Understanding how the payment of taxes works for companies in the United States is essential if you want to expand your company’s operations to US soil. Although it is a bureaucratic part of the process that may seem complicated, it is possible to be on top of the subject after understanding the four topics that we will cover in this post: federal income tax, state income tax, sales tax, and withholding tax. taxes.
In this article we will focus on the content of technology, e-commerce and international trade companies incorporated in Delaware and Florida in which the partner is not a US tax resident.
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To have a clearer view, the United States has 97 types of taxes , which must be paid annually. The good news is that as a non-resident entrepreneur planning to do business on US soil, you only have to deal with a few fees. Below we list the most common.
How do taxes work in the United States?
Federal taxes are paid to the Internal Revenue Service (IRS) and state taxes to the Department of Revenue (DOR) of each state.
Unlike Latin America, in the United States there is no need to pay a tax on the issued note. Rather, all taxes, regardless of whether your company is an LLC or CORP, are classified between income, costs and deductible expenses.
What are the most common taxes in the United States?
Income Tax Federal – Federal income tax
The amount to be paid to the IRS for this tax varies depending on your company’s earnings.
Since 2018, the profits of the companies are 21%, ceasing to be in bands, as before. When profits are distributed to shareholders, the amounts received are set according to the information in this table .
Companies recognized as LLCs do not have to pay this tax at the corporate level. The charge will be made at the individual level, once the profit has been shared (which in this category is divided 100% among the partners). Media in this category are listed in this table .
Generally, a C CORP will pay 21% corporate income tax. The shareholders of the C CORP, after receiving the dividends, will pay between 10% and 37%. This percentage is also valid for members of an LLC who pay taxes on the profits received.
The interesting thing is that until 2017 there was an exception of approximately $4,000 for individuals, which meant that the first $4,000 received from these dividends was not declared.
However, this exception was suspended until 2025 under the “Tax Cuts and Jobs Act” approved by US President Donald Trump in 2017.
To ensure that the entire tax payment process is done correctly, you need to hire an accountant or tax preparer.
State Income Tax – State income tax
America is full of quirks. Some taxes vary from state to state, such as state income tax, as certain regions of the country do not charge this fee.
In Florida, for example, you do not pay this tax as an individual. A CORP, for its part, must disburse 4.5% per year, with the exception of the first $50,000 of profits.
In California, a person pays between 1% and 12.3% in taxes, while a CORP pays between 4% and 9%. In Delaware, on the other hand, you will not have to pay any type of state income tax if you are not a resident of the area.
Sales Tax – Sales tax
Sales tax is a tax paid by the consumer at the time of purchase of consumer goods. As a state law, each of the 50 states in the United States has different rules.
For example, if you sell a $100 item to the customer, you must collect 7% sales tax, then charge the customer $107 for the item and pass the $7 on to the state.
There are 3 factors you need to consider to determine whether or not to charge Sales Tax to the customer based on their NEXUS:
- State of registration of your business: If your business is registered in Florida, for example, you must collect sales tax from all customers who have an address in the state. The state of Delaware does not have a sales tax bill.
- Physical presence in the state: If you use a warehouse in California, for example, even if your business is from Florida, you must collect sales tax from customers who are located in California.
- Economic Activity: After July 2018, states established the Economic Nexus, where depending on the volume of transactions you have for a given state in a 12-month period, you will also need to collect Sales Tax in that state.
Tax WithHolding
Tax Withholding and Estimated Tax Payment – Tax withholding and estimated tax payment
In the United States, the tax return is annual and is done at the beginning of the next fiscal year. But the collection of taxes must be done quarterly throughout the current year.
The Withholding/Estimated Tax Payment is not an additional tax and is the name given to these tax collections. That occur proportionally throughout the year. It works as a guarantee that. At the end of a tax year, you will file your taxes and pay the amount due or receive a refund of what you paid extra.
This retention/proportional payment can vary between 10% and 37% of the profit for the period. Depending on the corporate structure of your company and the tax status of each member.
Conclusion
This article addresses the most common tax liabilities of a US company and its members/shareholders. Other taxes may accrue according to the type of income, operations and tax status.
If you are thinking of starting a business in the United States, talk to our team! We can guide you through the process and explain all the necessary details to start a business on US soil.
