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South Carolina

South Carolina payroll taxes: Your 2026 guide to staying compliant

By QuickBooks
Published on April 24, 2026

South Carolina, known for its booming economy and innovative spirit, is home to over 500,000 small businesses. In fact, those enterprises comprise more than 99% of the state’s total number of businesses and employ nearly half of the state’s employees. However, this thriving landscape comes with unique challenges, particularly regarding the state’s payroll tax laws. 

Let’s explore the key aspects of South Carolina payroll taxes you need to know to keep your business compliant and your employees satisfied. 

Jump to:

What are payroll taxes?

Payroll taxes are taxes based on wages, salaries, or other compensation that both employers and employees must pay. While income taxes are also withheld through payroll, payroll taxes specifically fund programs like Social Security, Medicare, and unemployment insurance.

Understanding South Carolina payroll taxes

When starting a business in South Carolina, you'll need to understand both federal and state payroll taxes.

Federal payroll taxes

Payroll taxes are mandatory and encompass both federal and state requirements. 

Federal payroll taxes include:

  • Federal income tax: This is withheld from each employee's paycheck based on their W-4 form and the current IRS tax brackets. You'll be responsible for calculating the correct amount, withholding it, and then sending it to the IRS.
  • Social Security and Medicare taxes: Both of these taxes have a portion paid by the employee and a matching portion paid by you, the employer. For Social Security, the combined rate is 12.4% on the first $176,100 of wages in 2025. For Medicare, it's 2.9% on all wages, with an extra 0.9% for higher earners. You'll withhold the employee's portion and match it.
  • Federal Unemployment Tax (FUTA): This is paid solely by you at a rate of 6% on the first $7,000 of each employee's wages. However, most employers get a 5.4% credit, reducing the rate to 0.6%. The graphic below lists some best practices for managing your FUTA obligations.
Futa best practices for small businesses

South Carolina state payroll taxes

In addition to federal payroll taxes, South Carolina employers must also account for state-specific payroll taxes.

  • South Carolina State Income Tax (SIT): As of July 1, 2025, South Carolina’s income tax rates are 0% for income up to $3,500, 2% for income between $3,500 and $17,830, and a 6% rate for all income over $17,830. 
  • South Carolina Unemployment Insurance (UI): Employers are required to pay state unemployment insurance tax. The tax rate varies based on the size of the business and its experience rating, and the 2025 annual wage cap is $14,000. 

South Carolina local payroll taxes

There are generally no local payroll taxes to withhold in South Carolina cities or counties. However, some areas may impose other local taxes that businesses should be aware of. 

  1. Check with your local government to find out if your business is subject to any local taxes. Your city or county government can provide the most up-to-date information on applicable rates and regulations.
  2. Consult a tax professional if you need clarification on local tax requirements or assistance with compliance. An accountant specializing in South Carolina payroll taxes can help you identify any local taxes that apply to your business and ensure you meet all your obligations.

Other important tax considerations

Multiple locations

If your business has employees working in multiple jurisdictions, you may be subject to different local payroll taxes for each location.

Changing rates

Local payroll tax rates can change over time, so it's important to stay informed about any updates that may affect your business.

Employer responsibilities for payroll taxes in South Carolina

As a South Carolina employer, you're responsible for managing a complex array of federal and state payroll taxes, which involves careful calculation, timely withholding, and accurate reporting to various government agencies. Here’s an overview of what you should know.

Registering for payroll taxes

Registering for payroll taxes in South Carolina involves several steps to ensure compliance with state and federal regulations. Here’s a detailed guide to help you through the process:

