State Taxes

States and local municipalities levy various taxes on businesses under their jurisdiction. let’s get familiar with the most common ones:

State Income Tax

This is by far the biggest tax burden imposed on businesses on a state level. it is a fraction of company's net income, i.e income after all tax-deductible expenses. It's levied by the department of the revenue.

Revenue or Gross Receipts Tax

This tax is levied based on the gross profit of the company before any expenses. While significantly lower than income tax, it aims to assure companies don't manipulate business deductions and pay a minimum amount of tax. It is levied by DOR. Typically, states that have an income tax don’t have a revenue tax and vice-versa. Some states offer a business to choose which one they would like to pay.

Franchise Tax

This tax is imposed by some states for the privilege of doing business. The word franchise does not refer to the business being a franchise of another corporation but rather refers to being a franchisee of the state itself, such as "a California corporation". Failure to pay franchise tax will result in dissolution of the business. Most states charge franchise tax based on the assets or revenue in the given state but some jurisdictions such as California, have a flat fee. Depending on the state it may either be levied by SOS or DOR.

Sales Tax

Sales tax is collected by DOR as well as counties and municipalities as a percentage of the sales price. It is collected by the seller from the buyer and remitted to the tax agencies such as the department of the revenue. In our sales tax section, we’ll go over sales tax more in detail.

Annual Report Fee

Most secretary of the state’s offices require annual or biennial company reports along with a fee to keep entity’s information up to date.

Filing Fee

This is a one-time fee to file an entity with the secretary of the state.

Click on each state below to learn more about specific taxes and fees there.