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Tax-Exempt Religious Institutions Bona-fide religious institutions including churches, synagogues, and mosques are exempt from corporate income taxes under § 501(c)(3) of the IRC Labor Unions Labor unions and worker's organizations are exempt from taxation on dues and other forms of income. Tax-Exempt Recreational Organizations Social clubs and recreational groups may collect dues and other funds as a tax-free organization as long as the primary purpose of the group is not for profit. Tax-Exempt Charities Bona-fide charities are exempt from all corporate income taxes, including both religious and non-religious charities. Some of the most common 501(c) organizations include: Specifically, certified Texas 501(c) nonprofit corporations are exempt from the Texas corporate income tax. Texas is among three other states that have a similar business taxation setup.Ĭertain nonprofit entities registered in Texas may be able to exempt some or all of their qualifying income from Texas and federal income taxes.
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While Texas does not have a corporate income tax, a gross receipts tax is applicable to all companies and serves a similar purpose. However, the owners or members of the corporation must report their share of the corporation's income on their personal tax returns and pay Texas and federal income tax.Īll incorporated Texas businesses, regardless of whether or not they are required to pay any taxes, should file at least an informational tax return with the Texas Department of Revenue as well as a federal business tax return (Form 1120) with the IRS. 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. The most commonly used business structure that is subject to corporate taxes is a C-Corporation.īecause 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pay corporate taxes on their revenue in addition to the personal income taxes shareholders and owners pay on profits withdrawn from the company, profits received from a C-Corporation are subject to a phenomenon known as double taxation. In general, all businesses operating in Texas 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 Texas and Federal corporate income taxes on their earnings. What kind of businesses have to pay the Texas corporate income tax? 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. The Texas corporate income tax is the business equivalent of the Texas personal income tax, and is based on a bracketed tax system. 1, 2022.Texas' corporate income tax is a business tax levied on the gross taxable income of most businesses and corporations registered or doing business in Texas. " How High Are Property Taxes in Your State?” Accessed Feb. " State Individual Income Tax Rates - January 1, 2021." Accessed Feb. 1, 2022.įederation of Tax Administrators. " States Respond to Strong Fiscal Health with Income Tax Reforms." Accessed Feb. “ 2022 State Business Tax Climate Index.” Pages 3, 31, 33. “ 2022 State Business Tax Climate Index.” Pages, 1, 2, 30, 60. “ Estate, Inheritance, and Gift Taxes in CT and Other States.”. Office of Legislative Research, Objective Research for Connecticut’s Legislature. “ New Jersey Estate Tax Changes Effective 01/01/17.” Accessed Feb. Official Site of the State of New Jersey, Department of Taxation. " State Corporate Income Tax Rates and Brackets for 2021." Accessed Feb. “ 2022 State Business Tax Climate Index.”.
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New Hampshire has no state-level sales tax.Montana’s constitution limits its sales tax to 4%.Florida has no individual income tax and it has a low unemployment insurance tax.Alaska levies no individual income tax or state-level sales tax.South Dakota has no individual income tax, and this is the other state without a corporate income tax or gross receipts tax.Wyoming has no individual income tax and it’s one of only two states that doesn’t levy a corporate income tax or a gross receipts tax.The Most Tax-Friendly States for Business