  • Obtain an Employer Identification Number (EIN): Before registering for payroll taxes, you need to obtain an Employer Identification Number (EIN) from the IRS. This can be done online via the IRS website, and it’s essential for tax reporting purposes. 
  • Register with the South Carolina Department of Employment and Workforce (DEW): Go to the South Carolina Department of Employment and Workforce (DEW) website to set up an account. Fill out the necessary forms to register as an employer. You will need to provide information such as your EIN, business name, address, and type of business. 
  • Register for South Carolina withholding tax: Visit the South Carolina Department of Revenue (SCDOR) website to register for withholding state income tax from employees’ paychecks. Complete the South Carolina Withholding Tax Registration application (Form ST-3) and submit it online or via mail. 
  • Determine your tax responsibilities: Familiarize yourself with South Carolina payroll tax rates, including unemployment insurance and withholding tax rates. Employers withholding $15,000 or more per quarter can make 24 or more payments per year via the South Carolina Department of Revenue’s MyDORWAY online portal. 
  • Collect employee information: Gather necessary information from employees, including W-4 forms for federal withholding and any state-specific forms. 

By following these steps, you can successfully register for payroll taxes in South Carolina and ensure that your business remains compliant with state and federal tax regulations. 

Calculating payroll taxes

Calculating payroll taxes is essential for ensuring accurate employee compensation and compliance with federal and state tax regulations. You have a few options for this:

  • Check government websites: To calculate South Carolina payroll taxes, you can use official government resources such as the South Carolina Department of Revenue website. It offers detailed information about state income tax withholding rates, instructions for completing tax forms, and downloadable payroll tax tables. 
  • Additionally, the South Carolina Department of Employment and Workforce provides guidance on unemployment insurance tax rates and requirements. By assessing these resources, you can ensure accurate calculations by inputting the relevant employee wages into the provided formulas and tables. 
  • Payroll software: Some small business software payroll programs have built-in South Carolina tax payroll calculators, saving you time and minimizing the chance for errors.
  • Professional services: If you prefer to outsource payroll, a professional payroll service can handle everything for you.

Whichever method you choose, make sure you stay updated on the current tax rates and wage limits, as these can change every year.

Withholding state payroll taxes

Once you've calculated the taxes, you must withhold the correct amounts from your employees' paychecks. Understanding regulations surrounding this process helps employers ensure accuracy in their payroll practices. In South Carolina, the state’s Department of Revenue sets the withholding tax rates and regulations.

State Personal Income Tax (PIT): Use the employee’s Form W-4 and the state tax tables to calculate PIT. 

  • Example: The employee earns $1,400 per week and claims one allowance. Per the table in effect for 2025, the amount that you must withhold from each weekly paycheck is $60.16 ($49.00 plus 6.2% of the excess over $1,220).

Unemployment Insurance (SCUI): New employers pay an unemployment insurance tax rate of 0.41% for their first calendar year. Experienced employer rates can range from 0.06% to 5.40%. However, their history of unemployment claims, payroll size, and experience rating affect the rate they pay. 

  • Example: Take, for example, an employer with a SCUI tax rate of 1.0% and an employee earning $1,000 per week. As the annual wage base for SCUI purposes is capped at $14,000 for 2025, the SUTA tax for this employee for the entire year would be 1% of $14,000, or $140.

By applying these calculations to each paycheck, you ensure accurate withholdings and compliance with state requirements.

Remitting state payroll taxes

South Carolina employers can remit their state payroll taxes to the South Carolina Department of Revenue. They can pay online through the MyDORWAY online portal.

Filing payroll tax returns in South Carolina

Employers in the state are required to file payroll tax returns at different intervals depending on several factors, including the size of their payroll and the state’s specific regulations. Typically, these intervals can be quarterly or annually. 

Quarterly requirements

Annual requirements

Penalties for late filing or non-compliance and tips for staying organized

In South Carolina, the penalties for late payroll tax filing or non-compliance are steep. The penalty is 5% of the unpaid tax due for each month the return is late, with a maximum penalty of up to 25%. South Carolina also charges interest on any unpaid payroll taxes. Fraud or willful violations of payroll tax withholding laws could lead to criminal charges. Administrative actions for non-compliance could include revocation of the business license and other state agency-imposed penalties. 

Set reminders

Mark all payroll tax deadlines on your calendar, set reminders on your phone or computer, and use task management or payroll software tools to stay on top of the due dates. 

