Every state has a revenue department with myriad areas in which it collects a portion of your business' money. The corporate income tax is just the beginning. There are sales taxes, franchise taxes, property taxes and then a variety that could affect you depending upon your particular business (amusement taxes, fuel taxes, tobacco taxes, lodging taxes, food taxes).
Then there is the growing number of special taxing districts to fund such programs as public transportation, convention facilities, even sports arenas. Once you set up your business in a particular jurisdiction, you can be sure the various state and local tax officials will be in touch. But you still need to stay on top of your area's tax laws to ensure that you meet your responsibilities without committing costly tax errors.
To ensure that your company doesn't run afoul of your state and local tax obligations:
- Stay up-to-date on the latest state and local tax news.
- Know your corporate income tax responsibilities.
- Learn the sales tax requirements for your state.
- Understand the property tax system for your state.
Action Steps
The best contacts and resources to help you get it done
Get the latest tax compliance information online
The Internet has revolutionized the way state and local tax departments conduct business. Notices and guides are regularly published online by all 50 states.I recommend: The IRS has ramped up its collaboration with state tax departments and offers the following links to state government Web sites with useful information for businesses. Find your state.
You also can find your state's revenue department at the Federation of Tax Administrators clickable map and Tax and Accounting Sites Directory. At CCH's Business Owner's Toolkit, along with the state tax department links, you'll get some basic information about the various taxes levied by most states. The U.S. Census Bureau also offers you a way to look at the types of taxes your state levies. And Vertex's Tax Cybrary will send you upon your request free e-mail newsletters updating state tax law changes.
Sales taxes
Sales taxes are imposed by most states on retail sales of tangible items, and in some cases on certain services. In addition, additional local city and/or county sales taxes are added on to the state amount. Even in those few states with no statewide sales tax, some cities and counties go ahead and collect their own local sales taxes.I recommend: You can check your state's sales tax rate in this Federation of Tax Administrators' table. FTA also has an interactive search engine where you can find which services are taxable in your state. To learn whether you also must collect local sales taxes, contact your city and county officials by using the interactive search tool at State and Local Government on the Net.
Property taxes
Businesses, like their private citizen counterparts, must pay property taxes. This tax, however, is not levied at the state level. Rather, property tax administration is the responsibility of local government entities (e.g., county or school district), which determine tax rates and collect the money. Any disputes over the assessed value property also are under the purview of the local governments.I recommend: Contact your local tax appraiser, which you can find with the search option at State and Local Government on the Net, to find specifics on your locality's property tax system.
Corporate income taxes
Most states collect corporate income and/or franchise taxes.I recommend: You can check your state's business tax requirements at this Federation of Tax Administrators' table. To obtain forms to file your business returns, check your state revenue online office by clicking this FTA map.
Tips & Tactics
Helpful advice for making the most of this Guide
- Sign up for your state's tax department e-mail newsletter. If you're worried about it clogging your regular electronic correspondence, simply create a special e-mail folder and set up a rule that will direct the messages there automatically so you can look at them when you're ready.
- If you file some of the forms yourself, know the due dates and obtain the filing material well in advance so you have time to familiarize yourself. Filings done in a frantic last-minute rush could result in costly tax errors.
- Don't be shy about seeking help. Use either a software program or, if you don't want to hassle with your corporate taxes at all, hire a tax professional. It'll be money well spent and you can write off the fee.
- Take the time find out what taxes are required of your business. More than a little knowledge in this case is a very good thing, since no tax agency -- federal, state or local -- ever accepts ignorance of the law as a reason for noncompliance.
the State and Local Tax Information Resources page at Business.com
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Tax Resources
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Tax Advice Resources
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