South Carolina Tax Audits: Complete 2021–2025 Guide

South Carolina tax audits increased sharply between FY 2022 and FY 2025. Total assessments more than doubled in a single year, individual income tax audits nearly tripled, and the South Carolina Department of Revenue (SCDOR) closed more audits than in FY2022–FY2024, while its backlog kept growing at the same time.

The enforcement statistics behind these trends come from a public records response obtained under the South Carolina Freedom of Information Act, covering fiscal years 2021 through 2025. The procedural details — the letters SCDOR sends, the forms involved, and the deadlines for appealing an assessment — come directly from SCDOR's own published audit and appeals guidance, not from assumptions about how the process probably works.

Taxpayers who receive a notice, business owners managing sales tax compliance, and tax professionals advising South Carolina clients all face the same two questions: what's actually happening with enforcement statewide, and what to expect if an account is selected next.

About the South Carolina Department of Revenue

SCDOR is the state agency responsible for administering South Carolina tax law, including individual income tax, sales and use tax, and corporate tax. It was reorganized under the state's 1993 restructuring legislation into the Department of Revenue and Taxation, then later officially renamed the Department of Revenue in 1997.

SCDOR regularly analyzes previously filed tax returns alongside information it receives from the IRS and other state agencies to select accounts for audit. A mismatch between your South Carolina return and your federal income tax return can trigger state-level scrutiny even if the IRS never contacts you directly.

Key Findings at a Glance

Total tax assessments in South Carolina more than doubled between FY 2022 and FY 2025, while individual income tax audits nearly tripled over the same period. Penalty abatement and Offers in Compromise, the two relief programs available to taxpayers, haven't kept pace with that growth. 

*FY2021→FY2025 comparison

Audit activity and assessments are climbing quickly, while the two relief programs available to taxpayers — penalty abatement and Offers in Compromise — aren't keeping pace.

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Total Assessments: $915 Million in Additional Tax

Over four fiscal years, SCDOR assessed $914,972,096 in additional tax across every audit category combined. That total isn't evenly distributed — one year accounts for nearly half of it.

Year-by-Year Breakdown

FY 2025 exceeds the combined assessments of FY 2023 and FY 2024 ($343.4 million). The spike correlates with a sharp rise in individual income tax audits and desk audit assessment amounts, though SCDOR's records didn't include a narrative explanation. SCDOR was contacted for comment on July 2, 2026, and this guide will be updated if a response is received.

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South Carolina Tax Audits: Who's Being Targeted

SCDOR conducts more than 25 distinct types of audits. South Carolina regularly audits businesses and individuals alike, but Sales & Use Tax and Individual Income Tax together account for nearly three-quarters of all audits initiated.

Top Audit Types by Volume

The ranking below reflects four-year totals rather than any single year, which smooths out year-to-year swings and shows where SCDOR's audit resources are structurally concentrated. Sales & Use Tax and Individual Income Tax alone account for nearly three-quarters of every audit initiated across the full period. 

Total audits grew from 1,924 in FY 2022 to 2,790 in FY 2025 — a 45% increase driven almost entirely by individual income tax, not the higher-volume sales tax category.

The Growing Audit Backlog

By FY 2025, 268 more audits were opened than closed — a widening gap that can mean longer waits between an audit's start and its resolution, with interest continuing to accrue in the meantime.

The SCDOR Audit Process: Field Audits vs. Desk Audits

SCDOR conducts two structurally different types of audit, and knowing which one applies changes what to expect and how quickly to act. The distinction affects how much documentation you need to gather, whether you'll meet with an auditor in person, and how long the overall process is likely to take.

Step 1: Initial Contact Letter

Every field audit begins the same way: SCDOR sends an audit appointment letter that starts the process and identifies the auditor assigned to the account. This letter includes a list of the specific documentation the auditor is requesting, giving the taxpayer advance notice of what to gather before any meeting takes place, rather than being asked for records on the spot.

