As a business owner, it’s important to understand your federal, state, and local tax requirements. This will help you file your taxes accurately and make payments on time. The business structure you choose when starting a business will determine what taxes you’ll pay and how you pay them.
Employer Identification Number (EIN)
Most businesses need an Employer Identification Number (EIN). Your EIN is your federal tax ID number. You should get one right after you register your new business.
Find out from the IRS if you need an EIN, how to get one, what to do if you've lost or misplaced yours, and more.
Most businesses must file and pay federal taxes on any income earned or received during the year. Partnerships, however, file an annual information return but don't pay income taxes. Instead, each partner reports their share of the partnership's profits or losses on their individual tax return.
Almost every state imposes a business or corporate income tax. However, each state and locality has its own tax laws. Find out the business income tax requirements in your state or territory.
If you have your own business, you must pay Social Security and Medicare taxes. Otherwise, you won't be covered under the Social Security system. Learn about who must pay self-employment tax and how to pay it.
If you have employees, there are federal tax requirements for what you must pay and the forms you have to file. These employment taxes include:
- Social Security and Medicare taxes
- Federal income tax withholding
- Federal unemployment (FUTA) tax
FUTA ensures that people can receive unemployment benefits after losing a job.
Businesses in all states pay state workers’ compensation insurance and unemployment insurance taxes.
The federal government taxes businesses that manufacture or sell certain products. If your business uses various types of equipment, facilities, or other products, you may need to pay an excise tax. Learn about federal excise tax requirements and the forms you must file.
Each state has a different definition of what property is taxable. Some states collect property tax from businesses in commercial real estate locations. Others collect property tax for vehicles, computer equipment, and other business assets. The amount of tax you pay is calculated by the total value of the property or on a certain percentage of the value. Search for property tax requirements in your state.
Sales and Use Tax
States may tax the sale of goods and services. Check whether your business has to register to pay and/or collect sales tax in your state. Exclusions in sales tax often include food, clothing, medicine, newspapers, and utilities.
States may also tax your business on the use of goods and services when sales tax has not been collected. This typically applies to goods and services purchased outside of the state where you conduct business.
You must pay federal tax on income that is not subject to withholding. Or if the amount of your federal income tax being withheld is not enough to cover the taxes you owe, you must pay an estimated tax. Find out if your business has to pay estimated taxes and the steps to follow.