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How does taxes work?

Business Taxes--How do they work in smaller towns?

  • I am self-employed in Philadelphia and will soon be moving to small-town Michigan. I grok the business taxes here. I can't figure out the taxes there. Specifics inside. Right now I live in Philadelphia and am self-employed as an editor. I work from my apartment. I was a good little citizen and got my $300 business license and file my business privilege tax and net profits tax every year. They are very expensive. Later this year, for reasons, I’ll be moving to Michigan and living for 6-12 months in Benzie County and then moving to Saginaw County (specifically Saginaw Township). For both of those places I have kind of found what looks to be their business licenses (only $10???), but I can find nothing about a business tax of any kind. I’ve looked at the clerk’s office and the treasurer’s office and done random googling using various key words. I find it hard to believe that businesses don’t pay taxes in those two locales. What am I missing? How do business taxes for the self-employed work in places that aren’t Philadelphia? How do cities get their money from businesses if not by charging them for the “privilege” of setting up shop there? I WANT to pay the taxes I’m supposed to and I don’t want to be hunted down by Benzie/Saginaw if I just didn’t know what to do (Philadelphia hunts you down with a vengeance). I've emailed the clerk's office but have not received any kind of reply and it's been over a month...

  • Answer:

    A lot of places just rely on property tax and/or sales tax revenues. In my experience, the sort of business taxes that you're accustomed to are actually relatively unusual. Anyhow, all this varies wildly by location so unless you get lucky and some MeFites who both live in those locations AND are similarly self-employed as freelancers see this question, this is not something that MetaFilter can definitively answer for you. You just need to pick up the phone and call the local (town and/or county) government directly and ask them what local taxes and license fees you would be subject to (and don't be surprised if he answer turns out to be "nothing" for a self-employed freelance editor such as yourself).

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There's usually four levels of taxes: city, county, state, and federal, each operating somewhat independent of the other. You may find that there's no city or county taxes on business operation, but the state collects taxes on it. You should probably find a local accountant who can at least advise you on taxes, even if you do your filing yourself.

AzraelBrown

Business license fees vary widely between jurisdictions, as do the returns. As Michigan doesn't impose corporate income tax on c-corps making under $350,000 in a given year, it seems reasonable to find that local business license fees would be quite low. Call the county clerks and ask (I don't think a state or local jurisdiction has EVER responded to one of my emails for tax information, and I practice state and local tax - unless I already have a specific contact). A local tax attorney or CPA will also know the answer to this. Philadelphia and PA municipalities in general charge people, not just business owners, more taxes than many other states. There's a link to a handy simulator that also purports to help you figure out what you need to do on the http://onestopsimulator.state.mi.us:81/OneStopSim/mbsBase.do page.

loolie

They might just have corporate taxes -- i.e., for big business -- and not try to collect anything from small businesses and individuals that are self-employed. I agree that such things aren't universal. At the very least, you probably have a window of forgiveness to get there and keep editing (or whatever) while asking somebody local for a little advice -- you should be able to find a CPA who'll tell you what to expect during a half-hour or hour consult.

acm

Yeah, I live in Texas and we don't have income tax and anything resembling a corporate tax applies to guys much bigger than me. I have an LLC I run some stuff through and that cost a one-time setup fee and some miniscule portion of revenue coming through to keep it active but I only did that for some stuff I was working on. I think I only had to get involved with the county if I was doing food or setting up a warehouse but honestly don't remember. We rely pretty heavily on property taxes rather than income taxes here, that may also be the case there.

Ghostride The Whip

You'll essentially be working out of your home as a self-employed contractor, right? I'd be shocked if you had to fork over any sort of business tax for that.

Thorzdad

In my town in California, doing similar work, all I had to pay was a $30/yr business license fee (and, of course, federal and state taxes).

wintersweet

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