Taxpayers typically submit that documentation electronically before the initial meeting, using SCDOR's secure file-sharing tools rather than mailing paper records. This is also the right stage to submit a completed power of attorney form if a CPA, enrolled agent, or tax lawyer will be handling the audit, along with a statute of limitations waiver if SCDOR has requested one to extend the assessment window beyond the standard period.

Step 2: Field Visit, Office Visit, or Electronic Audit

Once the initial documentation is in hand, SCDOR and the taxpayer schedule the actual audit meeting, which can take the form of a field visit at the business's own location, a visit to an SCDOR office, or a fully electronic audit conducted remotely. A field visit is typically held at the taxpayer's corporate headquarters or primary place of business, particularly for larger accounts with more complex records to review.

During this stage, the auditor interviews the taxpayer to clarify specific line items or business processes, and may request additional documentation beyond what was originally submitted if new questions come up during the review. This is often the longest phase of a field audit, since the timeline depends on how quickly outstanding questions can be resolved and how complex the underlying records turn out to be.

Step 3: Final Audit Packet and the SC-870

At the conclusion of the audit, SCDOR issues a final packet of information summarizing the results. Depending on the outcome, this packet may include a Proposed Notice of Assessment, a Proposed Refund, a "Return(s) Accepted as Filed" notice indicating no change, and a Waiver of Restrictions form known as the SC-870, along with a copy of the Taxpayer Bill of Rights.

If the taxpayer agrees with the results and can pay in full, that resolves the matter directly. If the taxpayer agrees but can't pay the full balance immediately, signing the SC-870 allows a path forward — but it also means agreeing to the tax, interest, and penalties as assessed and waiving the right to appeal the matter any further, so it's worth fully understanding the assessment before signing. Taxpayers who disagree with the results instead have 90 days to file a written protest under SCDOR's separate appeals process, covered later in this guide.

Desk Audits (Examinations)

A desk audit, which SCDOR notices sometimes call an examination, is narrower in scope and conducted entirely by mail, typically beginning with an audit request letter asking for verification of specific return items. Because desk audits are narrower, most are resolved within 60 days; if SCDOR can't get the requested information in that window, it issues an assessment based on what's already available.

Power of Attorney and Representation

If a CPA, enrolled agent, or tax lawyer will represent you, SCDOR requires a power of attorney form — the state-specific SC2848, or a Federal Form 2848 completed to account for form differences — on file before it will communicate with that representative. Without one, SCDOR sends all notices directly to the taxpayer, even if a representative is actively working the case.

Individual Income Tax Audits: The 190% Surge

Individual income tax audits are the fastest-growing enforcement category by a wide margin. SCDOR initiated 410 in FY 2022, climbing to 1,190 by FY 2025 — a 190% increase.

Year-by-Year Growth

Growth was modest through FY 2023, then jumped 72.8% and 47.5% in the two years after — an acceleration pattern that typically points to a specific operational change, such as new staffing or a new data-matching system, rather than organic growth.

Who Is Most at Risk?

SCDOR's records don't break individual income tax audits down by income level, filing status, or the specific trigger that led to each one, so any explanation has to be inferred rather than stated directly from the data. The strongest available clue is timing: desk audits, which are correspondence-based and commonly triggered by automated matching against W-2 and 1099 data, grew in the same window as the individual audit surge, at nearly the same pace.

Based on that pattern, a few taxpayer profiles appear more exposed than others:

• Income that doesn't match third-party forms: A return reporting less income than the W-2s or 1099s SCDOR has on file is one of the easiest discrepancies for an automated system to flag, since it requires no manual review to catch.
• Multiple income sources in a single year: Taxpayers who changed jobs, freelanced alongside W-2 work, or received income from several payers face more reporting forms overall, which raises the odds that at least one won't reconcile cleanly against the return filed.
• Deductions that stand out relative to reported income: A return claiming deductions that are unusually large relative to income reported elsewhere on the same return can trigger review even without any third-party mismatch involved.

