Business Taxes: What to Expect
Taxes are a part of doing business, there is no getting around them. If you own your own business you will likely find the taxes to be confusing, there are a lot of different taxes charged by all levels of government. An accountant will almost certainly be necessary to help you keep them all straight. The tax system is so confusing in large part because there are so many different people who want to get their hands on your money and they have come with lots of different ways to do it.
Broadly speaking the first type of taxes will be applied to things that you use on the operation of your business. The big one here is property taxes, if your business owns property you will need to pay taxes on it.
This is usually done at the local level by the city or the county, this is usually their biggest source of revenues. Since the city usually relies on property taxes for their operation they usually are pretty serious
about making sure that they collect. Every year you will receive an assessment of how much your property is worth and the amount of tax you owe. Failure to pay your property taxes can result in your property beings
seized and sold at auction. In addition to property taxes you will likely be charge and excise tax. This will be paid on things like fuel and communications and is used to pay for infrastructure projects.
The next broad category of taxation is on the money you earn, the biggest of these will the business income tax. This is charged by the federal government and by most state governments. The business income taxes
is charged on your revenues with certain deductions allowed for operating expenses. In some states you will be charged a gross receipts
tax instead of a business income tax. This is a tax that is charged on the total revenue of your business with no deductions allowed, how this is charged will vary from state to state. Depending on the state you
operate in you may have to collect a sales tax, most states require it but there are a few that don't. This is a tax added to everything you sell and then submitted to the state. There may also be a franchise tax
charged by the state which is based on the value of the company. Obviously this is something your accounting firm can take care of, but it's important, as a business owner to keep your eyes on all of this as well.
The last category of taxes is on employment, if you have employees there are a variety of different taxes that you need to pay. There will be taxes to cover things like unemployment insurance, social security, medicare and workers compensation. These taxes can really add up and significantly increase the cost of hiring employees, they are based on the gross pay of the employee. If you think you can save on taxes by not having any employees you would be wrong, there is also a tax on the self employed to cover the same things as the employment taxes. The self employment tax is based on how much money your business earns.