The short answer: US businesses face five main types of tax: income tax on profit, payroll taxes on wages, sales and use tax on taxable sales and purchases, property tax on what the business owns, and excise tax on specific goods and activities. Which income tax return you file, and whether profit is taxed once or twice, depends on your entity type. Each tax runs on its own calendar, from semi-weekly payroll deposits to the annual return.
Every US business pays tax in more than one way, and rarely on a single date. This guide maps the full picture (income, payroll, sales, property and excise) so you can see what applies, how each is calculated and when it is due.
Key takeaways
- Five tax types: income, payroll, sales and use, property, and excise.
- Entity type comes first: it decides which return you file and whether profit is taxed once or twice.
- Not one tax day: payroll deposits, sales tax returns and estimated payments run all year.
- Withheld payroll tax is held in trust: the people responsible can be personally liable for it.
- Sales tax follows your customers: economic nexus can require collection in states where you have no office.
- Late filing is expensive: $260 per owner per month for a late partnership or S corp return due in 2027.
Most owners do not get caught out by the rates. They get caught out by the structure: choosing the wrong entity, missing a filing they did not know applied, or treating a tax as annual when it is really quarterly. This guide explains it plainly first, then with the detail your controller or CPA will want.
What Counts as a Business Tax?
A business tax is any tax a company owes to a federal, state or local government as a condition of operating. The label covers obligations that have little in common except who collects them: some are charged on profit, some on wages, some on sales, some on property, and some on selling a specific product. Three features set business taxes apart from the personal taxes you already know:
- They attach to the entity, not the individual. Who pays, and on which form, depends on how the business is legally organized.
- They stack across jurisdictions. The same dollar of activity can trigger federal, state and local tax at once, each with separate filings.
- They run on staggered calendars. Payroll tax is deposited through the year, sales tax is remitted monthly or quarterly, and income tax is reconciled annually. There is no single tax day for a business.
Why Your Entity Type Decides Almost Everything
Before you look at any rate, look at your legal structure. It decides which return you file, whether profit is taxed once or twice, and how owners are taxed on what they take out.
| Structure | How profit is taxed | Main federal return |
|---|---|---|
| Sole proprietorship | Passes through to the owner's personal return; subject to self-employment tax | Schedule C with Form 1040 |
| Single-member LLC | Taxed like a sole proprietorship by default | Schedule C with Form 1040 |
| Partnership or multi-member LLC | Passes through to partners by their share; the entity files an information return | Form 1065, plus a Schedule K-1 to each owner |
| S corporation | Passes through to shareholders; working owners take a salary plus distributions | Form 1120-S, plus a Schedule K-1 to each owner |
| C corporation | Taxed at 21% at the corporate level, then again when profit is paid out as dividends | Form 1120 |
Pass-through entities (sole proprietorships, partnerships, most LLCs and S corps) do not pay federal income tax at the entity level; the profit lands on the owners’ returns. A C corporation pays its own tax, and shareholders pay again on dividends. Neither model is always better. The right answer depends on how much profit you reinvest, how you pay yourself and your state’s rules.
Worked Example: $200,000 of Profit Under Three Structures
| Structure | Entity-level tax | Payroll or self-employment tax | Owner's income tax |
|---|---|---|---|
| Sole proprietor or SMLLC | No entity tax | $28,234 self-employment tax | Owner pays income tax on $200,000, less half the SE tax and any QBI deduction |
| S corp, $90,000 salary | No entity tax | $13,770 FICA on the salary (both halves) | Owner pays income tax on salary plus $110,000 of K-1 profit |
| C corp, all profit paid out | $42,000 corporate tax | None on the profit | Owner pays about $23,700 on a $158,000 qualified dividend at 15% |
Figures are federal only and use 2026 rates; the Social Security wage base of $184,500 caps part of the self-employment tax. The S corp salary must be one the IRS would accept as reasonable, and a C corp that reinvests its profit instead of paying dividends pays only the $42,000. Our business tax team can run this on your own numbers.
