What Is South Carolina Payroll Tax?
South Carolina payroll tax refers to the state payroll taxes that employers must withhold from employee wages or pay directly to state agencies. These taxes fund unemployment benefits and South Carolina individual income tax system.
South Carolina payroll tax system is relatively straightforward compared with states that impose separate city or county income taxes. Employers generally manage unemployment insurance through the South Carolina Department of Employment and Workforce and state income tax withholding through the South Carolina Department of Revenue. South Carolina counties and municipalities do not generally impose a separate local income tax on employee wages.
Most South Carolina employers are responsible for the following payroll tax requirements:
- Unemployment Insurance (UI), administered by the South Carolina Department of Employment and Workforce
- South Carolina Individual Income Tax withholding, administered by the Department of Revenue using the state withholding tables and employee Form SC W-4
- Quarterly withholding returns, unemployment wage reports, and annual employee W-2 reporting through the applicable state systems
South Carolina Payroll Taxes at a Glance
| Payroll Tax | Paid By | Purpose |
|---|---|---|
| Unemployment Insurance (UI) | Employer | Provides temporary income for eligible unemployed workers |
| Individual Income Tax | Employee (withheld by employer) | Progressive state income tax withheld from employee wages |
| Local Occupational License Tax | Not generally applicable to employee wages | South Carolina counties and municipalities do not generally impose a local payroll income tax on wages |
Understanding who pays each tax and recognizing that South Carolina doesn't generally impose separate city or county income tax withholding helps employers avoid unnecessary local payroll registrations while meeting their state unemployment and withholding obligations.
South Carolina Employer Payroll Tax Responsibilities
Every employer with workers in South Carolina has payroll tax responsibilities beyond simply issuing paychecks. Depending on your business, you'll generally need to:
- Register your business with the South Carolina Department of Employment and Workforce and the South Carolina Department of Revenue.
- Obtain a South Carolina unemployment insurance employer account and state withholding tax account.
- Collect a completed South Carolina Employee's Withholding Allowance Certificate, Form SC W-4, from each employee.
- Withhold South Carolina individual income tax from taxable employee wages.
- Pay employer UI contributions using the rate assigned to the unemployment account.
- File quarterly unemployment insurance wage and contribution reports through SUITS.
- File quarterly South Carolina withholding returns and remit withheld taxes according to the applicable payment schedule.
- File the fourth-quarter and annual withholding reconciliation using Form WH-1606.
- Submit required employee W-2 information to the South Carolina Department of Revenue by January 31.
- Report every new hire and rehire to the South Carolina New Hire Reporting Program within 20 days.
- Maintain payroll records for state compliance.
Many businesses use payroll software with built-in South Carolina withholding tables and unemployment calculations, since employers must apply employee SC W-4 information, payroll frequency, employer-specific UI rates, and state filing requirements correctly.
Types of South Carolina Payroll Taxes
Unemployment Insurance (UI)
Unemployment Insurance is an employer-funded payroll tax administered by the South Carolina Department of Employment and Workforce that provides temporary financial assistance to eligible workers who lose their jobs through no fault of their own.
Employers pay this tax directly it is never deducted from employee paychecks.
South Carolina assigns experienced employers to one of 20 tax classes based on their unemployment experience, benefit charges, taxable payroll, and the condition of the state's unemployment insurance trust fund. New employers use the state's standard new-employer rate until they develop sufficient experience for an individual rate.
Key Facts
- Paid entirely by employers South Carolina has no employee UI contribution
- Calculated on the first $14,000 of each employee's wages for 2026
- The standard 2026 new-employer contribution rate is 1.0%
- Experienced-employer rates for 2026 range from 0.06% to 5.46%
- Employers with no benefit charges during the applicable experience period may qualify for the lowest Tax Class 1 rate of 0.06%
- Employers that fail to file required wage reports or resolve delinquent liabilities may be assigned the Tax Class 20 rate of 5.46%
- Most South Carolina employers receive a federal FUTA tax credit of up to 5.4% for timely state UI payment, bringing the effective FUTA rate down to about 0.6%
- Must be reported quarterly through the State Unemployment Insurance Tax System, commonly known as SUITS
South Carolina Individual Income Tax Withholding
South Carolina imposes a progressive individual income tax, and employers calculate payroll withholding using official Department of Revenue wage-bracket tables or the percentage-method formula. Updated withholding tables and a revised Form SC W-4 apply to wages paid beginning January 1, 2026.
Employers are responsible for:
- Withholding South Carolina income tax from taxable wages using the current Department of Revenue withholding tables or formula
- Collecting Form SC W-4 from new employees and employees who change their withholding elections
- Calculating withholding based on taxable wages, payroll frequency, and the employee's withholding information
- Reporting withholding to the South Carolina Department of Revenue
- Making South Carolina withholding payments at the same time as applicable federal payroll tax payments
- Filing quarterly withholding returns and the fourth-quarter annual reconciliation
- Submitting required employee W-2 information by January 31
South Carolina withholding generally applies to wages earned by employees working in South Carolina, including nonresident employees performing services in the state. South Carolina does not maintain broad reciprocal income tax agreements with neighboring states, so nonresident employees generally remain subject to South Carolina withholding on wages earned for services performed in the state.
