What Types of Taxes Are Imposed on US Company Registrations?

American companies are subject to a variety of taxes at both the federal and state levels. These taxes can be broadly categorized into income tax, payroll tax, sales tax, property tax, and excise tax. Each type serves a different purpose and is levied on different aspects of business operations.

Income tax is perhaps the most well-known tax category for businesses. It is imposed on the profits earned by corporations and other entities. The Internal Revenue Service IRS governs federal corporate income tax in the United States, with rates that vary depending on the size of the company’s taxable income. For instance, as of 2024, the federal corporate income tax rate stands at 21%, which was established under the Tax Cuts and Jobs Act of 2017. However, many states also impose their own corporate income tax, which can range from 4% to over 10%, depending on the state. Some states, like Nevada and Texas, do not have a corporate income tax, while others, such as California, have relatively high rates.

Payroll tax is another significant component of business taxation. This tax is primarily used to fund Social Security and Medicare programs. Employers are required to withhold payroll taxes from employees’ wages and match the amount withheld. The Social Security tax rate is 6.2% for employers and employees each, up to a specific wage limit annually. The Medicare tax rate is 1.45% for both employers and employees, with no wage cap. Additionally, some states may impose additional payroll taxes, particularly for unemployment insurance.

Sales tax is levied on the sale of goods and services within a state or locality. Unlike income tax, sales tax is typically collected directly from consumers rather than businesses. However, businesses are responsible for collecting these taxes and remitting them to the appropriate government agencies. Sales tax rates vary significantly across states and even within states, depending on local jurisdictions. For example, as reported by the Tax Foundation, Tennessee had one of the highest average combined state and local sales tax rates in 2024, at 9.46%.

Property tax is another common form of taxation for businesses. It is assessed on the value of real estate owned by companies, including land and buildings. Property taxes are usually administered at the local level, such as counties or municipalities, and rates depend on the assessed value of the property and local tax policies. These taxes are used to fund public services like schools, infrastructure, and emergency services.

Excise tax is a specific type of tax levied on certain goods, such as gasoline, alcohol, tobacco, and firearms. Excise taxes are often included in the price of the product and can vary widely based on the item and its intended use. For example, the federal excise tax on gasoline is currently 18.4 cents per gallon, while the tax on cigarettes is $1.01 per pack.

In addition to these main categories, businesses may also encounter various fees and assessments, such as environmental fees, licensing fees, and franchise taxes. Franchise taxes, for instance, are charges levied on businesses for the privilege of operating in a particular state. Texas and Delaware are known for having relatively high franchise tax rates, making them popular states for incorporating businesses despite their higher costs.

Overall, the tax structure in the United States is complex and varies greatly depending on the jurisdiction and the type of business. Companies must carefully navigate these requirements to ensure compliance and manage their tax obligations effectively. As highlighted by recent news reports, businesses often rely on accountants and tax professionals to stay informed about changes in tax laws and regulations, ensuring they take advantage of available deductions and credits while adhering to legal standards.