Should A Non-Profit Collect Business Taxes?

March 16, 2016

Investigative Reports

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By RON AIKEN

taxes71

Bill allows non-profit to help set, collect business tax fees

If H.5109, introduced Tuesday,  passes, a publicly funded private non-profit with no governmental authority can collect business taxes and share sensitive individual tax data across town and county borders statewide.

The Municipal Association of South Carolina (MASC) is a publicly funded private non-profit lobbyist principal that has spent $212,403 this fiscal year alone pushing the legislature to broaden the scope of its powers.  Yesterday, thanks to H.5109, they may be able to do just that. A key provision of the legislation, sponsored by out-going Rep. Kenny Bingham, R-Lexington, would allow MASC to establish a Standardized Business License Class Schedule.

In effect, that change would allow a private non-profit to set the classification rates used in taxation on private businesses using only, according to the bill, “the business classification codes of the latest North American Industry Classification System.” The same authority also would extend to South Carolina Association of Counties.

The North American Industry Classification System only determines the size of a business. As for generating a rate, the bill involves a formula of past, projected and “estimated probable” income. Municipalities also can add “additional reasonable sub-classifications.”

MASC is funded from fees paid by municipalities across South Carolina – 270 in all, according to MASC’s website. The idea of a private group setting classifications that affect tax rates alarms anti-tax proponents.

“Any time you have an un-elected body getting involved in taxation in any form, it’s bad,” said Talbert Black, state coordinator for SC Campaign for Liberty. “Citizens should have direct accountability for who is setting the rates..”

Black isn’t the only one who disagrees with the bill.

“We are opposed to this bill (H.5109) and had no idea we were going to be included in it,” said Josh Rhodes of the S.C. Association of Counties. “We don’t believe you can mandate a city or county to do business with a private entity — even us.”

Under current law, businesses pay their respective license fees to the county or municipality to which they are subject. Under H.5109 all businesses must renew their business license and pay their license taxes through a portal controlled by the Municipal Association and counties and towns must use a standard license application created by MASC.

A final piece of the proposed legislation would allow towns and counties to share sensitive tax information among local governments. The bill allows “the sharing of data between public officials or employees, or their agents, in the performance of their duties,” it reads. Widening the exposure of one’s personal tax information is not the direction some want to see government go.

“Why would the City of Columbia need to see my tax records when I live in Lexington?,” Black said. “They obviously have a reason they want to do that. Personal information should always remain on a need-to-know basis only.”

H.5109 is MASC’s answer to H.4967, which the municipal association opposes. H.4967, which has 35 House sponsors to H.5109’s one, gives sole business license tax collection authority to the Department of Revenue – the state’s official tax-collecting agency. The Department of Revenue would then receive the revenue and redistribute it to the appropriate municipalities after taking an administrative fee.

It also prohibits the sharing of sensitive tax information by requiring that all tax return information used to calculate fees “only may be submitted to the department.”

“Taxes should be collected by the agency charged with tax collection,” Black said. “That’s as simple as it gets, and anything else that removes accountability is not in the best interest of the taxpayers.”

Reach Aiken at 803-200-8809. Email him at ron@thenerve.org. Follow him on Twitter @RonAiken and @TheNerveSC. To receive email updates as stories hit, click the button at the top right hand of the page.

  • Bob

    The MASC will not set rates, municipalities and counties will still do that. Read up on the MASC before you start commenting on it. http://www.masc.sc/about/the-association/history

    • colnzgprnts

      ..n effect, that change would allow a private non-profit to set the classification rates used in taxation on private businesses using only, according to the bill, “the business classification codes of the latest North American Industry Classification System.” The same authority also would extend to South Carolina Association of Counties.

      The North American Industry Classification System only determines the size of a business. As for generating a rate, the bill involves a formula of past, projected and “estimated probable” income. Municipalities also can add “additional reasonable sub-classifications.”

      • Saul

        “The North American Industry Classification System only determines the size of a business” Wrong again…

        “The North American Industry Classification System (NAICS) classifies business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. economy. The NAICS industry codes define establishments based on the activities in which they are primarily engaged. NAICS codes are also used for administrative, contracting, and tax purposes. NAICS is production oriented (not product oriented) and categorizes businesses with others that have similar methods of production.”

        Further, “The North American Industry Classification System (NAICS) is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.”.

        So, in effect, MASC would be classifying businesses according to federal standards.

        You really need to stop viewing the world thru the conspiracy lens.

  • Saul

    Your logic seems flawed, I read 5109 and it does not appear to grant the MASC the powers you claim.

    41-4-190(B)(2) states “The business license tax must be computed based on the gross income for the calendar year preceding the due date, the business’ twelve-month fiscal year preceding the due date, or on a twelve-month projected income based on the monthly average for a business in operation for less than one year. The tax for a new business must be computed on the estimated probable gross income stated in the license application for the balance of the license year. A business license related to construction contract projects may be issued on a per project basis.”

    Since the exact formula is provided in law to set the rate how is this power also granted to the MASC?

    It appears to me that the only thing MASC is being asked to do is serve as a one stop shop for license payments. This would at least appear to be pro business in that it would allow for businesses with multiple licenses in multiple counties to go to one site for all payments.

    “Each county must provide access to businesses for the reporting, calculation, and payment of business license taxes through the South Carolina Association of Counties Business License Tax Portal, subject to the availability and capability of the portal.”

    You article needs more detail if we are to believe your conclusions.