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5 State Tax Methods | State Gross sales Tax & Past


Should you’re a enterprise proprietor, employer, or each, you want to know what’s occurring in your state. There are various state tax methods that you could observe to stay compliant and keep away from penalties.

So, how are you going to presumably sustain? Brush up on the methods and your duties beneath.

5 State tax methods

If you wish to stay compliant with state legal guidelines, you want to know your state tax system. Check out 5 state tax methods.


1. State gross sales tax

The vast majority of states have state gross sales tax. Extra possible than not, you’ll come head to head with gross sales tax and must know your obligations.

The next states don’t have gross sales tax:

  • Alaska
  • Delaware
  • Montana
  • New Hampshire
  • Oregon

Hawaii and New Mexico do not need gross sales tax, both. Nevertheless, they do impose a normal excise tax (GET) and gross receipts tax (GRT) on transactions.

Gross sales tax is taken into account a pass-through tax. Which means that gross sales tax passes via to the purchasers through the level of sale.

Companies that want to gather gross sales tax should achieve this throughout a sale. Clients are liable for paying the gross sales tax along with their transaction stability.

Some companies may also must cost prospects native gross sales tax. Native gross sales tax charges can even fluctuate relying on the enterprise location.

Gross sales tax nexus

In some circumstances, what you are promoting may want to gather gross sales tax for various states (e.g., on-line gross sales), relying on whether or not you have got gross sales tax nexus. In some states, a enterprise might have gross sales tax nexus if they’ve sufficient of a bodily presence.

The next elements can influence gross sales tax nexus:

  • Your workplace, warehouse, retailer, or enterprise location
  • Staff, contractors, salespeople, or different personnel
  • Quantity of gross sales (e.g., $100,000)
  • Commerce exhibits or enterprise journey gross sales

State gross sales tax charges

Take a look at the completely different gross sales tax charges beneath. To study completely different gross sales tax legal guidelines by state, contact your state for extra info. Understand that you must also test along with your state for extra gross sales tax charges.

State 2022 Gross sales Tax Price
Alabama 4%
Alaska N/A
Arizona 5.6%
Arkansas 6.5%
California 7.25%
Colorado 2.9%
Connecticut 6.35%
Delaware N/A
D.C. 6%
Florida 6%
Georgia 4%
Hawaii 4%
Idaho 6%

6.25% (objects required to be titled or registered and normal merchandise)

1% (qualifying meals, medication, and medical home equipment)

Indiana 7%
Iowa 6%
Kansas 6.5%
Kentucky 6%
Louisiana 4.45%
Maine 5.5%
Maryland 6%
Massachusetts 6.25%
Michigan 6%
Minnesota 6.875%
Mississippi 7%
Missouri 4.225%
Montana N/A
Nebraska 5.5%
Nevada 6.85%
New Hampshire N/A
New Jersey 6.625%
New Mexico 5.125%
New York 4%
North Carolina 4.75%
North Dakota 5%
Ohio 5.75%
Oklahoma 4.5%
Oregon N/A
Pennsylvania 6%
Rhode Island 7%
South Carolina 6%
South Dakota 4.5%
Tennessee 7%
Texas 6.25%
Utah 4.85% (for the state gross sales tax charge; the mixed charge with native gross sales tax could be greater)
Vermont 6%
Virginia 4.3%
Washington 6.5%
West Virginia 6%
Wisconsin 5%
Wyoming 4%

2. Gross sales tax holidays

A gross sales tax vacation is a short-term exemption from state gross sales tax. Throughout gross sales tax holidays, what you are promoting doesn’t gather gross sales tax from prospects.

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Gross sales tax holidays could be:

  • A day
  • A weekend
  • A whole week

Gross sales tax vacation laws fluctuate from state to state. The gross sales tax vacation dates, time-span (e.g., week), eligible objects, and most quantity of a tax-exempt buy fluctuate by state.

Usually, not all objects are tax-exempt throughout a gross sales tax vacation. For instance, Iowa’s 2022 gross sales tax vacation solely permits clothes as much as $100 every to be exempt from gross sales tax.

Understand that not all states take part in gross sales tax holidays. And, gross sales tax holidays should not the identical time-span for each state.

