South Carolina Contractor Taxes and Licensing: Sales Tax, Licenses and Income Tax

In South Carolina, "a construction contractor is the user or consumer of everything he buys": it pays the 6% state tax plus local tax on materials and doesn't charge customers sales tax. A business treated as a retailer that sells and installs, though, collects tax on the materials, while separately stated, reasonable installation labor stays untaxed.

What's distinctive about South Carolina for contractors?

South Carolina's question isn't "is this labor taxable" so much as "are you a contractor or a retailer?" SCDOR's manual says the answer "depends on the facts and circumstances," such as whether you advertise as a seller, run a showroom, hold a contractor license or work as a sub. South Carolina also has a three-step licensing ladder split between two boards, starting at just $500 for residential specialty trades like roofing and siding.

This page summarizes SCDOR, the Department of Labor, Licensing and Regulation (LLR) and the Workers' Compensation Commission as of 2026-10-19. It's not tax advice. Your classification can change what you owe, so review it with a South Carolina CPA.

Do South Carolina contractors charge sales tax on labor?

Generally no. A construction contractor, "a person or business making repairs, alterations, or additions to real property," pays tax on what it buys and doesn't charge the customer sales tax. If SCDOR deems you a retailer making sales and installations, "the subsequent sales at retail of such materials are subject to the tax. However, installation labor, if separately stated on the bill to the customer and reasonable, would not be subject to the tax." We found no residential vs. commercial distinction in the manual.

How does use tax on materials work in South Carolina?

"A construction contractor is the user or consumer of everything he buys." Pay tax at the supply house. "A contractor who buys building materials in another state and brings them into South Carolina for use on a construction contract in South Carolina is liable for South Carolina use tax," with a credit for state and local tax paid in the other state. Local use tax is reported on Form ST-389 or UT-3.

• Light construction equipment: "the law provides a maximum tax of $500" on purchases used for construction (Form ST-405).
• Manufacturing machines: contractors installing qualifying machinery can give suppliers Form ST-8 under the "machine exemption."
• Pre-contract exemption: when a local tax takes effect, Form ST-10-C applies for exemption on contracts signed before it; SCDOR then issues certificate ST-585.

More on accruing tax yourself in use tax for contractors, and on state-by-state models in sales tax on labor vs. materials.

What's the sales tax rate in South Carolina?

The state rate is 6%. Items taxed at 6% "are also subject to any applicable local taxes administered and collected by the Department on behalf of local jurisdictions." Local rates vary by county, so check SCDOR's local tax information for the county where materials are delivered.

Which South Carolina contractor licenses do you need?

Residential builders doing work "that exceeds $5,000 for total cost of construction (labor and materials added together)" must file a $5,000 surety bond. Local licensing: building officials "shall refuse to issue a permit" to an unlicensed contractor (S.C. Code 40-11-350), and cities and counties charge business license taxes under the Business License Tax Standardization Act. The license year runs May 1 to April 30, and construction licenses may be issued per project. See our contractor license guide.

What income taxes do South Carolina contractors pay?

H.4216, signed March 30, 2026, set two brackets for tax year 2026. SCDOR says "the tax year 2026 tax rate for income less than $30,000 is 1.99%" and "the tax year 2026 tax rate for income from $30,000 and above is 5.21%, minus $966." Corporations pay "5% on South Carolina taxable income" plus an annual license fee of 0.1% of capital and paid-in surplus plus $15, with a $25 minimum, and owe estimated tax when it's $100 or more.

Sole proprietors and pass-through owners should plan state and federal quarterly estimated taxes; check South Carolina's individual estimate rules with SCDOR. The quarterly estimated tax calculator handles the federal side.

When do South Carolina contractors need workers' comp?

Employers that "regularly employ four or more employees within South Carolina" must carry coverage, and part-time workers and family members count. Employers with "an annual payroll of less than $3,000.00" are exempt. Subcontractors with fewer than four employees are handled "on a case-by-case basis," so many general contractors require subs to carry it. Corporate officers can elect an exemption; check the Commission's forms. See workers' compensation for contractors.

Local taxes in South Carolina

• Local sales and use taxes collected by SCDOR on top of the 6% state rate.
• Business license taxes from cities and counties, on a May 1 to April 30 year, or per project for construction.
• Permits that require a valid state license.

Neighboring state guides

Compare North Carolina, which taxes repair and installation labor, and Georgia, where every contractor registers for a sales tax number.