The Five Main Types of Business Tax
Almost every obligation a US business faces falls into one of five groups. Here they are in the order most companies meet them.
1. Income Tax
Income tax is charged on profit, meaning revenue minus allowable expenses, not on the money flowing through your accounts. Whether the business pays it or the owners do is decided by the entity type above.
Two points catch people out. First, the federal corporate rate is a flat 21%, but most states add their own income or franchise tax, so the true rate is rarely the headline figure. Second, income tax is not a once-a-year event: if you expect to owe at least $500 as a corporation or $1,000 as an individual, the IRS expects quarterly estimated payments through the year, with a true-up when you file.
2. Payroll and Employment Taxes
As soon as you have employees, you take on payroll tax. These are the taxes the IRS pursues hardest, because you are holding money withheld from someone else’s wages. They split into amounts you withhold from employees and amounts you owe as the employer.
| Tax | Who pays | Rate and what it covers |
|---|---|---|
| FICA: Social Security and Medicare | Employer and employee, 7.65% each | Social Security at 6.2% on wages up to $184,500 in 2026, Medicare at 1.45% on all wages, plus 0.9% extra Medicare withheld on employee wages above $200,000 |
| FUTA: federal unemployment | Employer only | 6% on the first $7,000 of each employee's wages, usually cut to 0.6% by the state credit; reported on Form 940 |
| SUTA: state unemployment | Employer (a few states also tax employees) | State unemployment funds; rate depends on the employer's claims history and the state's wage base |
| Income tax withholding | Withheld from employees | Prepayment of employees' own federal and state income tax |
Withheld amounts are not your money. You hold them in trust, and if they are not deposited, the IRS can assess the trust fund recovery penalty, equal to 100% of the unpaid amount, personally against the owners and officers responsible. Our payroll service handles deposits and quarterly Form 941 filings.
Worked example: an employee earns $60,000. The employer withholds $4,590 of FICA (7.65%) from the employee’s pay and pays a matching $4,590, plus FUTA of $42 (0.6% of $7,000) and state unemployment tax at its assigned rate.
3. Sales and Use Tax
Sales tax is collected from your customer at the point of sale and paid over to the state; you are the collector, not the taxpayer. Rates and rules vary by state and often by county and city, and what is taxable (services, digital goods, food) differs everywhere. There is no federal sales tax, and five states (Alaska, Delaware, Montana, New Hampshire and Oregon) have no statewide sales tax, though Alaska allows local ones.
The Supreme Court’s 2018 decision in South Dakota v. Wayfair changed the rules for anyone selling across state lines. A state can now require you to collect its sales tax once your sales into the state pass a threshold, commonly $100,000 a year, even with no physical presence. This is called economic nexus, and it is the most common compliance gap for growing online sellers.
Two related ideas:
- Use tax applies when you buy something taxable from out of state and no sales tax was charged. You owe the equivalent to your own state.
- VAT (value-added tax) is the international counterpart of sales tax, charged at each stage of production. The US has no VAT, but you will meet it as soon as you sell into most other countries.
4. Property Tax
Property tax is a local tax on what the business owns. Most owners think only of real estate, but many states and counties also tax business personal property, the movable assets you use to operate, usually through a separate yearly return. Commonly taxed items include:
- Furniture and fixtures, such as desks, shelving and cabinets
- Computers, servers and other electronic equipment
- Machinery, tools and operating equipment
- Supplies and inventory, in some jurisdictions
There is also real estate transfer tax, charged when property changes hands. Because property tax is assessed locally on assessed value, two identical businesses in different counties can owe very different amounts, and assessments can be appealed.
5. Excise Tax
Excise tax targets specific goods and activities rather than profit or sales in general: fuel, tobacco, alcohol, air travel, firearms, certain environmental products and more. If your business deals in one of these, the tax is often built into the price and reported separately, at the federal level on quarterly Form 720.
