How do governments tax corporate income?

Corporations, like individuals, must pay taxes on their income. In the United States, businesses are generally subject to federal and state taxes. In Minnesota, corporate tax is imposed at both the state and local levels. At the federal level, corporations are taxed at the corporate income tax rate as set by the Internal Revenue Service (IRS). Corporate income tax is generally imposed on income earned after deductions are taken for expenses, like wages and costs of goods sold. Corporate income taxes typically vary depending on the entity type, such as a C-corporation, a Limited Liability Company (LLC), or an S-corporation. Additionally, the income bracket the corporation falls into helps determine its corporate tax rate. At the state level, Minnesota taxes corporations under the Minnesota Corporate Franchise Tax. Generally, corporations in Minnesota must pay a minimum of 9.8 percent of their net income allocated or apportioned to the state. Corporations may also be subject to a Minnesota Surcharge Tax under certain conditions, such as if a company’s taxable income is greater than $500,000 or if the company’s income from sources outside of Minnesota exceeds 25 percent of its total income. At the local level, corporate tax is imposed by the individual cities in Minnesota. Each of Minnesota’s 87 counties may impose different taxes, including a net profits tax and a business license tax. The rate and type of taxes imposed varies by city, so it’s important to be familiar with the locality’s tax laws and regulations. In summary, corporations must pay federal, state, and local taxes. Depending on the type of business, income level, and location, corporate income taxes can vary. It is important to be aware of the applicable taxes and regulations when operating a business in Minnesota.

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How do governments tax corporate income?

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