Most states tax at least some types of business income derived from the state. As a rule, the details of how income from a specific business is taxed depend in part on the business's legal form. In most states, corporations are subject to a corporate income tax, while income from pass-through entities such as S corporations, limited liability companies (LLCs), partnerships, and sole proprietorships is subject to a state's tax on personal income. Tax rates for both corporate income and personal income vary widely among states. Corporate rates, which most often are flat regardless of the amount of income, generally range from roughly 4% to 10%. Personal rates, which generally vary depending on the amount of income, can range from 0% (for small amounts of taxable income) to around 9% or more in some states.
Currently, six states—Nevada, Ohio, South Dakota, Texas, Washington, and Wyoming—do not have a corporate income tax. However, four of those states—Nevada, Ohio, Texas, and Washington—do have some form of gross receipts tax on corporations. Moreover, five of those states—Nevada, South Dakota, Texas, Washington, and Wyoming—as well as Alaska, Florida, and Tennessee currently have no personal income tax. Individuals in New Hampshire are only taxed on interest and dividend income.
Apart from taxing business income through a corporate income tax or a personal income tax, many states impose a separate tax on at least some businesses, sometimes called a "franchise tax" or "privilege tax." This tax is frequently justified as a tax simply for the privilege of doing business in the state. As with state taxes on business income, the specifics of a state's franchise tax often depend in part on the legal form of the business. Franchise taxes are generally either a flat fee or an amount based on a business's net worth.
New Hampshire has both a business profits tax (BPT), which is a tax on business income, and a business enterprise tax (BET), which is a tax on a business's enterprise value tax base. Both of these taxes apply to essentially every form of New Hampshire business. At the same, and as mentioned above, in terms of personal income New Hampshire only taxes interest and dividend income. So, while your New Hampshire business itself may well be subject annually to two different types of state tax, any remaining income after those taxes that passes through to you personally, for example from an S corporation, LLC, or limited liability partnership (LLP), will not be subject to further taxation on your personal state tax return.
New Hampshire's business profits tax is charged at a flat rate. For 2020 through 2021, the tax rate is 7.7%. For 2022 and later the rate lowers to 7.6%.
The tax applies to income from business activity in the state, applied before any federal net operating loss or special deductions, and with various state-specific additions and deductions. For 2021 and earlier, businesses with $50,000 or less in New Hampshire gross receipts are not required to pay the BPT tax or a BPT return. For 2022 and later, this filing threshold is increased to $92,000.
BPT returns for partnerships are due on the 15th day of the 3rd month following the end of the taxable period. BPT returns for other business entities, such as corporations, are due on the 15th day of the 4th month following the end of the taxable period.
The business enterprise tax is based on a business's enterprise value tax base. This is defined by the Department of Revenue Administration as "the sum of all compensation paid or accrued, interest paid or accrued, and dividends paid by the business enterprise, before special adjustments and apportionment." The BET is charged at a flat rate. For 2020-2021, the BET rate is .60%. For 2022 and later, the rate lowers to .55%.
Currently, a business is required to file a BET return if either:
If your business receipts and tax base are below these thresholds, you need not pay the tax or file a return. But these thresholds have been subject to change in the past and may change again in the future.
Here's a brief look at additional details for five of the most common forms of New Hampshire business: corporations (C corporations), S corporations, LLCs, partnerships, and sole proprietorships.
New Hampshire corporations are subject to both the business profits tax and the business enterprise tax.
An S corporation is created by first forming a traditional corporation and then filing a special form with the IRS to elect S status. Unlike a traditional corporation, an S corporation is not subject to separate federal income tax. Furthermore, most states also do not subject S corporations to a separate income tax, and instead, tax each individual shareholder on the portion of the corporation's annual net income they receive. In other words, in most states, S corporations are pass-through entities. New Hampshire, however, is different: it does not recognize the federal S election, and instead treats S corporations like traditional corporations, including requiring them to pay the same taxes as traditional corporations. In short, like all other forms of business in New Hampshire, S corporations are subject to both the business profits tax and the business enterprise tax.
However, an individual shareholder does not owe state tax on whatever portion of the corporation's net income they ultimately receive.
In most states, standard LLCs are pass-through entities that are not required to pay either federal or state income tax. Instead, income from the business is distributed to individual LLC members, who then pay federal and state taxes on the amount distributed to them. New Hampshire, however, is different: It does not treat LLCs as pass-through entities, and instead requires them to pay both the business profits tax and the business enterprise tax. An individual member, however, does not owe state tax on whatever portion of the company's net income they ultimately receive.
(While by default LLCs are classified for federal tax purposes as either partnerships or disregarded entities, it is possible to elect to have your LLC classified as a corporation. In that case, the LLC would be subject to federal corporate income tax; however, this change in classification would not affect the LLC's New Hampshire tax obligations.)
In most states, partnerships are pass-through entities that are not required to pay either federal or state income tax. Instead, income from the business is distributed to individual partners, who then pay federal and state taxes on the amount distributed to them. New Hampshire, however, is different: it does not treat partnerships as pass-through entities, and instead requires them to pay both the business profits tax and the business enterprise tax. An individual partner, however, does not owe state tax on whatever portion of the partnership's net income they ultimately receive.
In most states, sole proprietorships are not required to pay either federal or state income tax. Instead, income from the business is distributed to the sole proprietor, who then pays federal and state taxes on the amount distributed to him or her. New Hampshire, however, is different: It does require sole proprietorships to pay both the business profits tax and the business enterprise tax. The sole proprietor, however, does not owe state tax on the income they ultimately receive from the business.
Our primary focus here is on businesses operating solely in New Hampshire. However, if you're doing business in several states, you should be aware that your business might be considered to have nexus with those states and, therefore, might be obligated to pay taxes in those states. Also, if your business was formed or is located in another state but generates income in New Hampshire, it might be subject to New Hampshire taxes. The rules for taxation of multistate businesses, including what constitutes nexus with a state for the purpose of various taxes, are complicated; if you run such a business, you should consult with a tax professional.
For further guidance on New Hampshire's corporation net income tax, visit the New Hampshire Department of Revenue Administration. For information on business-related taxes in other states, check Nolo's 50-State Guide to Business Income Tax. And, if you're looking for detailed guidance on federal income tax issues, check Tax Savvy for Small Business by Frederick Daily (Nolo).
Updated February 16, 2022