None of this is confirmed by SCDOR directly — the department's response didn't identify specific audit triggers — so these are reasonable inferences from the data's timing and structure rather than an official list of audit criteria.

South Carolina Sales Tax Audits and Nexus Rules

Sales & use tax audits remain the highest-volume category, and understanding nexus and documentation rules explains what a sales tax auditor is actually looking for.

Sales & Use Tax: The Volume Leader

Across four years, SCDOR initiated 3,716 sales & use tax audits—a growth of just 6.9%, a mature, steady-state compliance program compared to the individual income tax surge.

Nexus: What Creates a Sales Tax Obligation

Before a sales and use tax audit can happen, a business needs "nexus" with South Carolina — a connection to the state significant enough to require registering, collecting, and remitting sales tax in the first place. Physical presence creates a nexus immediately and with no minimum sales threshold: maintaining an office, warehouse, or even a single employee within South Carolina is enough to trigger the obligation from day one.

Following the 2018 South Dakota v. Wayfair Supreme Court decision, South Carolina also adopted economic nexus, extending that same obligation to businesses with no physical footprint in the state at all. A remote seller whose gross revenue from South Carolina sales exceeds $100,000 in the current or prior calendar year must register for a retail license and begin collecting and remitting sales tax, even without a single employee or piece of inventory located in South Carolina.

Documentation That Matters in a Sales & Use Tax Audit

South Carolina law presumes that all gross proceeds from a sale are taxable until the seller proves otherwise, which means the burden of proof in a sales tax dispute sits with the seller, not with SCDOR. That default assumption makes documentation the central issue in most sales & use tax audits, since a seller who can't produce the right paperwork for a claimed exemption will generally lose that argument by default. A signed resale certificate is the most common way liability shifts from seller to purchaser for a given type of transaction, and proper documentation covering the use of tangible personal property purchased for resale is one of the most frequently reviewed items during an audit.

Separately, sellers remain liable for sales tax even if they fail to collect it from the purchaser at the time of sale — the underlying obligation doesn't disappear just because it wasn't passed on to the customer. Some South Carolina counties also layer a local transportation tax on top of the state sales tax rate to fund road and infrastructure projects, and auditors routinely verify that the correct combined rate was applied at the point of sale.

Business Entity Audit Trends

Beyond sales & use tax, audit activity across other business entity categories moved in noticeably different directions depending on the type of business involved. C-Corporation audits held relatively stable across the four-year period, growing modestly from 181 to 231 initiated per year, while S-Corporation audits declined slightly, from 49 to 41 per year.

Partnership audits saw the sharpest change of any business category, falling from 25 to just 5 initiated per year — an 80% decline. Motor fuel audits moved in the opposite direction entirely, surging 140% from 47 to 113 per year. The decline in partnership audits in particular may reflect a deliberate reallocation of audit staff toward individual income tax cases, though SCDOR's response didn't confirm that interpretation directly.

Desk Audits: The Silent Assessment Machine

South Carolina's individual income tax desk audit program has quietly become one of the state's largest sources of assessment revenue.

Volume leveled off around 48,000 in the most recent two years, but the dollar amount kept climbing to $100.6 million — the average assessment per desk audit rose 32.6%, meaning SCDOR is extracting more revenue from a similar caseload. At that scale, desk audits now rival the total assessments generated by several field-audit categories combined.

Statute of Limitations: How Long Can SCDOR Audit You?

Under South Carolina Code Section 12-54-85, the general rule partly mirrors federal law: SCDOR generally has three years from the date a return was filed to assess tax. If a taxpayer understates their tax liability by 20% or more, that window extends to six years — but the IRS uses a different omitted-income standard federally. If no return was ever filed, there's effectively no time limit at all.

A taxpayer who assumes they're automatically "in the clear" after three years may not be, particularly if a later IRS adjustment to their federal income tax return prompts a corresponding South Carolina assessment — SCDOR routinely receives adjustment data from the IRS and can act on it outside the normal window.

