# 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.

## Key takeaways

- Contractors (repairs, alterations, additions to real property) pay tax on purchases and charge none. Retailers that sell and install collect tax on materials, not on separately stated labor.
- Which one you are depends on facts like advertising, showrooms, licensing and subcontracting.
- Three licensing triggers: residential specialty registration over $500, residential builder over $5,000, commercial general or mechanical over $10,000.
- Tax year 2026 income tax: 1.99% on income under $30,000; 5.21% minus $966 at $30,000 and above.
- Workers' comp at four or more regular employees, unless annual payroll is under $3,000.

## 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.

**Contractor or retailer? How South Carolina sees it**

| Factor SCDOR weighs | Points toward contractor | Points toward retailer |
| --- | --- | --- |
| How you advertise | As a builder or installer of improvements | As a seller of products, with installation available |
| Showroom | None | Showroom or retail counter |
| State contractor license | Holds one | Doesn't |
| Working as a subcontractor | Yes | No |

_Source: SCDOR Sales & Use Tax Manual, Ch. 16, verified 2026-10-19. The final call depends on all the facts._

## 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](https://www.brix.so/learn/use-tax-for-contractors), and on state-by-state models in [sales tax on labor vs. materials](https://www.brix.so/learn/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?

**South Carolina contractor licenses by trade**

| Trade | Agency | License and trigger | Link |
| --- | --- | --- | --- |
| Commercial general | LLR Contractor's Licensing Board | General contractor license for commercial work over $10,000 | [CLB](https://llr.sc.gov/clb/clb_general.aspx) |
| Commercial mechanical (electrical, plumbing, HVAC) | LLR Contractor's Licensing Board | Mechanical contractor license over $10,000 (AC, heating, electrical, plumbing, refrigeration and more) | [S.C. Code 40-11](https://www.scstatehouse.gov/code/t40c011.php) |
| Residential builder | LLR Residential Builders Commission | Residential builder license when cost exceeds $5,000; $5,000 bond | [RBC](https://www.llr.sc.gov/res/resbuilder.aspx) |
| Residential electrical, plumbing, HVAC | LLR Residential Builders Commission | Residential electrical, RBP plumbing or RBH heating and air license | [RBC licensure](https://llr.sc.gov/res/licensure.aspx) |
| Residential roofing, siding, drywall, painting and similar | LLR Residential Builders Commission | Residential specialty registration when jobs exceed $500 (up to three trades) | [RBS](https://llr.sc.gov/res/resspecialty.aspx) |
| Commercial roofing | LLR Contractor's Licensing Board | Subclassification under General Contractors-Building, over $10,000 | [S.C. Code 40-11](https://www.scstatehouse.gov/code/t40c011.php) |

_Sources: LLR and S.C. Code 40-11, verified 2026-10-19._

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](https://www.brix.so/learn/contractor-license).

## 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](https://www.brix.so/learn/quarterly-estimated-taxes-for-contractors); check South Carolina's individual estimate rules with SCDOR. The [quarterly estimated tax calculator](https://www.brix.so/tools/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](https://www.brix.so/learn/workers-compensation).

## 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](https://www.brix.so/taxes/north-carolina), which taxes repair and installation labor, and [Georgia](https://www.brix.so/taxes/georgia), where every contractor registers for a sales tax number.

BRIX tracks LLR licenses, RBS registrations, bonds, insurance and local business licenses and flags renewals before they lapse. Invoices show installation labor on its own line, which matters if you sell and install. Your CPA decides how you're classified.

- [Compliance and permit tracking](https://www.brix.so/#use-cases): Tracks licenses, safety documents and permits and flags renewals before they lapse.
- [Invoicing and payments](https://www.brix.so/features/invoicing-payments): Turns finished jobs into invoices and politely chases unpaid ones until the money is in your account.
- [Quotes and estimates](https://www.brix.so/features/quotes-estimates): Builds accurate quotes on site and follows up on every open estimate.

## Frequently asked questions

### Do contractors charge sales tax in South Carolina?

Construction contractors generally don't. South Carolina treats them as the consumers of everything they buy, so they pay tax on materials and don't charge customers. A business treated as a retailer that sells and installs collects tax on the materials, but not on separately stated, reasonable installation labor.

### Is labor taxable in South Carolina?

Contractor labor on real property generally isn't taxed. When a retailer sells and installs, installation labor isn't taxed if it's separately stated on the bill and reasonable. Combining labor and materials in one price can change that.