Local Occupational License Tax
Unlike states such as Kentucky, Missouri, or Ohio, South Carolina counties and municipalities do not generally impose a local occupational income tax that employers must withhold from employee wages. South Carolina businesses may still have local business-license fees, property taxes, sales taxes, or other municipal obligations, but these are generally business-level requirements rather than payroll taxes deducted from employee compensation.
Key rules employers need to know:
- South Carolina does not generally require employers to withhold county or municipal income tax from employee wages
- Employers normally calculate only state income tax withholding and employer-funded unemployment insurance for South Carolina-specific payroll tax purposes
- Counties and municipalities may impose business-license fees or other business-level taxes
- Business-license obligations should not be confused with employee wage withholding
- Employers operating in multiple South Carolina jurisdictions should still review local licensing requirements
- The employee's physical work location generally determines whether wages are subject to South Carolina withholding
- Remote employees working from South Carolina may create state withholding and unemployment insurance obligations
- South Carolina state payroll registration does not automatically satisfy local business-license requirements
Because South Carolina does not generally impose local payroll income tax, employers usually don't need to manage separate county or municipal wage-withholding accounts. Businesses should still distinguish state payroll obligations from local business licenses and other non-payroll taxes.
Which Payroll Taxes Are Paid by Employers vs Employees?
| Tax | Employer Pays | Employee Pays |
|---|---|---|
| Unemployment Insurance (UI) | YES | NO |
| Individual Income Tax | NO | Withheld from wages using state withholding tables |
| Local Occupational License Tax | Not generally applicable as a payroll tax | Not generally withheld from wages |
South Carolina places the entire unemployment insurance tax burden on employers, while state individual income tax is withheld from employee wages. A separate county or municipal payroll income tax generally does not apply.
South Carolina Payroll Tax Rates for Employers
Understanding current South Carolina payroll tax rates is essential for calculating payroll accurately. Because experienced-employer UI rates are assigned individually, employers should review their annual contribution-rate notice rather than relying only on the statewide rate range.
South Carolina Payroll Tax Rates at a Glance
| Payroll Tax | Who Pays | General Rate | Taxable Wage Base |
|---|---|---|---|
| Unemployment Insurance (UI) | Employer | New employers: 1.0%. Experienced employers: 0.06%–5.46% | $14,000 for 2026 |
| Individual Income Tax | Employee | Progressive withholding calculated using the 2026 South Carolina withholding tables, withholding formula, and Form SC W-4 information | Applies to taxable South Carolina wages, with no UI-style annual wage cap |
| Local Occupational License Tax | Not generally applicable to employee payroll | No general county or municipal income tax withholding on wages | Not applicable |
According to the South Carolina Department of Employment and Workforce's official 2026 guidance, unemployment insurance tax applies to the first $14,000 paid to each employee. The standard new-employer rate is 1.0%, while experienced-employer rates range from 0.06% to 5.46% across the state's 20 tax classes.
Instead of relying on a general statewide estimate, employers should review their annual UI rate notice, confirm employee Form SC W-4 information, and make sure payroll software reflects South Carolina's current withholding tables and payment schedule.
Understanding Taxable Wages
Not every South Carolina payroll tax applies to wages the same way. Depending on the tax involved, taxable wages may include:
- Hourly wages
- Salaries
- Bonuses
- Overtime pay
- Commissions
- Certain taxable fringe benefits
UI tax applies only to the first $14,000 of each employee's annual wages, while state income tax withholding generally applies more broadly to taxable South Carolina wages without the same wage base cap. Understanding which wage rules apply to each obligation helps reduce calculation errors.
South Carolina Payroll Tax Filing Deadlines
Meeting payroll tax deadlines is just as important as calculating taxes correctly. Late filings or payments can lead to penalties and interest charges.
Unemployment Insurance (Quarterly Wage Report)
| Reporting Quarter | Filing Deadline |
|---|---|
| January – March | April 30 |
| April – June | July 31 |
| July – September | October 31 |
| October – December | January 31 |
State Income Tax Withholding
South Carolina employers file quarterly withholding returns. Forms WH-1605 for the first three quarters are generally due April 30, July 31, and October 31. The fourth-quarter and annual reconciliation is filed on Form WH-1606 and is generally due January 31. South Carolina withholding payments must generally be made at the same time as the employer's corresponding federal withholding payments.
Local Occupational License Tax
South Carolina does not generally impose a county or municipal occupational income tax on employee wages, so employers normally do not have a separate local payroll withholding return. Businesses may still have local business-license or other municipal filings that follow schedules established by the applicable jurisdiction.
If a deadline falls on a weekend or legal holiday, it generally moves to the next business day. Because South Carolina withholding payments may be due more frequently than quarterly returns and UI reports, employers should track each payment and filing obligation independently.
How to Register for South Carolina Payroll Taxes
Before paying employees, businesses typically need to register with the South Carolina Department of Employment and Workforce and the South Carolina Department of Revenue.
