When you're running your own business, tax obligations are often on your mind. If you are not yet a business
Common State Taxes
Each state has different taxes imposed on businesses and different ways of calculating the tax due. Common state-level taxes include:
- Income tax. Income tax can be classified as either corporate income tax or individual income tax. For those business types that pass-through business income to the individual owners, individual income tax is paid.
- Franchise tax. This is a tax imposed on corporations, limited liability companies (LLCs) and other business types formed by a state-filing for the mere privilege of being incorporated in that state. (Franchise taxes also apply to companies that are registered to transact business, also called foreign qualified, in other states.)
- Sales tax. There are different types of sales taxes and some are paid by the seller while others are paid by the buyer.
- Use tax. While sales tax applies to retail sales that happen within that state, the use tax applies to storage or other use of tangible personal property or taxable services in a state.
- Property tax. Most property taxes
isused to fund local governments versus state government, but should also be considered as a tax obligation your business will incur. Owning real estate is not a pre-requisite for property tax. Many state and local governments charge personal property tax on furniture, equipment andleasehold improvements.
What you can do
Retaining a good accountant or other tax professional can prove invaluable in sorting out your tax matters. Speaking to an accountant before you incorporate your business can help you select the right business type for you,
Our recommended resource, Business Owner’s Toolkit®, includes detailed information on your state tax requirements as well as tips on saving money and avoiding problems. Additionally, we provide details on