How do governments tax corporate income?

In Pennsylvania, corporate income is taxed at the state level by the Department of Revenue. This taxation is based on a corporate income tax rate, which is determined by the amount of taxable income a business earns. The tax rate begins at 7.1% and ranges up to 9.99%. The first step in determining corporate income taxes in Pennsylvania is for businesses to calculate their gross income. Gross income includes a business’s total income from sales and other revenue, before deductions are taken. Then, the business must calculate deductions such as business expenses and depreciation of assets. After the deductions are determined, businesses must subtract the deductions from the gross income to find the taxable income. The taxable income is then taxed using the corporate income tax rate. The business must pay the rate for the taxable income amount they made. For example, if the taxable income was $100,000 and the corporate income tax rate was 8%, the business would owe $8,000 in taxes. International companies may also owe taxes to other countries as well. This is known as “cross border” taxation, where a business based in one country is taxed in another. For example, if the business was based in the US but earned income in the UK, they would owe taxes in both countries. In Pennsylvania, corporate income taxes are important source of revenue for the state. The money collected from corporate taxes is used to fund programs and services that benefit Pennsylvania citizens.

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How do governments tax corporate income?

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