South Carolina State Tax Collections & Enforcement

Resolution program and collection activity rose 34% from FY 2021 to FY 2025.

SCDOR reported $96,157,503 in total collections revenue, distinct from the $915 million in assessments, since assessments are what's owed, and collections are what's actually recovered once a balance becomes due and payable. Wage garnishment counts, tax lien filing counts, and payment plan data were all marked "information not accessible" in the records response.

Appeals: Protests, Department Determinations, and the Administrative Law Court

If you disagree with a proposed assessment following a South Carolina tax audit, SCDOR's appeals process follows a defined, multi-step sequence, and missing a deadline at any point can forfeit your right to challenge the assessment further. Unlike the audit process itself, which can vary in length, the appeals process runs on fixed statutory deadlines that don't bend for individual circumstances.

Step 1: File a Written Protest

If you disagree with SCDOR's findings on a proposed assessment, you have 90 days from the date of the notice to file a written protest. If that 90th day falls on a weekend or state holiday, the deadline extends automatically to the next business day, but there's no other flexibility built into this window.

A protest can be filed using SCDOR's C-245 form or as a standalone written statement, as long as it includes the taxpayer's identification number, the tax period covered by the Proposed Assessment, and a clear statement of the reasons for disagreement, including any law or authority the protest relies on. If SCDOR receives a timely written protest, it will not attempt to collect the disputed tax or take other collection action until the protest is resolved. If the 90-day deadline passes without a protest being filed, SCDOR issues a final assessment and begins collection activity immediately.

Step 2: Department Review

Once a protest is filed, it is first reviewed by the issuing division and Appeals Section; unresolved matters then move to SCDOR's Litigation Section, which may include an informal conference before a final decision is made. This review stage is where many disputes are actually resolved without ever reaching a formal hearing, since the Litigation Section has some authority to settle cases based on the specific facts presented.

SCDOR is required by law to issue a department determination within one year of the taxpayer's initial protest. That determination becomes the department's formal position on the dispute, and if the taxpayer still disagrees with it, that's what triggers the next and final step in the process. Any tax assessed by the department determination becomes due within 30 days unless the taxpayer moves to the next step.

Step 3: Request a Contested Case Hearing

If the taxpayer still disagrees with the findings in the department determination, they have 30 days from the date it's issued to request a contested case hearing before the South Carolina Administrative Law Court. This step functions as the closest thing South Carolina has to a dedicated tax court, since the state doesn't operate a separate judicial body exclusively for tax disputes the way the federal government does with the U.S. Tax Court.

At this hearing, an administrative law judge reviews the case independently of SCDOR and issues a final determination that either upholds, modifies, or overturns the department's original position. Because this is a genuine judicial proceeding governed by its own procedural rules, taxpayers reaching this stage — particularly for larger or more complex assessments — commonly bring in a tax lawyer or enrolled agent with experience before the Administrative Law Court rather than proceeding without representation.

Appeals Data From the Records Response

South Carolina's appeals and litigation figures were disclosed only as a single multi-year total rather than broken out by fiscal year. The table below reflects everything SCDOR provided on this topic. 

Of 138 appeals, 64 (about 46%) were resolved administratively without reaching the Administrative Law Court. Because SCDOR provided this data only as a multi-year aggregate, year-by-year appeal trends aren't available.

Offers in Compromise: A Program Few Use

South Carolina's Offer in Compromise program allows qualifying taxpayers to settle a tax debt for less than the full amount owed, similar to the IRS's own program federally.

For a state of 5.6 million residents, that's roughly one submission per 192,000 residents annually. SCDOR disclosed only submission counts, not acceptance rates — the single largest information gap in this dataset.

Penalty Abatement: Relief in Decline

Penalty abatement — waiving penalties when a taxpayer shows reasonable cause for filing or paying late — moved in the opposite direction from assessments.

