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Basic State and Local Tax Information
For The Small Business Man
Property Tax
This tax exists in all counties, muni-
cipalities, school and most other special
districts, and nearly all states. The tax
is generally levied on all classes of
property, real and personal, tangible
and intangible. As a general rule it is
levied by, and paid to, the County Tax
Collector, although in some jurisdic-
tions it may be paid to the City or Town
Treasurer or Tax Collector. Any local
tax official should be able to give you
full information concerning this tax.
Sales and Use Taxes
At the present time 31 states and the
District of Columbia have some form
of general retail sales tax. The re-
maining states levy a special sales tax
on one or more items, such as gasoline,
tobacco, and soft drinks. Most states
levy "use" taxes upon the use. con-
sumption", or storage of certain com-
modities not already subject to their
sales tax. as. for example, merchandise
shipped in from another state. The lo-
cal tax collector may be able to give
you information on these taxes, al-
though they are usually administered
by the State Tax Commission. Commis-
sioner of Revenue, or some other state
official, such as the State Treasurer.
License Taxes
All states which permit the manu-
facture or sale of alcoholic beverages
levy special license fees for the privi-
lege of engaging in those businesses.
Most states have special licensing laws
applying to one or more other types of
business. Druggists, barbers and beau-
ticians, funeral directors, and many
professional people will find that their
businesses are subject to license taxes
in many states. In addition, nine states
have a general license tax law provid-
ing for a varying scale of license fees
upon nearly all classes of business op-
eration. Tbe states are: Alabama. Ark-
ansas, Florida. Georgia. Louisiana, Mis-
sissippi. North Carolina. Tennessee,
and Virginia.
Unemployment Compensation Tax
All states levy an unemployment
compensation tax to conform with the
requirements of the Federal Social Se-
curity Act. However, many variations
are to be found in the different states.
Under the Federal law a business must
have eight employees before it is sub-
ject to the Federal unemployment tax.
Twenty-five of the states make employ-
ers who have a lesser number of em-
ployees liable to the state tax. The
14
twenty-five states are Arizona. Arkan-
sas, California. Connecticut, Delaivare,
Idaho, Illinois. Louisiana, Maryland,
Massachusetts, Minnesota, Montana,
Nevada, New Hampshire, New Jersey,
New Mexico, New York, Ohio, Oregon.
Pennsylvania, Rhode Island, Utah,
It'ashington, Wisconsin, and Wyoming.
The italicized states and the District of
Columbia have a one-employer mini-
mum. The tax varies among the states,
but the minimum initial rate is 2.7 per-
cent of the first $3,000 in annual wages
of each employee. You should investi-
gate the requirements of your state be-
fore you begin business. In most states
the tax is administered by an Unem-
ployment Compensation Commission, a
State Division of Employment Security,
or some similarly titled agency. Usu-
ally the agency is located in the state
capital, with field offices throughout the
state.
Income J ax
Thirty-three states and the District of
Columbia levy a net income tax upon
incorporated businesses or upon indi-
viduals regardless of source of income.
If you are located in one of the follow-
ing states you will NOT be required to
pay either a corporate or a personal
state income tax: Florida, Illinois, In-
diana, Maine, Michigan, Nebraska,
Nevada. New Hampshire, New Jersey.
Ohio, South Dakota. Texas. Washing-
ton, West Virginia and Wyoming. The
States of Pennsylvania, Rhode Island
and Connecticut have a corporate but
no individual income tax. Delaware
has an individual but no corporate in-
come tax. Since these taxes are enacted
by the state legislatures, enactment or
amendment of state income taxes may
take place at any session of the state
legislature.
Local Taxes
Because of their variety, only a brief
mention can be made of local taxes.
You should investigate carefully the
local laws providing for license fees,
permits, and special taxes relating to
business and levied under the authority
of your city or county government. The
most important form of local tax, other
than the property tax, is usually a spe-
cial license tax. Often this is a mercan-
tile license tax based on gross volume
of business, or a tax on business, pro-
fessions and occupations according to a
schedule of fixed rates. However, To-
ledo, Columbus, and some other cities
in Ohio; Louisville, Kentucky; Port-
land, Oregon; and Philadelphia and
some other Pennsylvania cities have
city income taxes. New York City, New
Orleans, Denver, and a number of West
Coast cities, particularly in California,
have sales taxes. There has been a de-
cided increase in the use of this form
of municipal business tax.
Experts See 1953 As Good
Business Year
The Wall Street Journal reports that
the crystal ball gazers at the Harvard
Business School have come up with the
following predictions for 1953: Busi-
ness won't slump in the second half of
this year, even though most seers are
expecting at least a mild recession then.
Physical volume of retail sales will be
higher in 1953, but prices might be
lower. So dollar volume could only
equal, or fall below, 1952. Defense out-
lays will continue to mount throughout
the year. Substantial tax cuts are not
likely this year. Professor Sumner H.
Slichter predicted there would be no
slump in business activity in the sec-
ond half of the year, due to three main
factors: (1) The Eisenhower Adminis-
tration will look more realistically at
the need of foreign countries for
American military aid, so defense
spending won't level off until some
time in 1954; (2) Outlays for public
works by states and municipalities will
rise for several more years, due to ac-
cumulated needs for roads, schools,
hospitals, water, sewage and other proj-
ects; (3) A slow rise in personal
income, after taxes, to be spent for
consumer goods.
Malcolm P. McNair, professor of re-
tailing, forecasts a larger physical
movement of goods over store counters,
but perhaps a dip in prices. The "rev-
olution" in retailing will probably be
accentuated over the next 12 months,
writes Professor McNair. This revolu-
tion embraces the marked trend to the
suburbs, development of planned shop-
ping centers, a great increase in self-
service, and movement toward evening
openings.
Other forecasters see interest rates
continuing upward; doubt that appre-
ciable tax cuts can be made in 1953,
due to impossibility of trimming Fed-
eral expenditures fast enough. Clinton
S. Golden, lecturer on labor problems
and a former union official, expects
unions to become more self-reliant
under the new administration and to
devote themselves more extensively to
dealing with employers directly, rely-
ing less on the Government for assist-
ance than in the past.
THE MUSIC TRADE REVIEW, MARCH, 1953