Most states tax, at least, some types of business income derived from the state. In most states, corporations are subject to a corporate income tax while income from “pass-through entities” — such as S corporations, limited liability companies (LLCs), partnerships, and sole proprietorships — is subject to a state’s tax on personal income. Tax rates for both corporate income and personal income vary widely among states. Corporate rates, which often are flat regardless of the amount of income, generally range from 4% to 9%, and personal rates, which often vary depending on the amount of income, can range from 0% to 9% or more in some states.
New York Business Tax
What is the New York corporate income tax?
New York has a flat corporate income tax rate of 7.100% of gross income. The federal corporate income tax, by contrast, has a marginal bracketed corporate income tax. There are a total of twenty three states with higher marginal corporate income tax rates then New York.
New York’s corporate income tax is a business tax levied on the gross taxable income of most businesses and corporations registered or doing business in New York. The New York corporate income tax is the business equivalent of the New York personal income tax, and is based on a bracketed tax system. Similar to the personal income tax, businesses must file a yearly tax return and are allowed deductions such as wages paid, cost of goods sold, and other qualifying business expenses.
What kind of businesses have to pay the New York corporate income tax?
In general, all businesses operating in New York which are not registered as a flow-through entity (like a sole proprietorship, a partnership, or an S-Corporation) must report their income and pay both New York and Federal corporate income taxes on their earnings. The most commonly used business structure that is subject to corporate taxes is a C-Corporation.
Because C-Corporations pay corporate taxes on their revenue in addition to the personal income taxes shareholders and owners pay on profits withdrawn from the company, profits received from a C-Corporation are subject to a phenomenon known as double taxation.
S-Corporations and other flow-through entities aren’t subject to the double taxation of revenue imposed on a C-Corp, because they aren’t required to pay corporate taxes on their revenue. However, the owners or members of the corporation must report their share of the corporation’s income on their personal tax returns and pay New York and federal.
All incorporated New York businesses, regardless of whether or not they are required to pay any taxes, should file at least an informational tax return with the New York Department of Revenue as well as a federal business tax return (Form 1120) with the IRS.
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