Excise taxes come in two forms:
- Ad valorem: a percentage of value. A 10% excise on a $10 item adds $1.
- Specific (per unit): a fixed amount per quantity, whatever the price. A 25-cent-per-gallon fuel tax adds 25 cents to every gallon sold.
Not sure which business taxes apply to you?
Book a free 30-minute call with a Countsure CPA. We will map your income, payroll and sales tax obligations by state and set up a filing calendar.
How to File Business Taxes, Step by Step
Filing feels heavier than it is, mostly because there are several filings rather than one. This is the general path; your exact forms depend on your entity type.
- Confirm your entity structure. It decides every form that follows. If you formed an LLC but elected S corp tax, you file as an S corp.
- Gather your records. Income statements, expense records, payroll reports, fixed asset registers and prior-year returns. Pass-through entities need owner details; corporations need a balance sheet. Clean bookkeeping through the year makes this step short.
- Calculate taxable income. Revenue less deductible expenses, then depreciation, credits and carryforwards.
- Complete the right returns. Schedule C, Form 1065, 1120-S or 1120, plus state returns and the K-1s owners need for their own filings.
- File and pay on time. E-file for speed and confirmation. If you cannot finish the return, file an extension, but an extension to file is not an extension to pay.
Deadlines and the Cost of Missing Them
Because obligations are staggered, the safest habit is a tax calendar rather than a single reminder. These are the main federal dates.
| Filing | Federal deadline | Notes |
|---|---|---|
| Form 1065 and Form 1120-S | 15th day of the 3rd month after year-end (March 15 for a calendar year) | K-1s go to owners by the same date; late filing costs $260 per owner per month for returns due in 2027 |
| Form 1120 | 15th day of the 4th month after year-end (April 15 for a calendar year) | 5% of unpaid tax per month, up to 25%; at least $535 (or the tax due) if more than 60 days late, for returns due in 2027 |
| Corporate estimated tax | 15th of the 4th, 6th, 9th and 12th months (April, June, September and December for a calendar year) | Required if the corporation expects to owe $500 or more |
| Individual estimated tax (pass-through owners) | April 15, June 15, September 15 and January 15 | Generally required if you expect to owe $1,000 or more |
| Payroll tax deposits and Form 941 | Deposits monthly or semi-weekly by IRS schedule; Form 941 quarterly | Forms W-2 and 940 are due January 31 |
| Sales tax returns | Monthly, quarterly or annually, set by each state | A return may be due even with zero sales |
| Federal excise (Form 720) | Quarterly | Only for businesses selling or using taxed goods and services |
When a deadline falls on a weekend or federal holiday it moves to the next business day. Check each year’s dates on IRS.gov and with your state. Penalties apply per filing and grow with how late you are, and for payroll, missed deposits can fall on the responsible people personally. Filing on time is always cheaper.
Worked example: a three-member LLC files its 2026 Form 1065 four months late with no extension. The penalty is $260 × 3 members × 4 months = $3,120, even though the LLC itself owes no income tax.
Seven Mistakes That Cost Businesses Real Money
- Mixing business and personal money. Commingled accounts make deductions hard to support and can weaken the liability protection of an LLC or corporation.
- Treating withheld payroll tax as cash flow. It is held in trust, and using it invites the trust fund recovery penalty against you personally.
- Ignoring economic nexus. Passing a state’s sales threshold creates a duty to collect that you may not notice until an audit, by which point the uncollected tax comes out of your margin.
- Skipping estimated payments. Waiting until filing to pay income tax triggers underpayment penalties even if you pay in full later.
- Forgetting business personal property. Many owners pay real estate tax but miss the separate return on equipment and fixtures.
- Missing deductions and credits. Research, energy and hiring credits go unclaimed because no one looked.
- Using a stale or unsupported valuation. Where a transaction or equity grant depends on fair market value, an out-of-date figure undermines the filing.