The next states have gross sales tax holidays in 2022:

  • Alabama
  • Arkansas
  • Connecticut
  • Florida
  • Iowa
  • Maryland
  • Massachusetts
  • Mississippi
  • Missouri
  • New Mexico
  • Ohio
  • Oklahoma
  • South Carolina
  • Tennessee
  • Texas
  • Virginia
  • West Virginia
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Examine along with your state for extra gross sales tax vacation guidelines to make sure you’re compliant.

3. State company earnings taxes

If what you are promoting is structured as a company, you might be liable for paying a company tax charge on enterprise earnings. There are each federal and state company tax charges.

Not all states levy a company tax charge. As of 2022, 44 states levy company earnings taxes. Nevada, Ohio, Texas, and Washington impose a gross receipts tax as an alternative of company earnings taxes.

South Dakota and Wyoming do not need a company earnings or gross receipts tax.

Many states set a state company tax charge along with the federal charge of 21%. State company earnings tax charges vary from 2.5% to 11.5%. Some states apply tax charges based mostly on the company’s earnings.

Should you’re structured as a company, contact your state for extra info on state company earnings tax charges and guidelines.

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4. State earnings taxes

Most states have state earnings tax. States use earnings tax to fund state tasks and packages, resembling training, well being care, and public help.

Should you make use of staff in a state with state earnings tax, you could deduct these taxes from their wages.

There are seven states with no state earnings tax:

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Texas
  • Washington
  • Wyoming

New Hampshire and Tennessee solely have earnings tax on dividend and curiosity earnings. They don’t have earnings taxes on employment earnings.

With nearly all of states (41 states, plus Washington D.C.) having earnings tax, it’s necessary to know your state’s system for earnings tax withholding.

State earnings tax charges

Earnings tax charges should not the identical in each state. Like gross sales tax charges, state earnings tax charges fluctuate relying in your state.

Some states have a single-rate tax construction, whereas others have a graduated-rate tax construction. A single-rate construction means one flat tax charge applies to all staff in any respect pay ranges. A graduated-rate construction is when there are completely different tax charges for a number of earnings ranges.

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Eight states use the single-rate technique. These states embrace Colorado, Illinois, Indiana, Massachusetts, Michigan, North Carolina, Pennsylvania, and Utah.

The opposite 42 states and Washington D.C. use the graduated-rate technique. States that use the graduated-rate tax construction have various tax ranges (e.g., 2% to five% in Alabama) and may have a number of tax brackets.

5. State unemployment taxes

Should you’re an employer, you probably must pay state unemployment taxes, or SUTA tax. State unemployment tax may also be known as:

  • State unemployment insurance coverage (SUI)
  • Reemployment taxes (e.g., Florida)

SUTA tax helps fund unemployment packages and pay out advantages to workers who lose their jobs via no fault of their very own.

Most often, state unemployment is an employer-only tax. Nevertheless, workers in Alaska, New Jersey, and Pennsylvania are topic to state unemployment tax withholding.

Every state units a distinct vary of tax charges. And, your charge may fluctuate relying on elements like your business, expertise, and workers.

States additionally set a wage base for unemployment taxes. As soon as an worker hits the wage base, cease contributing to state unemployment tax.

State unemployment tax charges

As talked about, charges fluctuate based mostly on a number of elements. Considered one of these elements is whether or not or not you’re a brand new employer.

Many states subject a regular new employer SUTA tax charge to new employers. These new employer charges fluctuate by state. If what you are promoting is in a state that doesn’t use a regular charge, you could wait to your state to assign you a charge.

Charges additionally fluctuate relying on whether or not or not what you are promoting is within the building business. Non-construction corporations are inclined to have decrease SUTA charges than building corporations.

For instance, new non-construction employers in Ohio normally obtain a SUTA charge of two.7% (2022). New building employers in Ohio begin with a 5.5% SUTA tax charge.

As what you are promoting grows and extra elements come into play, your charge may improve or lower.

Take a look at our new employer states web page for extra details about SUTA charges by state.

Just a few different state tax methods…

Along with the principle state tax methods, there are a number of you won’t be as accustomed to. A few of these embrace:

  • Tax and expenditure limits
  • State wet day fund laws
  • Tobacco tax income
  • State motor gasoline tax charges

To seek out out extra about your state’s tax methods, contact your state.

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This text has been up to date from its unique publication date of September 10, 2019.

This isn’t supposed as authorized recommendation; for extra info, please click on right here.