New Hampshire Business Taxes Explained

New Hampshire has no state income tax, which can be a huge advantage for businesses and individuals alike. This means that your company won't have to worry about paying state income tax on your profits.

New Hampshire's business-friendly environment is also reflected in its low corporate tax rates. For C corporations, the tax rate is 8.5% of net income.

The state also offers a tax credit for businesses that invest in research and development, which can be a great incentive for companies looking to innovate and grow. This tax credit can be worth up to 80% of eligible expenditures.

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New Hampshire taxes several services since it doesn't have a sales tax rate.

Businesses in New Hampshire have two types of taxes to worry about: businesses should check with the New Hampshire Department of Revenue Administration to ensure they know of all taxes for their industries.

Sole Proprietorships are required to pay both the business profits tax and the business enterprise tax in New Hampshire, unlike in most other states.

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Sole proprietorships are a common business type, and in most states, they're not required to pay federal or state income tax. This means that the income from the business is distributed to the sole proprietor, who then pays federal and state taxes on the amount distributed.

In New Hampshire, however, sole proprietorships are an exception. They must pay both the business profits tax and the business enterprise tax.

For a sole proprietorship in New Hampshire, the business profits tax is calculated at 7.6% of the business income. For example, if your sole proprietorship had New Hampshire income of $500,000, the business would owe $38,000 in business profits tax.

The business enterprise tax, on the other hand, is calculated at 0.55% of the enterprise value tax base. For instance, if your sole proprietorship has an enterprise value tax base of $200,000, the business would owe $1,100 in business enterprise tax.

As a sole proprietor, you won't owe state tax on the income you receive from the business, even if your business owes taxes in New Hampshire.

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The Phantom Gains Tax debate in New Hampshire has been a contentious issue for businesses. This tax provision applied to certain situations, such as when someone sells their interest in a partnership at a profit.

For federal purposes, the tax on that profit is levied at the personal level, not the business level. The individual who made the sale pays a capital gains tax on their earnings.

New Hampshire doesn't have a capital gains tax, so if the partner making the profit lives in the state, they won't have to pay any personal state-level tax on the money they made in the transaction.

However, the "step up" in asset value for federal tax purposes had a fiscal side effect in New Hampshire. The state levied its business profits tax against the increase, saddling the remaining partners with a sometimes significant tax obligation.

In 2016, the Legislature addressed criticisms of this policy by making the "step up" optional for businesses. Companies may now opt to maintain their lower asset basis for New Hampshire tax purposes, eliminating the need to pay business profits tax on the "phantom" income.

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New Hampshire has a unique tax system for businesses, with two types of taxes: the business profits tax (BPT) and the business enterprise tax (BET). The BPT is a flat rate of 7.7% for 2020-2021 and 7.6% for 2022 and later, applied to income from business activity in the state.

Businesses with $50,000 or less in New Hampshire gross receipts for 2021 and earlier are exempt from paying the BPT tax or filing a return. This threshold increased to $92,000 for 2022 and later.

BPT returns for partnerships are due on the 15th day of the 3rd month following the end of the taxable period, while returns for other business entities, such as corporations, are due on the 15th day of the 4th month following the end of the taxable period.

The business enterprise tax is based on a business's enterprise value tax base, which includes compensation, interest, and dividends paid by the business. The BET rate is 0.60% for 2020-2021 and 0.55% for 2022 and later.

To file a BET return, a business must have an enterprise value tax base of more than $111,000 or gross business receipts of more than $222,000.

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New Hampshire is a shining example of a state that keeps corporate subsidies in check. It spends only $30 per capita on tax subsidies, free property, and other kickbacks.

This is remarkably low compared to other states, which can spend hundreds of dollars per capita on similar subsidies.

New Hampshire's business taxes have been a topic of discussion in recent years. Calls to reduce the Business Enterprise Tax (BET) and Business Profits Tax (BPT) rates have been made, particularly during state budget debates.

Tax rate reductions have been a focus of these debates. Reducing these tax rates could have a significant impact on businesses operating in the state.

In recent years, there have been calls to reduce or increase New Hampshire's BET and BPT rates. This suggests that the current tax rates are a point of contention among lawmakers and business owners.

Businesses in New Hampshire pay both the BET and BPT, which are two separate taxes. These taxes are levied on businesses and are used to fund state government operations.

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New Hampshire's research and development tax credit is a valuable incentive for businesses that invest in innovation. This credit can be applied to up to 10% of a business's qualifying manufacturing research and development expenses.

Businesses must apply for the credit by submitting an application to the Department of Revenue by June 30 of the year following the expense was incurred. Any unused credit can be carried forward for up to five years.

The credit is capped at $7 million per year, which has led to a situation where demand far exceeds the available credit, resulting in the Department of Revenue dividing the available credit between businesses with qualifying applications. This has sparked calls to raise the cap or eliminate it entirely.

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The research and development tax credit is a valuable incentive for businesses in New Hampshire.

This credit can be applied to up to 10% of a business's qualifying manufacturing research and development expenses, with each taxpayer's share not exceeding $50,000.

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Businesses must apply for the credit by submitting an application to the Department of Revenue by June 30 of the year following the expense was incurred.

