Business Taxes
Businesses may be subject to a number of different taxes by local, state, and the federal governments. Virtually every state, and some municipalities, impose a sales and use tax. Each taxing authority has its own rules regarding the property and services subject to tax, the tax rate, and the method of collection.
Businesses that own real estate are required to pay local real estate taxes. If they lease their space, they may also be obligated to pay a tax on their leasehold interest. Businesses may also be required to pay a tax to a city or state based upon the amount of their payroll.
The federal government and the states also impose separate taxes on certain so-called "luxury" items. These excise taxes are imposed on the sale of:
- gasoline and related products
- cigarettes and other tobacco products
- alcoholic beverages
- firearms
- heavy trucks and trailers
- telecommunication charges
- transportation by air and water
- luxury and gas-guzzling automobiles
- and other items
The most pervasive type of business tax is the tax imposed upon the net income of a business. The federal government and most states impose an income or franchise tax. Because the federal rate is much higher than the rate charged by the states, it is of primary importance in deciding how a business is formed and operated.
Business Taxes
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