Small Business Taxes: Federal and State
Small businesses owe taxes at two levels, and the two do not line up. Federal rules apply almost everywhere. State rules depend on where you operate and what you sell. This guide lays out what you owe at each level, who pays what, and where the deadlines fall.
Federal taxes
These apply to nearly every business in the country. Which ones hit you depends on your structure and whether you have employees.
Income tax
How you pay depends on your entity. Sole proprietors, partnerships, and S-corps are pass-through: profit lands on the owners' personal returns. C-corporations pay tax at the company level.
Self-employment tax
If you work for yourself, you cover both halves of Social Security and Medicare (about 15.3% on net earnings) on top of income tax. Employees split this with an employer; you do not.
Quarterly estimated tax
Income without withholding usually means paying tax four times a year, in mid-April, mid-June, mid-September, and mid-January, rather than once at filing. It kicks in once you expect to owe $1,000 or more.
Payroll tax
If you have employees, you withhold and deposit income, Social Security, and Medicare taxes on a monthly or semi-weekly schedule, then reconcile on Form 941 each quarter and Form 940 each year.
Information returns (1099s)
Pay a contractor $600 or more in a year and you file a 1099-NEC, due to the recipient and the IRS by January 31. Miss it and you can lose the deduction for those payments.
Annual return deadlines at a glance
The single date most owners miss is the March 15 filing deadline for partnerships and S-corps, a month before the personal-return deadline most people have in their head.
| Business type | Form | Filing deadline |
|---|---|---|
| Sole proprietor / single-member LLC | Schedule C with Form 1040 | April 15 |
| Partnership / multi-member LLC | Form 1065 | March 15 |
| S-corporation | Form 1120-S | March 15 |
| C-corporation | Form 1120 | April 15 |
Dates roll to the next business day on weekends and holidays. A six-month extension buys more time to file, not to pay. For estimated payments, payroll deposits, and 1099 dates, see the full deadline calendar.
State taxes
This is where it gets local. Two businesses doing the same thing in different states can owe very different taxes. Your state's department of revenue is the authority for the specifics.
State income tax
Most states tax business income, but the rules vary widely and a handful have no income tax at all. Pass-through owners report state income on their personal returns, much like the federal side.
Sales and use tax
If you sell taxable goods or services, you collect sales tax and remit it to the state, monthly, quarterly, or annually depending on volume. Selling across state lines can create obligations in other states under economic nexus rules.
State payroll and unemployment
Employers register for state income tax withholding and state unemployment insurance (SUTA). Most states also require workers' compensation coverage once you have employees.
Franchise, gross receipts, and excise
Some states charge a franchise or gross receipts tax just for operating there, regardless of profit. Specific industries (fuel, alcohol, tobacco, and others) also carry excise taxes.
How to pin down your state's taxes
Federal obligations are fairly uniform. The state side is where people get caught out. Three sources settle it:
- Your state department of revenue. The authority on state income, sales, and business taxes, plus registration and filing frequencies.
- Your state labor or workforce agency. Handles unemployment insurance and employer payroll registration.
- A local SBDC or a CPA. Free, SBA-funded advisors (or a paid pro) who can map your exact obligations across both levels for your industry and location.
Frequently asked questions
What is the federal income tax deadline for small businesses?
What taxes does a small business pay?
Do small businesses pay both federal and state taxes?
Do I have to pay estimated taxes quarterly?
What happens if I miss a tax deadline?
Catch the changes before they cost you
Tax rules and thresholds shift every year, at both the federal and state level. Bizmoon watches those changes and tells you when one affects your business, in plain English, with the deadline attached.
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