Posted by Fred Lake

Types of Business Taxes You Must Know And Paying Them Accordingly

Types of Business Taxes You Must Know And Paying Them Accordingly

Businesses, just like dependent or independent individuals are indebted to pay numerous kinds of taxes. Some of the business taxes are easier to understand and some are complicated. The complicated ones require a sheer consideration of terms and conditions and are often subject to change due to the flexible laws of the tax department and external environment.

In a broader sense, taxes for business comes in three selections. They are federal, state and local business taxes. Furthermore, there are also various kinds of taxes that are subjective to different kinds of business operations. These diversified taxes are imposed on selling taxable business products or services, using assets of business such as equipment, having possession of a business property and the taxes on the profit a business generates.

Furthermore, if you are starting a new business, the taxes imposed on it will be different from the business is operating for quite a long time and has changed considering in terms of its operations, expansion that have resulted in hiring for more employees.

So, let us now look at different kinds of business taxes and their requirements:

Income tax:

All business taxpayers are expected and obligated to pay taxes on the income or profit they generate from their business operations. Keep in mind that taxpaying on income is related to the form of the business. So, businesses that are headed by sole proprietors or run on the basis of partnerships are required to pay income tax through the returns on their personal incomes. Although the concept of paying income tax is same for all business forms whether they are small scale sole proprietors or a limited liability, the process slightly differs from one another.

The sole proprietors are required to pay income tax by filing a Schedule C in addition with the returns on their personal incomes. Whereas, limited liability company associates must file a business return, pay on the portion of the income they receive from the company and include this income in their personal returns.

In some states there is a sales tax on the sale of specific products and services

Majority of the businesses do not directly pay taxes on the respective products or services that they sell. However, if a certain business functions in a state where it is necessary for them to directly pay the tax on the sale of products that they cater to the market, then it is incumbent upon the business to set up such a system that enables them to gather, report and pay the required sales tax.

Business taxpayers need to take in to account the property tax as well

If your business owns real estate upon which the set-up is organized within a office building, it is obligated for the business to pay property tax to the regional tax authorities who, in most of the cases is the city or country in which the business is located.

The tax on business property is assessed upon the value of the property. In fact the criteria of allocating property tax on business property is same as on personal property such as house. However, when the business owners decide to sell their respective business property they need to keep in mind certain conditions and adhere to specific considerations. It is advisable that before deciding to sell the business property, find a tax preparer and an accountant who would guide you properly regarding all the tax paying requirements.

Businesses are also required to pay excise taxes

As the business increases its usage on transportation, communication and consumption of resources such as fuels, they need to pay taxes on them. By making use of Form 720, the business owners need to pay excise tax to the Internal Revenue Service each year on after every three months. The tax payment is dependent on the usage of these resources.

Upon owner’s share of income in business, there is a self-employment tax that needs to be paid

Depending upon the income the business generates at the end of each financial year, sole proprietors need to pay self-employment tax in order to avail the facilities of Medicare and Social Security.

So, these are the main ad basic types of business taxes that every individual before starting his business needs to take in to consideration. 

Fred Lake
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