Business Taxes and Employee Tax/Insurance Requirements

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|  Overview of State and Local Business Taxes  |  Franchise Tax  |  Sales Taxes  |  Permits and Licenses  |

|  Local Business Taxes  |  Texas Unemployment Taxes  |  Texas Workers Compensation Laws  |

|  Federal Income Tax Withholding  |  Social Security and Medicare Taxes  |  Federal Unemployment (FUTA) Taxes  |

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Overview of State and Local Business Taxes

The Comptroller of Public Accounts is charged with the administration and collection of state and local sales tax from businesses operating in Texas, and also collects any franchise taxes owed by Texas corporations. There is no state income tax in Texas. The Comptroller maintains field offices in most major Texas cities to provide assistance and aid in complying with tax regulations. For further information on these taxes, contact: Comptroller of Public Accounts, (512) 463-4600 or (800) 252-5555, http://www.window.state.tx.us/taxes/

Franchise Tax

The Texas franchise tax is a privilege tax imposed on corporations, including banking corporations and limited liability companies that are chartered in Texas. The tax is also imposed on non Texas corporations that do business in Texas.  For more information, go to www.window.state.tx.us/taxinfo/franchise/franfaq.html. Forms available for downloading may be accessed at www.window.state.tx.us/taxinfo/taxforms/05-forms.html

Sales Taxes

You must obtain a Texas Sales and Use Tax permit if you are engaged in business and sell tangible personal property, lease tangible personal property, or sell taxable services in Texas.   To apply for a permit, you must submit a completed application for a Texas Sales and Use Tax permit to the Comptroller's office.  An application can be downloaded from the Tax Forms Online page,

http://www.window.state.tx.us/taxinfo/taxforms/00-forms.html

Sole owners should complete form AP-157.  All other ownership types (corporations, LLC's, partnerships, etc.) must complete AP-201 and form 01-707. You may also obtain an application by calling (800) 252-5555 or by visiting an enforcement field office, http://www.window.state.tx.us/taxinfo/fieldoff.html

Permits and Licenses

The permits required for taxes collected by the Comptroller are defined and outlined in the section titled Listing of Business Licenses and Permits. www.texasonline.com/portal/tol/en/gov/9

Local Business Taxes

If the business owns tangible personal property that is used to produce income, the property must be reported on a rendition form to the local county appraisal district, after January 1 and no later than March 31, each year. Business owners must report all inventories, equipment, and machinery. For additional information, contact the local county appraisal district. For phone numbers, go to: http://www.window.state.tx.us/taxinfo/proptax/apprdir09/index.html

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State Employment Taxes

Texas Unemployment Taxes – The Texas Workforce Commission collects all unemployment taxes for workers employed in Texas. For information regarding these taxes, to obtain a state employer’s identification number, and for information on tax credits, contact: Texas Workforce Commission Tax Department, http://www.twc.state.tx.us/ui/tax/uitaxreg.html

Texas Workers Compensation Laws – Texas does not require employers to have Workers Compensation coverage.  However, not doing so leaves an employer open to personal injury lawsuits from employees who are injured on the job – the damages and attorney’s fees are almost unlimited – in addition, certain defenses available in most personal injury lawsuits, such as assumption of the risk, contributory negligence, "last clear chance", and co-worker negligence, are not available to a non-subscriber in a job injury case.  For more information, go to: www.tdi.state.tx.us/business/index.html

Federal Employment Taxes

All companies with employees are required to participate in the following employee tax programs:

Federal Income Tax Withholding – All employers are required to withhold income taxes from their employees’ wages for both the Federal and State government.  To know how much income tax to withhold from employees' wages, you should have all new employees complete the appropriate forms: a Form W-4, Employee's Withholding Allowance Certificate for Federal withholding, http://www.irs.gov/pub/irs-pdf/fw4.pdf

Social Security and Medicare Taxes – By Federal law, all employers must withhold Social Security and Medicare taxes from an employee’s gross wages.  The employer must also pay an equal amount for this tax.  Depositing procedures vary depending upon the total amount an employer withholds from all employees.  Current information on amounts to withhold as well as up-to-date employee income tax withholding taxes may be found in the IRS publication entitled Circular E, Employer’s Tax Guide, http://www.irs.gov/publications/p15/index.html

Federal Unemployment (FUTA) Tax – The Federal Unemployment Tax Act (FUTA), with state unemployment systems, provides for payments of unemployment compensation to workers who have lost their jobs. Most employers pay both a Federal and a state unemployment tax. A list of state unemployment tax agencies, including addresses and phone numbers, is available in Pub. 926, Household Employer's Tax Guide. Only the employer pays FUTA tax; it is not deducted from the employee's wages. For more information, see the Instructions for Form 940, http://www.irs.gov/pub/irs-pdf/i940.pdf