What are the Different Types of C Corporation Taxes?

Terry Masters

A C corporation in the U.S. is considered a legal person and pays many of the same taxes as an individual, including income, employment, sales, and property taxes. These taxes are paid at the federal and state levels. A C corporation might also be liable for certain local or specialty taxes, such as franchise or excise taxes, depending upon the tax laws in the state where the business is incorporated or where it has set up operations.

The Internal Revenue Service logo.
The Internal Revenue Service logo.

Federal income taxes are the most significant category of C corporation taxes that are paid by businesses in the U.S. Most countries have a corporate tax rate that is assessed on the profits made by businesses registered in their jurisdictions. The corporate income tax rate is set by statute and administered by the Internal Revenue Service (IRS).

A corporation must file a federal income tax return every year to report to the IRS the profits made and to remit any taxes owed. The corporation must also file and pay state income taxes on its profits if it is registered or operates in a state that assesses a corporate income tax. Paying federal income tax is mandatory for every C corporation, but certain states do not assess a corporate income tax at all.

If a C corporation has employees, it must pay employment taxes. This includes state and federal payroll taxes. Employment taxes are often the second biggest category of C corporation taxes that a business must pay. Unlike income taxes, every state requires the payment of employment taxes by corporations. These taxes are usually paid quarterly rather than annually.

Sales tax is the third category of major C corporation taxes that must be paid, but the tax is a state and local assessment on gross sales rather than a federal tax. Every state has a different sales tax rate that is typically applied to sales of tangible products and not services. Some localities apply an additional tax either as a flat rate or on certain products.

There are many miscellaneous C corporation taxes that can be assessed on a business depending upon where it operates, what it sells, what it owns, or the size of its operations. Property taxes are a type of contingent tax that some C corporations have to pay at the federal and state levels. Transfers of property can trigger a capital gains tax, or a tax on the appreciated value of the property from the time the property was acquired to when it was sold. Some corporations pay a franchise tax to a locality that is analogous to a special assessment to operate in a high-value jurisdiction. Other corporations must pay excise taxes because they sell certain consumable products, such as cigarettes or motor oil.

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