Any unused credit may be carried forward for up to five years.

Currently, funding for the credit is derived from business tax revenue and is capped at $7 million per year.

Last year, 111 qualifying businesses shared the $1 million funding, resulting in each of the 58 businesses who qualified for the maximum credit of $50,000 receiving $12,065.

The New Hampshire Senate has recently approved a bill that increases the state's research and development tax credit funding from $1 million to $2 million starting this year.

New Hampshire is a great example of a state with no sales tax exemptions, since it doesn't collect sales and use taxes at all.

In some states, sales tax exemptions are necessary because they do collect sales taxes. For instance, New Hampshire's neighbors, such as Massachusetts and Vermont, do require exemption certificates for certain purchases.

New Hampshire's lack of sales tax exemptions is likely due to its own unique tax laws and policies.

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If you're an LLC owner or member, you'll need to pay the Interest and Dividends Tax on any gross interest or dividend income exceeding $2,400 in a year.

This tax applies to all individuals and LLCs, as well as certain other businesses, and you'll need to file the I&D tax return with Form DP-10 until 2026.

The good news is that New Hampshire is phasing out the I&D tax, with the rate dropping from 5% to 4% starting at the end of 2023, and it will be repealed at the end of 2026.

Make sure to keep track of your interest and dividend income to ensure you're meeting the $2,400 threshold and can take advantage of the upcoming rate reduction.

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New Hampshire has specific taxes for certain industries. The state's taxation policies can be complex, but understanding the basics can help businesses navigate the system.

The New Hampshire Department of Revenue taxes industries such as communications services, which includes phone and internet services. This tax is a percentage of the revenue generated by these services.

Other industries subject to taxation in New Hampshire include electricity consumption, excavation and gravel extraction, timber harvesting, and tobacco sales. These taxes can be a significant expense for businesses operating in these sectors.

Here are the industries subject to specific taxes in New Hampshire:

Partnerships are pass-through entities in most states, meaning they don't pay federal or state income tax directly. Instead, partners pay taxes on their share of the business income.

In New Hampshire, however, partnerships are treated differently, requiring them to pay both the business profits tax and the business enterprise tax.

For example, if a partnership has New Hampshire income of $500,000 and an enterprise value tax base of $200,000, they'll owe $38,000 in business profits tax and $1,100 in business enterprise tax.

Individual partners won't owe state tax on their share of the partnership's net income, but the partnership itself will have to pay these taxes.

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Motor Vehicle Rental businesses must collect a 9-percent excise tax on vehicle rentals.

Taxes collected in January are due on or before February 15, so be sure to keep track of your payments to avoid any late fees.

The tax is due on the 15th of the month following the month taxes were collected, so mark that date in your calendar to stay on top of your tax obligations.

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Communication services in New Hampshire are subject to a 7-percent tax. This tax applies to two-way communication services, including VoIP and prepaid wireless.

Two-way communication providers collect the tax from their consumers, and retailers of these services are also subject to the tax. However, if the place of primary use is not in New Hampshire, the carrier does not charge the tax.

Tax returns for communication services are due on or before the 15th day of the month after the business collects the taxes. For example, taxes collected during January are paid on or before February 15.

Here's a summary of the communication services tax in New Hampshire:

Electric companies must collect a tax of $0.00055 per kilowatt-hour of electricity consumed.

If you generate your own power, you'll need to file a tax return to pay the tax on your own behalf.

The tax return is due on the 15th day of the second month following the month the electricity was consumed.

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In New Hampshire, you won't find a general sales and use tax or local sales taxes at the city or county level. However, there are some specific taxes to be aware of.

The state does apply taxes to gasoline and diesel fuel sales at 23.83 cents per gallon. This tax is typically passed on to the customer.

Sales of beer, cigarettes, vapor products, and other tobacco products are also taxed at variable rates.

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The New Hampshire Senate has approved a bill to increase the state's research and development tax credit funding from $1 million to $2 million beginning this year.

Businesses can apply for up to 10% of their qualifying manufacturing research and development expenses, with each taxpayer's share not exceeding $50,000.

The credit is applied first against the business's BPT obligation, and then BET obligation if there is any credit still remaining.

Businesses must apply for the credit by submitting an application to the Department of Revenue by June 30 of the year following that in which the expense was incurred.

Any unused credit may be carried forward for up to five years, and funding for the credit is derived from business tax revenue.

In recent years, demand for the credit has far exceeded the cap, leading the Department of Revenue to divide the available credit between businesses with qualifying applications.

Last year, 111 qualifying businesses shared $1 million, with 58 businesses receiving the maximum credit of $50,000, each getting $12,065.

Remote sellers and marketplace sellers don't have to collect New Hampshire sales tax because the state doesn't have a sales and use tax.

However, remote sellers doing business in New Hampshire likely have to collect taxes for other states. Most states have thresholds of $100,000 of gross sales or 200 transactions that business taxpayers must meet before being required to collect and pay sales taxes.

Businesses often collect sales tax regardless of meeting these thresholds as a convenience to their customers. This way, customers don't have to pay use taxes in their own states.

If a business doesn't collect the other states' sales taxes, consumers must pay use taxes in their own states.

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