina tax update.
Individual Income Tax: A New Two-Bracket Structure
South Carolina enacted significant changes to its individual income tax structure. Effective for 2026, two tax rates apply: 1.99% on taxable income up to $30,000, and 5.21% on income above that threshold. The legislation also creates a path for further reductions, with provisions to lower the 5.21% rate to 1.99% and the 1.99% to 0%, measured against tax collections in excess of the Trust Fund for Tax Relief.
Equally important is the introduction of the South Carolina Income Adjusted Deduction (SCIAD). Rather than adopting the federal standard deduction, South Carolina established its own: $30,000 for joint filers, $15,000 for single filers, and $22,500 for heads of household. These amounts phase out for higher-income taxpayers with Federal AGI over $80,000 for joint filers, $40,000 for single filers, and $60,000 for heads of household. For nonresidents, SCIAD is prorated by the ratio of South Carolina gross income to federal adjusted gross income. Full-year residents remain entitled to an earned income tax credit equal to 125% of the federal EIC, limited to $200.
Revenue Rulings: New Guidance on Admissions, Sales Tax, and Credits
The Department of Revenue issued several Revenue Rulings that provide practical guidance for a range of client situations. RR25-8 addressed dinner attraction shows, applying a “true object” test to determine whether sales tax or admissions tax applies to the meal or to the show. For dinner attraction shows — which have both objects — sales tax applies only to the reasonable price of the meal, while admissions tax applies to the admission portion.
RR25-9 clarifies the 1% sales tax reduction for individuals age 85 and older. The individual must affirmatively request the reduction and provide proof of age. Gifts purchased for others do not qualify, and retailers are required to post notice of the reduction or face a $100-per-month penalty.
RR26-1 provides comprehensive guidance on the Abandoned Building Revitalization Credit, including requirements that at least 66% of the property must have been continuously closed for five years, and minimum rehabilitation expenditure thresholds ranging from $75,000 to $250,000 depending on the size of the municipality. The credit is set to repeal on December 31, 2035, and unused credits may be carried forward for five years (eight years for unused property tax credits).
Landmark Case Law: Amazon and Marketplace Facilitators
The South Carolina Supreme Court issued a closely watched decision in Amazon Services, LLC v. SC Department of Revenue, affirming the Court of Appeals’ ruling that Amazon is liable for sales tax as a seller of “tangible personal property, whether owned by Amazon or by others.” The South Carolina Supreme Court held that Amazon was engaged in the business of selling at retail, pointing to the company’s control over pricing, product listings, payment processing, customer communications, returns, and fund disbursements to third-party merchants. The court also found that Amazon had sufficient notice of its tax obligations, rejecting the argument that the Department retroactively applied 2019 statutory amendments to the 2016 tax period.
This ruling has broad implications for businesses operating as marketplace facilitators and for those who sell through them. It underscores South Carolina’s position that marketplace facilitators, not individual third-party sellers, bear the responsibility for collecting and remitting sales and use tax.
Pass-Through Entity Tax: Still in Effect
South Carolina did not legislatively repeal its Pass-Through Entity Tax (PTET) this session. Two election pathways remain available: an individual election for a 3% rate on the owner’s personal return, or an entity-level election to be taxed at 3% on the entity’s own return. Practitioners should continue to evaluate which election, if any, is beneficial for each client, taking into account multi-state implications, the treatment of PTET payments by resident states, and any disproportionate effects on owners with differing tax profiles.
Planning Points for the Road Ahead
South Carolina’s divergence from federal law creates both compliance challenges and planning opportunities. Practitioners should thoroughly review each client’s situation for non-conformity adjustments, particularly around overtime income, tip income, SALT, depreciation, and IRA contribution limits (note: the South Carolina IRA contribution limit remains $2,000). The new SCIAD deduction and two-bracket tax rate deserve careful attention in tax projections and withholding recommendations. For business clients, the Amazon ruling serves as a reminder to evaluate marketplace facilitator exposure in all states where sales occur. And for eligible property owners, the Abandoned Building Revitalization Credit may present a compelling incentive in the right circumstances.
Staying current with Department of Revenue guidance — particularly the Information Letters and Revenue Rulings issued throughout the year — remains essential to accurate and effective South Carolina tax practice.
Disclosure: This article was generated using AI technology based on previously presented content. J. William Strickland and the SC.CPA team have reviewed, edited, and verified the article for accuracy, quality, and relevance.
