State Business Taxes

Want to see how business taxes in your state compares with another state? Read on to learn which state is the most tax-friendly and to know what, when, and where to pay your business taxes.

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The main types of state and local business taxes are income taxes and employment taxes. In some states, you’ll also have sales taxes and real estate taxes. You may also have to pay workers compensation insurance, unemployment insurance taxes, and short-term disability insurance. Companies are typically required to withhold employee income taxes, social security taxes, and FICA taxes.

The type and amount of state income taxes your business pays depends on your business structure. For example, sole proprietors, LLC owners, and S-Corp owners report business profits on their personal income taxes. C-corporations are taxed separately from the owners and tax rates vary, with some states opting to forego corporate taxes in favor of franchise or margin taxes. Certain types of entities may be exempt from state income taxes, including non-profit companies and certain industries.

Typically, state employment taxes include workers’ compensation insurance, unemployment insurance taxes, and temporary disability insurance. These taxes vary by state.

Each state has a different approaches to business property taxes. Typically, a business’s property is taxed according to the market value of things like real estate, vehicles, business inventory, and more. Property taxes are the primary funding source for local governments, including cities, counties, and school districts.

Some states have programs and policies in place that support renewable energy and energy efficiency. For example, in Massachusetts, qualifying small businesses could be exempt from paying energy taxes. There may also be tax credits for buying energy-efficient appliances or making energy-saving improvements to your business. Some localities also offer grants, tax credits, and tax exemptions for making energy-efficiency updates to the way you do business.