Tax Types for Small Businesses: A Quick Guide

Business accounting is challenging; calculating how much you owe in taxes even more so. Still, failing to pay one of your liabilities may lead to significant fines or even legal issues. Besides, by becoming more educated, you may get some reliefs that make your life easier.

You can, and in some cases, should hire a professional. Either way, as a business owner, you should understand the different types of business taxes and how to calculate them.

Today, we will go through the very basics of small business taxes. We hope to make you feel a bit more confident to continue exploring and educating yourself.

Before We Start

If you don’t run a corporation, you file your business tax returns along with the personal returns. In that case, the deadline is April 15th each year.

Individual small businesses have various liabilities. After understanding the basics, you should look into the specific responsibilities for your company. 

Types of Taxes

There are several types of taxes your business must pay to the IRS. The business structure, your employees, products, and services determine whether you need to pay each of them.

In general, the following are the responsibilities of small-business owners.

Income Tax

You pay income tax on payrolls, income from investment, and earnings. If your small business is a corporation, you are also responsible for paying net income tax.

Some types of small businesses don’t pay income taxes, but owners report it at their individual tax returns.

Payroll Tax

You must pay employment (payroll) taxes on the wages of your employees. These include:

  • federal income tax,
  • social security,
  • medical care,
  • state and federal unemployment taxes.

You also need to report income for those working for you, but aren’t directly employed by you – contractors are a great example. Use a 1099 generator to tackle this type of taxation.

Self-Employment Tax

As an owner of a small business, you’re self-employed. Thus, you must pay self-employment taxes, which include social security and medical care.

Excise Tax

This type is indirect, which means customers don’t pay it directly, but it’s included in the price of the product or services. 

If your business engages in some industries or sells certain types of services or products, you are responsible for collecting excise tax.

Sales Tax

You should pay this one to any organization where your company has a presence. It may be a store, office, and more. If the business is present in different locations, a sales tax is necessary for each location.

Remember that sales taxes aren’t federally regulated, but they depend on the state. So, you need to work with the authorities there to identify your tax rate.

Property Tax

If your business doesn’t run only online, you own a property. Whether it’s a land, commercial property, or a brick-and-mortar location, you have to pay property tax. Your city or town assesses the rate.

The Bottom Line

We must recognize that taxes are complicated — individuals struggle with it, and businesses even more so.

So, if you still find it too much to handle, hire a professional to help you. It will be a massive relief, and perhaps, you’ll be able to do it yourself next time.


Alex is a small business blogger with a focus on entrepreneurship and growth. With over 5 years of experience covering the startup and small business landscape, Alex has a reputation for being a knowledgeable, approachable and entrepreneurial-minded blogger. He has a keen understanding of the challenges and opportunities facing small business owners, and is able to provide actionable advice and strategies for success. Alex has interviewed successful entrepreneurs, and covered major small business events such as the Small Business Expo and the Inc. 500|5000 conference. He is also a successful entrepreneur himself, having started and grown several small businesses in different industries.