Use the MyDORWAY online portal

Take advantage of the MyDORWAY online portal for electronic filing and payments on the South Carolina Department of Revenue’s website. This streamlined process reduces errors and delays associated with paper filing. 

Consider payroll software

Invest in reliable payroll software that automatically calculates taxes and reminds you of upcoming deadlines. You’ll minimize calculation mistakes and missed payments.

Outsource payroll

If managing payroll seems overwhelming, consider outsourcing to a reputable payroll service provider. They will handle all tax calculations, filings, and payments on your behalf, ensuring compliance. 

Seek professional help

If you have any questions or concerns about payroll taxes, don't hesitate to consult with a tax professional or accountant. They can provide expert guidance and help you tackle the complexities of payroll tax compliance.

Pre-tax vs post-tax payroll deductions

Payroll tax credits and incentives

South Carolina offers a variety of payroll tax credits and incentives aimed at fostering economic growth and local business support. These programs are designed to encourage job creation, investment, and workforce development. Understanding and leveraging these programs can provide substantial financial benefits. Explore these key payroll tax incentives in South Carolina that can maximize your business potential:

Job Development Credit (JDC)

The Job Development Credit program does not reduce a particular tax liability; instead, it provides companies with funds to offset the cost of locating or expanding a business facility in the state.

Capital Investment Credit

The Capital Investment Credit is a nonrefundable income tax credit available to taxpayers who place qualified manufacturing and productive equipment into service within the state. This credit aims to incentivize businesses to invest in and expand their manufacturing and production capabilities in South Carolina. 

Research Expenses Credit

Companies engaging in certain research activities that are eligible for the federal R&D tax credit can claim a state research expenses credit equal to 5% of qualified research expenses made within the state.

Industry Property Tax Assessment Ratio

South Carolina offers a low property tax assessment rate for industrial properties, reducing expenses for businesses and aiding in job creation. Review the eligibility requirements for the Industry Property Tax Assessment Ratio. 

Small Business Tax Credits

Small businesses may qualify for various local and state tax credits and incentives, including the Apprenticeship Income Tax Credit, all of which are designed to stimulate growth. 

Work Opportunity Tax Credit (WOTC)

A federal program that South Carolina participates in is the WOTC, which provides tax credits to employers who hire individuals from certain targeted groups facing employment barriers. 

Energy Efficiency Equipment Tax Credit

Businesses that invest in energy-efficient equipment may be eligible for tax credits. The Energy Efficiency Equipment Tax Credit indirectly supports payroll by reducing overall operating costs. 

Veterans Apprenticeship Credit

Employers hiring veterans may qualify for the Veterans Apprenticeship Credit, which promotes veteran employment. This program expires at the end of 2027.

Federal Unemployment Tax Act (FUTA) Credit

Employers who pay their state unemployment insurance (SUI) taxes on time and in full may receive a FUTA credit of up to 5.4%, reducing the effective federal FUTA rate from 6.0% to 0.6% on the first $7,000 of wages per employee.

Industries frequently benefiting from South Carolina business tax credits

Consult with a tax professional to understand what tax credits and incentives you could potentially apply to your business. 

Common payroll tax mistakes in South Carolina (and how to avoid them)

South Carolina businesses find themselves navigating a complex landscape of regulations when managing payroll. Common payroll tax mistakes can lead to severe financial repercussions, including penalties, fines, and unexpected liabilities. Understanding these pitfalls is critical for business owners. Here are some of the most frequent payroll tax mistakes made in South Carolina:

Misclassifying employees

Failing to accurately distinguish between employees and independent contractors can lead to improper tax withholding and reporting. 

Incorrect calculation of withholdings

Not properly calculating federal and state tax withholdings based on updated tax tables can result in under- or over-withholding from employee paychecks.

Neglecting local taxes

Overlooking local payroll taxes and regulations specific to certain municipalities within South Carolina can lead to compliance issues. 

Failing to update employee information

Not promptly updating employee information, such as changes in marital status or exemptions, can lead to inaccurate withholding. 

Missing deadlines

Failing to adhere to payroll tax filing deadlines can result in penalties and interest on unpaid taxes. 