State registration: Employers establish a South Carolina unemployment insurance account through the Department of Employment and Workforce's SUITS portal and apply for an income tax withholding account with the South Carolina Department of Revenue. Withholding accounts, returns, and payments can generally be managed through MyDORWAY.
Local registration: South Carolina counties and municipalities do not generally impose local income tax withholding on employee wages, so employers normally do not need to register with local revenue offices for payroll income tax. Separate municipal or county business-license requirements may still apply.
During registration, you'll generally need information such as:
- Legal business name
- Federal Employer Identification Number (EIN)
- Business entity type
- Business address and all South Carolina work locations
- Owner or responsible party information
- Date employees first performed services in South Carolina
- Estimated payroll information
How to File South Carolina Payroll Taxes
Filing payroll taxes in South Carolina involves managing unemployment insurance and state income tax withholding obligations in parallel. A typical filing process includes:
Step 1: Calculate Employee Wages
Determine each employee's gross wages, including regular pay, overtime, bonuses, commissions, and other taxable compensation.
Step 2: Determine Applicable Local Jurisdictions
Confirm where each employee physically performs services and whether employment is localized in South Carolina. South Carolina does not generally impose local wage withholding, but the employee's work location can determine whether South Carolina withholding and unemployment insurance rules apply.
Step 3: Calculate Payroll Taxes
Determine your employer UI contribution using the rate shown on your current annual notice and calculate employee state income tax withholding using Form SC W-4 and the current South Carolina withholding tables or formula.
Step 4: Withhold Employee Taxes
Deduct South Carolina individual income tax from each paycheck when wages are subject to state withholding. Do not deduct unemployment insurance contributions from employee wages.
Step 5: Pay Employer Contributions and Remit Withholding
Pay employer UI contributions through SUITS and remit state income tax withholding through MyDORWAY or another approved payment method according to the applicable deposit schedule.
Step 6: File Payroll Tax Returns
Submit quarterly unemployment wage and contribution reports, quarterly South Carolina withholding returns, the fourth-quarter annual reconciliation, and required employee W-2 information through the applicable state systems.
Step 7: Maintain Payroll Records
Keep detailed payroll records, employee Form SC W-4 certificates, UI contribution-rate notices, wage information, filed returns, and payment confirmations in case of future audits or compliance reviews.
Following a consistent payroll process helps reduce mistakes and makes year-end reporting significantly easier.
Frequently Asked Questions
Who is required to pay South Carolina payroll taxes?
Most businesses that hire employees performing services in South Carolina are required to register with the South Carolina Department of Employment and Workforce and the South Carolina Department of Revenue. Their responsibilities may include paying employer UI contributions, withholding state income tax, filing payroll reports, reporting employee wages, and maintaining payroll records.
What payroll taxes are employers responsible for in South Carolina?
South Carolina employers generally have responsibilities related to unemployment insurance and state individual income tax withholding. UI is paid entirely by employers, while South Carolina income tax is withheld from employee wages. Counties and municipalities do not generally impose a separate payroll income tax.
How often do employers file South Carolina payroll tax returns?
Unemployment insurance wage and contribution reports are filed quarterly. South Carolina withholding returns are also filed quarterly, although withholding payments are generally made at the same time as the employer's corresponding federal payroll tax payments.
How do I register for South Carolina payroll taxes?
Employers register for unemployment insurance through the South Carolina Department of Employment and Workforce's SUITS system and establish a withholding tax account with the South Carolina Department of Revenue. Withholding filings and payments can generally be managed through MyDORWAY.
What happens if payroll taxes are filed late?
Late filings or payments may result in penalties, interest charges, collection action, or other compliance issues. Employers with delinquent unemployment reports or liabilities may also be assigned the highest Tax Class 20 rate. Filing accurately and on time helps avoid unnecessary costs.
Does South Carolina payroll tax apply to remote employees?
Yes. An employee who physically performs services from a South Carolina location may create South Carolina income tax withholding and unemployment insurance obligations even when the employer is located in another state. Employers should review where the employee's services are performed and whether any specific federal or state exemption applies.
Are South Carolina payroll tax rates the same every year?
Not always. South Carolina's UI tax-class rates, employer-specific contribution rate, withholding tables, income tax brackets, employee withholding forms, filing requirements, and payment schedules can change. Employers should review current Department of Employment and Workforce and Department of Revenue guidance before processing payroll each year.
Can payroll software calculate South Carolina payroll taxes automatically?
Many payroll platforms automatically calculate South Carolina UI contributions and state income tax withholding, apply the appropriate wage base and withholding tables, and help employers meet filing deadlines. Employers are still responsible for ensuring employee Form SC W-4 information, work locations, assigned UI rates, and withholding account details are accurate and up to date.
Disclaimer
This article is for general informational purposes only and doesn't constitute legal, tax, or accounting advice. Payroll tax rates, taxable wage bases, withholding tables, filing requirements, and payment schedules can change. Consult a qualified CPA or tax professional for guidance specific to your business.
