South Carolina law requires employers to withhold state income taxes from wages paid to residents and nonresidents for services performed within the state using the formula or withholding tables provided by the state Department of Revenue (SCDOR). The term “employer” includes persons, firms, corporations, associations, joint stock companies, partnerships, fiduciaries, and government entities (SC Code Sec. 12-8-510 et. seq).
Taxes must be withheld on “wages,” which includes all remuneration, cash and noncash, for services. The definitions of taxable income in South Carolina generally conform to the federal Internal Revenue Code (SC Code Sec. 12-6-40). However, the state does not tax annual training/weekend drill or inactive duty pay for National Guard and Reserve members (SC Code Sec. 12-6-1120). An employee may request a waiver of the withholding requirements for a particular year by filing a withholding exemption certificate (Form W-4) on or before January 1 that certifies that he or she incurred no liability for South Carolina income tax in the previous taxable year and anticipates no income tax liability for the current year (SC Code Sec. 12-8-1040).
Taxes do not have to be withheld on wages paid to or for:
• Ministers performing duties of the ministry
• Services performed on a fishing boat with a crew of 10 or fewer
• Domestic service in a private home
• Personal services performed on occasion by nonresident employees in connection with their regular employment outside the state (this excludes construction-type services)
• Reimbursement of employee business expenses reasonably believed to be excludable from income