Custom Taxonomies Not Redirecting Properly

My wordpress theme called montreal(http://themeforest.net/item/montreal-interactive-creative-wordpress-theme/3957460) uses a custom post type “portfolio” and custom taxonomy “portfolio-category” and for some reason when i try to view any of the taxonomy items like

http://sickwebmedia.com/portfolio-category/web-design

for example It doesn’t redirect properly. I just get a 404 error. I’m really just trying to have each portfolio category display the query of posts that it is related to when i click the link to it. I would also like to be able to view a list of each portfolio category when I visit the url for the taxonomy (http://sickwebmedia.com/portfolio-category).

I thought that when a custom taxonomy is created, it should be working as described…but I’ve been banging my head around this for a while now and decided its time to get some help.

Below is the code for the custom post type

add_action( 'init', 'register_portfolio' );

function register_portfolio() {

    $labels = array(
        'name' => __( 'Portfolios', 'montreal' ),
        'singular_name' => __( 'Portfolio', 'montreal' ),
        'add_new' => __( 'Add New', 'montreal' ),
        'add_new_item' => __( 'Add New Portfolio', 'montreal' ),
        'edit_item' => __( 'Edit Portfolio', 'montreal' ),
        'new_item' => __( 'New Portfolio', 'montreal' ),
        'view_item' => __( 'View Portfolio', 'montreal' ),
        'search_items' => __( 'Search Portfolios', 'montreal' ),
        'not_found' => __( 'No portfolios found', 'montreal' ),
        'not_found_in_trash' => __( 'No portfolios found in Trash', 'montreal' ),
        'parent_item_colon' => __( 'Parent Portfolio:', 'montreal' ),
        'menu_name' => __( 'Portfolios', 'montreal' ),
    );

//AND HERE'S AN ARRAY OF ARGUMENTS TO DEFINE PORTFOLIOS FUNCTIONALITY
    $args = array(
        'labels' => $labels,
        'hierarchical' => false,
        'description' => __('Portfolio entries for the montreal Theme.', 'montreal'),
        'supports' => array( 'title', 'editor', 'thumbnail', 'comments', 'post-formats' ),
        'taxonomies' => array( 'portfolio-category' ),
        'public' => true,
        'show_ui' => true,
        'show_in_menu' => true,
        'menu_position' => 5,

        'show_in_nav_menus' => true,
        'publicly_queryable' => true,
        'exclude_from_search' => true,
        'has_archive' => true,
        'query_var' => true,
        'can_export' => true,
        'rewrite' => true,
        'capability_type' => 'post'
    );

    register_post_type( 'portfolio', $args );
     flush_rewrite_rules();
}'

and the custom taxonomy

'add_action('init', 'create_portfolio_taxonomies');
function create_portfolio_taxonomies(){
     register_taxonomy('portfolio-category', 'portfolio', array('hierarchial' => true, 'label' => 'Portfolio Categories', 'singular_label' => 'Portfolio Category', 'rewrite' => true));
}