One of the best ways to ensure the long-term success of your Wisconsin business is understanding the costs of operation. And though it might not be the first thing that springs to mind, paying your business’s taxes is central to the cost of doing business and staying legally compliant.
If you’re looking for more complete compliance help, our Worry-Free Compliance Service can organize all your business’s legal and financial documents in one place and keep track of state-required filing deadlines such as annual reports.
If you don’t properly file and pay your taxes, the state can levy financial and legal penalties which could ultimately jeopardize your business’s survival. In this guide, we’ll go through the types of state taxes that Wisconsin small businesses might face, how and when to pay them, and which of our products and services can make your life easier when tax time rolls around.
If you’re looking for information about federal taxes, head over to our page on federal taxes for small businesses to learn more.
Step 1: Establish your Wisconsin business’s corporate income tax
Wisconsin, like the vast majority of states, has a standard corporate income tax. The tax is called the corporation franchise tax and is payable by all Wisconsin businesses. It’s assessed against a business’s net income at a Wisconsin business tax rate of 7.9% and is due on the 15th day of the fourth month after the close of a business’s fiscal year. For calendar year businesses that means the tax is due on or before April 15. If your business operates on a non-calendar fiscal year (i.e., the business’s fiscal year starts in a month other than January), the due date is the 15th day of the fourth month after the close of the fiscal year.
Naturally, you may be thinking that your personal state income tax rate is lower than the corporation franchise tax rate and wondering whether you can take advantage of that lower rate. The answer is “yes.” The business’s entity structure is critical to the tax rate your business will pay on its income. In the case of Wisconsin, income for a C corporation gets taxed to the corporation, with a tax rate of 7.9%. The state then also taxes shareholders on any dividends they receive from the company.
However, if the income can pass-through to the owners of the business, such as with a limited liability company (LLC) treated as a partnership, and is taxed at the owner’s personal income tax rate, there is potential for tax savings (Wisconsin personal income taxes range from 4.6% to 7.65%).
Step 2: Determine your Wisconsin business employment taxes
If you have employees in Wisconsin, your business is required to file and pay withholding taxes. Wisconsin withholding tax rates range from 3.54% to 7.65%. The amount of wages that your business pays will determine whether you’re required to file and pay employment withholding taxes monthly, quarterly, or semi-annually.
For information on filing requirements, you can review the standards on the Wisconsin Department of Revenue’s website. For due dates to pay taxes, look at when employee wage payments are made. If they’re between the 1st and 15th of the month, withholding taxes are due by the end of the same month. If the wage payments are after the 15th then withholding taxes are due on or before the 15th of the following month.
Step 3: Establish your Wisconsin business’s additional state tax obligations
There are also several other types of Wisconsin small business taxes.
The first, and most common, is the state sales tax. The state sales tax rate in Wisconsin is 5%, plus most counties charge an additional .5% (there are a small handful of counties with no additional .5% tax). This creates an almost statewide sales tax rate of 5.5%. Generally, sales taxes are filed and paid on a quarterly basis. Payments are due by the last day of the month following the end of the quarter.
In addition to the sales tax, Wisconsin has a privilege tax for conducting business in Wisconsin. The privilege tax is known as the economic development surcharge (EDS). Essentially, any business that has gross receipts in excess of $4,000,000 must pay the EDS. The EDS rate is the greater of $25 or 3% of gross tax liability (this is different from gross receipts). The due date is the same as the unextended corporate income tax return date.
All Wisconsin businesses with employees must file unemployment insurance taxes. The tax rate is an average of “experienced employer” rates and is fixed for the first three years of your business. You can review the applicable table on the Wisconsin Division of Workforce Development’s website. The taxes must be filed quarterly, and the payments are due at the end of the month immediately following the end of the applicable quarter.
Wisconsin imposes an excise tax on tobacco and alcohol. The excise tax rates are flat, and you can review the table on the Wisconsin Department of Revenue’s website. Excise taxes are reported quarterly with payment due by the 15th day of the month immediately following the applicable quarter.
Step 4: Prepare to file and pay your Wisconsin business taxes
With the exception of unemployment insurance taxes, all your business taxes are paid to the Wisconsin Department of Revenue. In addition, Wisconsin has established an online portal to accept both filing and payment of state business taxes. Unemployment taxes are paid to the Department of Workforce Development. We encourage you to register with Wisconsin’s online payment portals. Doing so can help ensure timely tax compliance and also solidify your commitment to managing the costs of doing business in Wisconsin.
Consistent with managing the costs of doing business is establishing a complete and thorough set of tax records to support your tax compliance. Such records include:
- Customer invoices
- Vendor invoices
- Expense receipts
- Rent or mortgage payments
- Insurance premiums
This list isn’t complete, but it’ll give you a good idea of what you will need to gather. We can also help you gather this information using our ZenBusiness Money App, which helps with your recordkeeping and money management obligations.
Do I need an accountant?
Deciding whether you need to hire professional services can be difficult. In the early years, discretionary spending is tight, if not nonexistent, for small businesses. Sometimes, however, the wisest business choice is to recognize when a specialist is needed.
A tax professional can be a big help to your small business. Not only can a tax professional help you comply and file your taxes properly, they can also give advice on disposing of assets, when to hire employees, and what tax elections to take to reduce tax liability (i.e., restructuring your business into a pass-through entity).
How we can help
Running your own business is hard enough without adding the stress of taxes, but we’re here to support your business with its tax planning and compliance needs. Our ZenBusiness Money App allows you to easily send custom invoices, accept credit card and bank transfer payments, and manage your clients from an easy-to-use dashboard.
If your business is still in the formation stage, our Wisconsin LLC Formation Service of Corporation Formation Service can help you get started. Not sure how to stay compliant? Learn more about legal compliance for small business owners.
No matter where your business is in its lifecycle, we are here to help you.
Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
- How much can a Wisconsin small business make before paying taxes?
Wisconsin businesses will pay a corporation franchise tax (income tax) on all net income. There is no exemption for a minimum net income.
- What percentage does a Wisconsin small business pay in taxes?
The Wisconsin corporation franchise tax is 7.9%. There are also taxes for unemployment insurance, sales, and excise. Finally, if you have gross receipts of over $4,000,000 per year, your business may have to pay the economic development surcharge tax. Check with the Wisconsin Department of Revenue or the Wisconsin Department of Workforce Development to learn whether these taxes apply to your business.
- How does a Wisconsin small business pay taxes?
All taxes, except unemployment insurance taxes, can be paid online through the Wisconsin Department of Revenue. Unemployment insurance taxes are paid to the Wisconsin Department of Workforce Development.
- Do I have to file taxes for my small business in Wisconsin?
Yes. If you have a net income from business activity your business must pay the corporation franchise tax. In addition, if your business has employees or retail sales, you will file withholding and sales tax. Finally, if you sell certain goods, such as alcohol or cigarettes, you may need to file an excise tax.