Where Valuation Enters the Tax Picture
Some tax filings turn on what an asset or a business is worth rather than on what it earned. In those cases the IRS expects a fair market value supported by a recognized method, usually following the factors in Revenue Ruling 59-60.
| Tax event | What needs valuing | Why it matters |
|---|---|---|
| Granting stock options | A 409A valuation sets the exercise price | Options priced below fair market value can trigger immediate tax and a 20% penalty for employees |
| Gifting or transferring shares | Fair market value for gift and estate tax (Form 709) | An unsupported value invites IRS adjustment |
| Buying or selling a business | Purchase price allocation across asset classes (Form 8594) | Drives depreciation and amortization for years |
| Donating property over $5,000 | A qualified appraisal (Form 8283) | Without it the deduction can be disallowed |
| Converting a C corp to an S corp | Asset values on the conversion date | Sets the built-in gains exposure for five years |
For startups the most common case is the 409A valuation needed before granting stock options. Foreign-owned US companies should also note that transactions with their foreign owners are reported on Form 5472 and should be at arm’s-length prices.
Want Your Business Taxes Filed Correctly and On Time?
Countsure’s CPA-led team prepares business returns (Forms 1065, 1120-S and 1120), state filings and payroll tax returns, and provides independent valuations when a filing depends on what your business is worth.
Frequently Asked Questions
1. What taxes does a small business actually have to pay?
Most pay some mix of income tax (through the entity or its owners), payroll tax once they have employees, and sales tax if they sell taxable goods or services. Property tax and excise tax apply in specific situations. The starting point is the entity type, which decides how income tax works.
2. Does my LLC pay tax separately from me?
Usually not at the federal level. A single-member LLC is taxed like a sole proprietorship and a multi-member LLC like a partnership, so profit passes through to the owners’ personal returns. An LLC can elect to be taxed as an S corp or C corp, which changes this. Some states charge LLCs a separate fee or franchise tax.
3. What is the difference between sales tax and use tax?
Sales tax is collected by the seller at the point of sale. Use tax is the mirror image: the buyer owes it directly when they buy something taxable from out of state and no sales tax was charged. Together they make sure a purchase is taxed once, wherever the seller is.
4. Do I have to pay estimated taxes quarterly?
Generally yes, if tax is not being withheld and you expect to owe at least $1,000 as an individual or $500 as a corporation for the year. Skipping them can trigger an underpayment penalty even if you pay the full balance at filing. Owners of pass-through businesses make these payments on their personal returns.
5. What happens if I file or pay business taxes late?
Penalties and interest apply, and they grow with how late you are. For returns due in 2027, a late partnership or S corp return costs $260 per owner per month, and a C corp return more than 60 days late carries a minimum penalty of $535 or the tax due. Unpaid withheld payroll tax is the most serious: the people responsible can be held personally liable for 100% of it.
6. What is economic nexus for sales tax?
Since the Supreme Court’s 2018 Wayfair decision, a state can require an out-of-state seller to collect its sales tax once the seller’s sales into the state pass a threshold, commonly $100,000 a year, even with no physical presence. Thresholds and what counts toward them differ by state.
7. Is the federal corporate tax rate the same for every C corp?
Yes. Since 2018 the federal rate has been a flat 21% of taxable income. Most states add their own corporate income or franchise tax, so the combined rate is usually higher.
8. When does a business tax filing depend on a valuation?
When the tax turns on what something is worth: granting stock options (409A), gifting shares, allocating the price in a business sale, donating property worth more than $5,000, or converting a C corp to an S corp. In each case the IRS expects a supportable fair market value.
Other Related Services
- What Is an S Corporation?: how an S corp is taxed and who qualifies.
- How to Form a C Corp: incorporation steps and yearly filings.
- FICA Tax Explained: Social Security and Medicare on wages.
Parth Shah, Managing Director
(CPA-US, FCA, RV-S&FA, DISA)
Parth Shah who is head of Accounts and Book keeping has experience of more than 10 years. A Certified Public Accountant – US, fellow Chartered Accountant, Registered Valuer and Diploma in Information System Audit.