Not keeping accurate records

Inadequate recordkeeping can lead to difficulties in audits and a lack of supporting documentation for tax filings. 

Inaccurate reporting of fringe benefits

Misreporting employee benefits or failing to account for taxable fringe benefits can lead to underreporting of income. 

Overlooking state-specific regulations

South Carolina has unique payroll regulations that businesses must follow. Overlooking these can result in compliance issues. 

Inadequate training for payroll staff

Insufficient training for those responsible for payroll can lead to mistakes and misunderstandings of tax obligations. 

Tip: QuickBooks Payroll can help you avoid these common mistakes by automating calculations, tracking deadlines, and keeping accurate records.

How to manage your small business payroll obligations 

Understanding the nuances of South Carolina's payroll taxes and regulations can take some time. Follow our small business tax preparation checklist and these steps to help you manage your payroll taxes.

Step 1. Partner with a tax professional

Consult a tax professional familiar with South Carolina’s payroll taxes and regulations. They can guide you through compliance requirements, local tax nuances, and potential tax benefits for your business.

Step 2. Explore payroll software

Consider using payroll software to streamline your payroll processes. Tools like QuickBooks automate tax calculations, minimize errors, and ensure compliance with South Carolina laws.

Step 3. Proactively plan for compliance

Stay informed about South Carolina’s payroll tax deadlines and updates. Payroll software combined with expert guidance can help ensure you meet state and local requirements.

Step 4. Optimize your tax strategy

Work with your tax professional to uncover deductions, credits, or other incentives that could benefit your business. Leverage software reports to better understand your payroll data and identify opportunities for savings.

Step 5. Build a financially strong foundation

By combining expert guidance with the right tools, you can efficiently manage payroll taxes and focus on growing your business in the Palmetto State.

What are the payroll taxes in South Carolina?

Payroll taxes are an essential aspect of the employment landscape in South Carolina. They impact both employers and employees. These taxes help fund various social programs and government services. Employers must navigate their own responsibilities, including unemployment insurance and local taxes. 

Calculating payroll taxes in South Carolina

Payroll tax calculations in South Carolina depend on several factors, including:

  • Employee’s wages and taxable income 
  • Employer’s UI tax rate
  • Federal and state taxes

For employees, the main payroll taxes are: 

  • State income tax (SIT)
  • Federal income tax
  • FICA (Social Security and Medicare taxes)

For employers, the main payroll taxes are:

  • Unemployment Insurance (UI)
  • Federal Unemployment Tax (FUTA)

To accurately calculate South Carolina payroll taxes, you can use the South Carolina Department of Revenue’s MyDORWAY online portal, payroll software configured with South Carolina-specific data, or consult a professional. These resources will help you calculate the specific amounts for your business and employees.

It’s essential to stay updated on the current rates and regulations, as they can change annually.

Leverage payroll software for compliance in South Carolina

Managing payroll in South Carolina requires accuracy due to complex regulations. Errors can lead to penalties and legal risks, but QuickBooks streamlines payroll management to ensure compliance. It automatically calculates, files, and pays federal and state payroll taxes—with a 100% accuracy guarantee.** You'll stay current with South Carolina tax law changes, easily generate reports for filings, and get up to $25,000 in penalty coverage if issues arise.**



Disclaimer: 

**Accuracy Guaranteed: Available with QuickBooks Online Payroll Core, Premium, and Elite. We assume responsibility for federal and state payroll filings and payments directly from your account(s) based on the data you supply. As long as the information you provide us is correct and on time, and you have sufficient funds in your account, we’ll file your tax forms and payments accurately and on time or we’ll pay the resulting payroll tax penalties. Guarantee terms and conditions are subject to change at any time without notice.

Tax penalty protection: If you receive a tax notice and send it to us within 15 days of the tax notice we will cover the payroll tax penalty, up to $25,000. Additional conditions and restrictions apply. Only QuickBooks Online Payroll Elite users are eligible to receive tax penalty protection.

This content is for information purposes only and information provided should not be considered legal, accounting or tax advice or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. cannot warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.




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