From FY 2021 to FY 2025, penalty abatement declined 13.2% even as assessments more than doubled. SCDOR didn't disclose request counts, so an approval rate can't be calculated from this data alone.

What the Data Does Not Show

Several categories of information that would normally accompany a tax enforcement dataset were either withheld, marked as inaccessible, or never generated in a form SCDOR could provide. Each gap limits the public's ability to fully evaluate how the department enforces South Carolina tax law. 

These gaps have been documented in a follow-up records request, and this guide will be updated if SCDOR provides additional data.

Taxpayer Implications

The trends and procedures covered in this guide carry different practical implications depending on where a reader sits — whether they've just received an audit notice, currently owe SCDOR money, or advise clients on South Carolina tax matters professionally. The three sections below address each of those situations in turn.

If You're Selected for an Audit

Respond to the initial contact letter promptly and provide the requested documentation before any scheduled meeting, since SCDOR's own process depends on having that information in hand before the audit can move forward efficiently. If a desk audit letter arrives by mail, it's worth treating just as seriously as a field audit appointment letter, even though the process feels less formal — ignoring it typically results in a default assessment based entirely on SCDOR's own figures.

It also helps to know your rights and deadlines before the audit concludes. You have 90 days to file a written protest if you disagree with a proposed assessment, and that clock starts the moment the notice is dated, not when you get around to reading it. Given record audit volumes and a widening backlog, taxpayers facing a field audit in particular should give real consideration to bringing in a tax lawyer or enrolled agent once the interview stage is reached, rather than navigating it alone.

If You Owe South Carolina Taxes

Penalty abatement remains available to taxpayers who can document reasonable cause for having filed or paid late, even though the total dollar value of abatement granted statewide has trended downward over the period covered here. A well-documented reasonable-cause statement is still the standard path to pursuing that relief, and it's worth pursuing even in a climate where overall abatement dollars are declining.

The Offer in Compromise program exists for taxpayers who cannot pay their balance in full, though its low usage and the missing acceptance-rate data mean it's worth approaching with realistic expectations and, ideally, professional guidance rather than assuming it's a quick or easy path. Because SCDOR's collection tools intensify once a debt goes unaddressed, engaging with the department proactively—through a payment plan, an abatement request, or an OIC — is almost always preferable to waiting until collection action has already begun.

For Tax Professionals

Practitioners serving South Carolina clients should expect the individual income tax audit trend to continue shaping their caseloads, since that category was the fastest-growing by a wide margin over the four years covered in this guide. Desk audit per-case dollar amounts are also rising, which makes early, well-documented responses at that stage increasingly valuable rather than something to treat as routine correspondence.

Make sure a valid power of attorney form is on file before representing any client in an audit, since SCDOR will not communicate with a representative who isn't properly authorized on record, regardless of how far along the case already is. Practitioners should also build nexus review into their standard client intake process for any business with multistate sales activity, since South Carolina's $100,000 economic nexus threshold catches many out-of-state sellers by surprise, often well after the obligation to collect and remit tax has already begun accruing.

Historical Context & Comparisons

South Carolina's audit trends look different depending on what they're measured against. Federal IRS patterns and a state-to-state comparison with New Jersey's own public records data both help put the numbers into perspective. 

South Carolina vs. Federal (IRS) Trends

The IRS has intensified compliance efforts targeting higher-income taxpayers, but current IRS materials do not clearly support rising overall audit activity, and South Carolina's 190% increase exceeds recent reported federal audit trends. Both systems generally apply a three-year statute of limitations extending to six years for a substantial understatement. 

The systems diverge once a case turns criminal: the federal government refers its most serious cases to the U.S. Department of Justice Tax Division, while South Carolina handles criminal tax referrals through its own state channels. If you're ever audited by the IRS and your federal taxable income changes, SCDOR generally expects a corresponding South Carolina amendment — and often gets the adjustment data directly from the IRS either way.

