Taxes on Business Income in New Hampshire

Filed under State Taxes. Fact checked on February 13, 2013.

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The Business Enterprise Tax and the Business Profits Tax are imposed on all business entities in New Hampshire, including sole proprietorships and pass-through entities as well. Personal income tax is imposed solely on gross interest and dividends in New Hampshire.

In New Hampshire, you're generally free to choose to operate your business as a C corporation, S corporation, partnership, limited liability company (LLC), or sole proprietorship. The state of New Hampshire does not recognize an S corporation business form. Therefore, if you are an S corporation you will be treated as a regular corporation for New Hampshire purposes. However, the entity type you select for your business may, in some cases, decide whether you or your business pays federal income taxes on the business income.

The state of New Hampshire has a Business Enterprise Tax and a Business Profits Tax. All businesses--whether corporations, partnerships, LLCs or sole proprietorships--are subject to these taxes.

Business Enterprise Tax Applies to All Businesses

This tax is computed at 0.75 percent of the taxable enterprise value tax base (total compensation, interest and dividends) of your business enterprise. Basically, you are a business enterprise if your organization is engaged in or carrying on any business activity within the state. If your business enterprise has gross business receipts in excess of $150,000 during the taxable period or has an enterprise value tax base greater than $75,000 you must file an annual report and pay the tax. The 0.75 percent enterprise value tax base is based on the total of all compensation paid or accrued, interest paid or accrued, and dividends paid by your qualified business. A business enterprise with gross receipts of $150,000 or less during the tax period or with an enterprise value tax base of $75,000 or less is not subject to the payment of this tax and needn't file the return.

Business Profits Tax Applies to All Businesses

In New Hampshire, a tax is imposed on profits of business organizations deriving economic benefit from carrying on any business activity in New Hampshire. Business organizations include corporations, partnerships, limited liability companies, proprietorships, associations, business trusts, real estate trusts, grantor trusts, etc. The Business Profits Tax is imposed at the rate of 8.5 percent on income from conducting business activity within the state. However, organizations with $50,000 or less of gross business income from all their activities are not subject to the payment of any tax or the filing of the return.

New Hampshire Does Not Recognize S Corporation Status

If you meet the federal tax law requirements to operate as an S corporation, the IRS allows your business to "pass through" its income to the shareholders. This means that your business will not pay any IRS corporate level income tax. However, you'll have to claim your entire share of the business income on your personal federal income tax return even if you did not take any money out of the business.

New Hampshire does not recognize the S Corporation and you will be treated as a regular corporation.

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