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Find Out if You Need to File a State Tax Return
Business Tax Information

Find Out if You Need to File a State Tax Return

There may be a separate requirement to file a state tax return. Filing due dates, rates, procedures, forms and regulations vary from state-to-state.

Crystal Stranger
October 20, 2022

Depending on where your company is doing business there may be a separate and independent requirement to file a state tax return. Failure to file on time may result in interest and penalties.

Compounding on the already complex nature of taxes is that tax laws, filing due dates, rates, procedures, forms and regulations vary from state-to-state. To help you sort through the confusion, below is an outline of what you need to know to determine if you are required to file a corporate state tax return.

State Requirements

One quick qualifier is understanding that there are a few states in the US that do not charge state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.  If your company earns income in any one of the other 41 states or the District of Columbia, you will likely need to file a state income tax return.

Nexus

Nexus means that you file and pay state taxes on sales for the state(s) in which you do business. For example, if you are doing business in Chicago, you must file and pay Illinois state taxes.

Most states impose tax on income or on corporations with sufficient connection nexus. That is, if they have “sufficient physical presence” with the state.

Most taxpayers have a tax home where they live and work, and file one tax return in that state.  Taxpayers earning income in a state other than their tax home must file a state tax return in that state(s).  The tax rate may be fixed for all income levels, taxpayers of a certain type or graduated. Most states conform to federal rules for determining gross income, timing of recognition of income and deductions, and most aspects of business deductions.

Deadlines

Filing due dates vary from state to state. Fortunately, the American Institute of CPAs (AICPA) has compiled a helpful list of states and their corresponding corporate state filing deadlines here.

Payments

You will not pay taxes twice. The US Supreme Court rules that two states cannot legally tax the same income. This exempts the taxation earnings and other sources of income taxed elsewhere.

Penalties

Penalties for not filing a state tax return can be just as harsh as those imposed by the IRS.  Every state, including those with no income tax, has a state taxing authority. These authorities have the power to examine the returns filed with it. Each has a tax collection mechanism, impose penalties and interest for failing to file or pay taxes, or filing late.

If you need help, email hello@cleer.tax

ABOUT THE AUTHOR
Crystal Stranger

Crystal Stranger, EA, NTPI Fellow, International Tax Director • Multi-Industry Entrepreneurial Innovation • Speaker • Writer • Blockchain Technology • Business Development. Crystal Stranger started out as a software developer in the tech world of San Francisco, then ended up homeless in the dot com crash, turned her life around as an investor, gaining millions in real estate, then worked in finance and became an enrolled agent, federally licensed for tax planning and representation. She has done much project management and product development across different industries, but continually comes back around to software. She has been writing about cryptocurrency tax and regulatory issues since 2014 and has built several companies from the ground up.

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