Today, we’re talking about one of our most exciting topics yet: business taxes in Florida. Okay, so business taxes in Florida aren't exactly the sexiest or the most fun of topics, but knowing what type of taxes you owe (and paying them!) is an important part of running your business (and keeping you out of legal trouble).
Let’s dive into Florida's state business taxes, the different types of business taxes in Florida, and what types of businesses are required to pay state taxes in Florida. We know this sounds a little daunting, but don’t worry—we’ll walk through everything together.
How do business taxes in Florida work?
A huge plus for starting your business in Florida is that small businesses owners, generally speaking, pay less in taxes compared to other states. This is because the type of taxes you owe in Florida will depend on your business structure and net worth.
The only business structure that owes state income tax is C corporations. This means pass-through entities (like S corporations, LLCs, partnerships, and sole proprietors) do not owe state income tax. This is because these business structures are taxed on the personal level, rather than on the entity level; conveniently, there is no personal income tax in Florida, so any income that “passes through” your small business to yourself is not taxed (woo hoo)!
In order to pay your taxes, you’ll need to register with the Florida Department of Revenue (FDOR).
Business taxes in Florida: Key takeaways
- C corporations must pay state income tax, typically 5.5%.
- Florida does not mandate state income tax on individuals.
- S corporations, LLCs, partnerships, and sole proprietors do not owe state income tax.
- Almost all businesses will be subject to other state taxes, like sales and use tax, and federal taxes.
Florida business taxes for corporations
As we mentioned before, C corporations in Florida must pay state income tax. If you have a C corp, you will either be taxed the federal income rate of 5.5% OR the minimum Florida business tax rate of 3.3%. Unfortunately, you’ll have to use whichever method results in the higher tax (boo).
Regardless of which option you choose, the first $50,000 your corporation earns in income is not taxed. For example, let’s say your Florida corporation had an income of $100,000 in its first year. That means only $50,000 is taxable, and whichever tax rate results in more taxes would be applied.
How are S corporations taxed in Florida?
Although they are technically corporations, don’t be fooled: S corporations are state income tax exempt! S corps are such a popular choice in Florida because they give you all the perks of corporations (like legal and financial protection) without the state income tax.
Example time. Let’s say your S corporation had an income of $100,000 in the past year. This amount will be assigned to you and any shareholders, and you’ll pay federal taxes on your portion of the income. Regardless of how much income your S corp brings in, you won’t owe any state income tax.
Florida business taxes for limited liability companies (LLCs)
Unless an LLC chooses to be treated as a corporation, it isn’t subject to state income tax. In general, income from an LLC “passes through” to each LLC member, who then pays federal taxes on their respective amounts. Like S corps, LLC owners in Florida are protected from any financial or legal liabilities related to their businesses and get to skip the state income taxation.
Depending on the type of LLC you have, there may be special state filing requirements, so we recommend getting the help of a tax pro to make sure you’re on the right track.
Okay, let’s go over an example using a multi-member LLC. This LLC has opted to be taxed as a partnership. Let’s say the LLC’s income was $100,000 for the past year. (As you can see, $100,000 is apparently our favorite number.) This income would be divided between you and the other LLC members, and you would each owe federal taxes on that amount. But regardless of how much income you make, you aren’t subject to Florida income tax.
Partnership business taxes in Florida
Regardless of what kind of partnership you have (whether it be general, limited, or limited liability), you do not have to pay Florida state income tax. For federal taxes, income is divided between the individual partners who then pay federal tax on that amount.
Business taxes in Florida for sole proprietorships
Sole proprietorships also (you guessed it) do not owe Florida state income tax, because income from sole proprietorships are treated as personal income which is not taxed. However, you would still owe federal tax for that income.
Alright, time for another example involving $100,000. So, you are the sole owner of your small business and you made $100,000 in income. That income flows down to you, and it would be taxed on your personal federal tax return. The $100,000 would not be taxed on your Florida tax return.
How multistate business are taxed in Florida
But what if your company is based in Florida but conducts business in other states?
In this scenario, the concept of “nexus” comes in. Even if your company is based in Florida, you may still owe taxes in other states if you conduct business there. We call this “having a nexus” with another state.
Taxation for multistate businesses is complex, so we highly suggest you consult a tax professional, like Wave Advisors. Wave Advisors are trained in-house professionals who can give you expert bookkeeping, accounting coaching, and tax preparation services year-round.
Additional Florida state tax obligations
Up until now, we’ve been strictly talking about income tax. Unlike most states, Florida does not have franchise tax (which is tax owed simply for the sake of doing business), but there are some other Florida state business taxes to be aware of.
Sales tax in Florida is 6% for most sales and purchases of goods, services, and rentals. Your filing period depends on how much sales tax you collect.
If you used a taxable good or service for your business but sales tax wasn’t paid at the time of purchase, then you owe use tax. An example of this would be if you bought an item from a different state with the intention to sell or use it in your state, but paid no sales tax. It’s up to the consumer to calculate and pay use tax.
Only certain industries are subject to excise tax, which is a tax imposed on certain goods and services, including motor fuel, cigarettes, and cell phone service plans.
Unemployment tax payments
This part only applies if you have employees. Florida does not have state withholding taxes (unlike other states), but it does have unemployment insurance tax (also known as “reemployment tax”) that needs to be paid.
The tax rate for new employers is 2.7%, which is applied to the first $7,000 paid to each employee; any wages after that will not be taxed for the rest of the year. Reemployment tax reports and payments are submitted on a quarterly basis, on or before April 30, July 31, October 31, and January 31.
The bottom line on business taxes in Florida
Taxes are daunting and complex, especially once you start breaking them down on the state-level, so give yourself a huge pat on the back for making it to the end of this article! Now that you have the lowdown on business taxes in Florida, you not only have the tools to financially plan and ensure your small business is on the right track, but get organized for tax season too.
Remember, the type and amount of state taxes you owe will depend on your business structure and net worth. We always recommend speaking with a tax professional so you can get personalized advice for you and your small business.
The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.