As a business owner, there are a few things you should know about state taxes. There are different kinds of state taxes that you may need to pay, and you could be responsible for several depending on the services your business provides.
The six main kinds of state taxes include:
- Corporate income tax
- State sales tax
- Gross receipts tax
- State income tax
- State unemployment insurance tax
- Excise tax
Of course, your business may not need to pay all of these taxes. The kind of business entity your business is structured as, as well as other factors, will determine what you pay.
Sole proprietors: Tax Facts
For sole proprietors, there is no corporate income tax. There may be no gross receipts tax for you in New Jersey, either, since those are usually only levied in Ohio, South Dakota, Wyoming, Oregon, Delaware, Tennessee, Texas, Nevada and Washington. You should check with a tax professional, though, since franchises or other kinds of companies could be treated differently.
Sole proprietors may also not have to pay excise or unemployment taxes. Some pay the most basic taxes, like state income tax and sales tax.
More than a sole proprietor? You could pay more
If your business is an LLC or corporation, as an example, then you could end up paying a greater portion of taxes. It’s more likely that you’ll need to pay corporate taxes to the state and that this will be levied on top of corporate taxes to the federal government.
You may also have to pay sales tax, unemployment insurance taxes and other taxes to cover employees or other special circumstances.
Getting your taxes right helps protect your business
It’s necessary to realize that you have to get your taxes right to protect yourself and your business. If you pay too little, you could end up owing the state more. If you pay too much, you’re essentially loaning the government your money (and may not realize you deserve a refund). Working with a business tax professional, and even your attorney, can help you understand your situation and avoid making mistakes that hurt your business.