What North Carolina-South Carolina Border Change Means for Taxpayers

After 20 years of negotiations, geological surveys, and research into the historical border, the governments of North Carolina and South Carolina have finally reached an agreement about where the state border lies, based on historical documentation dating as far back as 1735.

That means some taxpayers and businesses may wake up on January 1, 2017, to find themselves in a different state than where they started – without ever having moved!

It’s not that they’re changing the border, according to government representatives. They’re simply enforcing the existing border. Over many decades, the landmarks for the original boundary between the states, some of which were simply rocks and marks in trees, have disappeared or become corrupted. So, it turns out that what people thought was the state line in some counties wasn’t the actual state line.

That’s small consolation to taxpayers who now have to deal with the fallout of having their places of business and residences move to a new state.

As a result, South Carolina has issued new legislation that clarifies the tax consequences of the boundary changes between South and North Carolinas. It specifically addresses the effects on individuals and businesses whose residences and businesses will now be located in South Carolina but were previously in North Carolina.

The first step any individual or business needs to take is to determine if they are close enough to the border to be affected by the new legislation. There are some places that will clearly land in one state or the other. For residents and commercial buildings that fall on the state line, residents will get to decide which state they want to claim.

Once they have determined whether or not their state (and thus their tax liabilities and responsibilities) have changed, people and business owners should ask:

  • How does my current tax rate compare to my new state’s tax rate?
  • What are the differences in specific taxes, such as taxes on gasoline, cigarettes, food, corporate income and franchises, real property, and motor vehicles, as well as sales and use tax?
  • Are there new laws, restrictions, or regulations I need to be aware of that could impact how I run my business (such as bans on firework sales or limits on alcohol purchases)?
  • If I get to choose which state I’m in, what are the advantages of one state over the other?

If you find you or your business is impacted by the shift in the Carolina state border, reach out to a member of the Cherry Bekaert State and Local Tax (“SALT”) team for guidance on how changing states could affect you. Or, talk to a local member of the Cherry Bekaert team. They’ll be happy to answer the questions you have about your unique situation – a once-in-281-years kind of situation.