In a significant ruling, the South Carolina Court of Appeals has upheld an assessment of corporate income taxes against Mastercard International Inc. The court's decision, filed on October 21, 2026, affects the financial giant's operations in South Carolina, where it is now required to pay taxes for income-producing activities conducted within the state from 2007 to 2016.

The case, titled Mastercard International Inc. v. South Carolina Department of Revenue (Docket No. 2024-001252), centers on whether Mastercard has income-producing activities in South Carolina that warrant taxation. The court ruled that Mastercard's operations do indeed generate taxable income in the state.

This ruling is significant as it clarifies the tax obligations for multi-state corporations like Mastercard, particularly regarding how they attribute income to different states based on their business activities. The implications of this case may influence how other corporations assess their tax liabilities in South Carolina and beyond.

Background

Mastercard International Inc., a global payments and technology company, provides a network that facilitates electronic transactions. The company is incorporated in Delaware and has its headquarters in Purchase, New York. The South Carolina Department of Revenue (SCDOR) assessed Mastercard for corporate income taxes, license fees, penalties, and interest for the tax years 2007 through 2016, totaling over $6 million.

The dispute arose when the SCDOR determined that Mastercard's income-producing activity occurs in South Carolina through its payment network, which allows cardholders to make purchases at local merchants. Mastercard contested this assessment, arguing that its income-generating activities were conducted outside of South Carolina and that its customers were primarily the financial institutions that issued cards, not the cardholders or merchants themselves.

The case was initially heard by the Administrative Law Court (ALC), where Administrative Law Judge Milton G. Kimpson ruled in favor of the SCDOR. After Judge Kimpson was elected to the circuit court, the case was reassigned to Judge Deborah Brooks Durden, who also upheld the ALC's findings.

The Ruling

The South Carolina Court of Appeals affirmed the ALC's decision, agreeing that Mastercard has income-producing activities in South Carolina. The court stated, "Mastercard generates revenue by charging fees based upon both the number and dollar amount of credit and debit transactions that use Mastercard-branded cards." This means that every time a cardholder uses a Mastercard to make a purchase, it generates income for the company, which is taxable in South Carolina.

The court also noted that the ALC had correctly determined that Mastercard's income-producing activity consists of providing network access to cardholders, merchants, and banks, and that this activity occurs, in part, in South Carolina. The judges emphasized that the income is produced when cardholders use their cards at local merchants, thus establishing a direct link between Mastercard's operations and its tax obligations in the state.

Impact

The ruling has significant implications for Mastercard and potentially other multi-state corporations operating in South Carolina. By affirming that income-producing activities can be attributed to the state where transactions occur, the court sets a precedent for how corporate income tax is assessed in similar cases. This decision may lead other companies to reevaluate their tax strategies and compliance efforts in South Carolina, potentially increasing tax revenue for the state.

Additionally, the ruling reinforces the idea that even if a corporation's physical operations are based outside of a state, it can still be liable for taxes if its services generate income within that state. This could affect how businesses approach their operations and revenue generation strategies in the future.

What's Next

While Mastercard has the option to appeal the ruling, the court's decision stands as a significant legal precedent regarding corporate income tax assessments in South Carolina. Details regarding any potential appeal or related cases were not available in the court filing.