### When do you need a contractor license in South Carolina?

Commercial general and mechanical contractors need a Contractor's Licensing Board license for work over $10,000. Residential builders need a Residential Builders Commission license when a job exceeds $5,000. Residential specialty trades like roofing and siding need a registration for jobs over $500.

### What is South Carolina's income tax rate for 2026?

For tax year 2026, SCDOR says income under $30,000 is taxed at 1.99%, and income of $30,000 and above at 5.21% minus $966. Corporations pay 5% on South Carolina taxable income plus an annual license fee.

### Do contractors owe use tax on materials bought out of state?

Yes. A contractor who buys materials in another state and brings them into South Carolina for a job owes South Carolina use tax, with a credit for state and local tax paid in the other state.

### How many employees before workers' comp is required in South Carolina?

Four regular employees in South Carolina, counting part-time workers and family members. Employers with an annual payroll under $3,000 are exempt. Subcontractors with fewer than four employees are reviewed case by case.

## Related

- [Do Contractors Charge Sales Tax on Labor or Materials?](https://www.brix.so/learn/sales-tax-on-labor-vs-materials)
- [What Is Use Tax for Contractors?](https://www.brix.so/learn/use-tax-for-contractors)
- [What Is a Contractor License?](https://www.brix.so/learn/contractor-license)
- [What Is Workers' Compensation Insurance?](https://www.brix.so/learn/workers-compensation)
- [Quarterly Estimated Taxes for Contractors: How They Work in 2026](https://www.brix.so/learn/quarterly-estimated-taxes-for-contractors)
- [Quarterly Estimated Tax Calculator for Self-Employed Contractors (2026)](https://www.brix.so/tools/quarterly-estimated-tax-calculator)
- [North Carolina Contractor Taxes and Licensing: RMI Sales Tax, Licenses and Income Tax](https://www.brix.so/taxes/north-carolina)
- [Georgia Contractor Taxes and Licensing: Sales Tax, Licenses and Income Tax](https://www.brix.so/taxes/georgia)
- [Self-Employment Tax Calculator (2026)](https://www.brix.so/tools/self-employment-tax-calculator)
- [Mileage Deduction Calculator for Contractors (2026)](https://www.brix.so/tools/mileage-deduction-calculator)

## Sources

- [SCDOR — Sales & Use Tax Manual, Chapter 16: Construction Contractors (Sept. 2025)](https://dor.sc.gov/sites/dor/files/Documents/Policy%20Manuals/Chapter%2016%20-%20Construction%20Contractors.pdf) (checked 2026-10-19)
- [SCDOR — Individual Income Tax (tax year 2026 rates, H.4216)](https://dor.sc.gov/iit) (checked 2026-10-19)
- [SCDOR — C Corporation (5% rate, license fee)](https://dor.sc.gov/business-income-taxes/corporate/c-corporation) (checked 2026-10-19)
- [SC LLR — Contractor's Licensing Board, general contractors](https://llr.sc.gov/clb/clb_general.aspx) (checked 2026-10-19)
- [S.C. Code Title 40, Ch. 11 (contractor licensing, §§ 40-11-30, 40-11-350, 40-11-410)](https://www.scstatehouse.gov/code/t40c011.php) (checked 2026-10-19)
- [SC LLR — Residential Builders Commission, residential builder](https://www.llr.sc.gov/res/resbuilder.aspx) (checked 2026-10-19)
- [SC LLR — Residential Builders Commission, licensure](https://llr.sc.gov/res/licensure.aspx) (checked 2026-10-19)
- [SC LLR — Residential specialty registration](https://llr.sc.gov/res/resspecialty.aspx) (checked 2026-10-19)
- [SC LLR — Residential specialty FAQ (bond)](https://llr.sc.gov/res/PDF/FAQ/RBS%20FAQ.pdf) (checked 2026-10-19)
- [S.C. Code Title 6, Ch. 1 (Business License Tax Standardization Act, § 6-1-400)](https://www.scstatehouse.gov/code/t06c001.php) (checked 2026-10-19)
- [SC Workers' Compensation Commission — Employer FAQs](https://www.wcc.sc.gov/employer-faqs) (checked 2026-10-19)

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Written by BRIX Editorial Team. Last updated 2026-10-19. General information, not tax, legal or financial advice.
Canonical: https://www.brix.so/taxes/south-carolina