South Carolina vs. New Jersey

New Jersey is collecting more while auditing less; South Carolina is auditing more while growing collections at a comparatively modest pace. Both states show limited transparency around taxpayer relief programs.

Frequently asked questions

How much did South Carolina assess in additional taxes over the past four fiscal years?

SCDOR assessed $914,972,096 in additional tax across all audit types from FY 2022 through FY 2025. Of that total, $371.7 million — about 40.6% — was assessed in FY 2025 alone, making it the clear outlier year in the four-year dataset. The remaining three fiscal years combined accounted for the other 59.4%, according to SCDOR's public records response covering this period.

What's the difference between a field audit and a desk audit in South Carolina?

A field audit is a thorough examination of a taxpayer's returns and records, conducted electronically, at an SCDOR office, or at the taxpayer's place of business, with no fixed timeline for completion. A desk audit, sometimes called an examination, is narrower in scope, conducted entirely through the mail, and usually resolved within 60 days. Both types can result in a proposed assessment if SCDOR finds discrepancies.

How far back can SCDOR audit my tax return?

Generally, SCDOR has three years from the date a return was filed to assess additional tax, under South Carolina Code Section 12-54-85. That window extends to six years if you understated your tax liability by 20% or more, matching the substantial-omission standard the IRS applies at the federal level. If a return was never filed at all, there is effectively no time limit on assessment.

Do I need to collect South Carolina sales tax if I don't have a store there?

Possibly. South Carolina requires remote sellers to register, collect, and remit sales tax once their gross revenue from South Carolina sales exceeds $100,000 in the current or prior calendar year, even without any physical presence such as an office, warehouse, or employee in the state. This economic nexus standard took effect following the 2018 South Dakota v. Wayfair Supreme Court decision.

What happens if I disagree with a South Carolina tax audit's proposed assessment?

You have 90 days from the notice date to file a written protest with SCDOR, and the department must issue a department determination within one year of that protest. If you still disagree with the findings, you have 30 days to request a contested case hearing before the South Carolina Administrative Law Court, which functions as the state's closest equivalent to a dedicated tax court.

What is South Carolina's Offer in Compromise acceptance rate?

SCDOR did not disclose an Offer in Compromise acceptance rate in its public records response — it provided only submission counts, which averaged 29 per year across four fiscal years for a state of more than 5.3 million residents. Without acceptance-rate data, taxpayers currently have no reliable way to gauge their realistic odds of success before applying for this program.

Where did the data in this guide come from?

The audit and enforcement statistics in this guide were obtained through a public records request filed with the South Carolina Department of Revenue under the South Carolina Freedom of Information Act, covering fiscal years 2021 through 2025. The audit process, appeals steps, and nexus details come directly from SCDOR's own published procedures and the South Carolina Code of Laws, not from third-party estimates.

Methodology

The enforcement statistics in this guide come from a public records response provided by SCDOR, received in June 2026, under the South Carolina Freedom of Information Act, covering fiscal years 2021 through 2025. The audit process, appeals steps, and nexus details come from SCDOR's published guidance and the South Carolina Code of Laws as enacted by the South Carolina General Assembly, with full citations listed in the External Sources section below. As Burr & Forman's Tax Law Insights blog has separately noted, South Carolina's extended six-year statute of limitations is a detail many taxpayers overlook.

All factual claims in this guide are supported exclusively by government and official sources; no private or competitor data was used. SCDOR was contacted for comment on July 2, 2026, and this guide will be updated if a response is received. This guide is informational and does not constitute legal or tax advice.

External Sources

• South Carolina Department of Revenue — public records response received via a Freedom of Information Act request, June 2026; copy on file with the author
• South Carolina Department of Revenue, Audit Process
• South Carolina Department of Revenue, Appeals Process
• South Carolina Department of Revenue, Remote Sellers Guidance
• South Carolina Code of Laws, Title 12, Chapter 54, Section 12-54-85
• South Carolina Freedom of Information Act, S.C. Code Ann. § 30-4-10 et seq.