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StevenMcGrathCPA
StevenMcGrathCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 39
Experience:  12+ years of state tax experience, MST, CPA
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Hi, My husband and I are planning to move to NH. We have

Resolved Question:

Hi,
My husband and I are planning to move to NH. We have a small online business which has had approx $75,000 profit annually for the last 3 years. We live in Massachusetts and assumed that moving to NH would eliminate the need for us to pay State Tax on the income. The business is a sole proprietorship and we each spend over 40 hours per week working on it. I just found out that there is a Business profit Tax (8.5%) and Business enterprise tax (.75%) in NH. If I pay myself $75,000 as a salary, will that be taken off of the total profits. Also, if I pay myself $75,000, will I then need to pay a BUSINESS Enterprise tax of .75% on that amount? Is this illegal?? I don't want to do anything that will cause me to be audited. We really want to move to NH and are ready to put an offer in on a house, but need to find out how the tax system works. Any help would be greatly appreciated. Thanks so much.

Terry
tewksbury, MA
Submitted: 4 years ago.
Category: Tax
Expert:  StevenMcGrathCPA replied 4 years ago.

Hi There,

 

The New Hampshire Business Profits Tax is an 8.5% tax assessed on income from conducting business activity within the state.It is paid by any entity organized for gain or profit and carrying on business activity within the state.. Businesses with $50,000 or less of gross business income from all their activities are not required to file a return, thus your business would have to deal with the tax.

 

The starting point for determining the tax base is Federal taxable income from your Federal return and there is a deduction allowed for a "reasonable" salary paid to the partners or proprietors or a business that is organized as a sole proprietorship. This cite can be found at N.H. Rev. Stat. Ann. § 77-A:4(III)(a). Thus, that $75K would likely be taken out of the total profits used to determine the tax base.

 

Next, the Business Enterprise Tax is a 0.75% tax assessed on the enterprise value tax base, which is the sum of all compensation paid or accrued, interest paid or accrued, and dividends paid by the business after special adjustments and apportionment. Businesses are required to file this return if they have more than $150,000 of gross receipts from all their activities or an enterprise value tax base more than $75,000. For this tax, the base DOES include compensation paid to partners or proprietors of the business. Deductions would be allowed for any compensation paid to other employees. This cite can be found at N.H. Rev. Stat. Ann. § 77-E:3(I). Thus, your $75K salary would be included in the tax base for this tax.

 

You can register your business and get more information on these taxes by contacting the NH Secretary of State's Office at(NNN) NNN-NNNNor(NNN) NNN-NNNN or be using the NH Dept. of Revenue Administration's website here:

 

http://www.nh.gov/revenue/index.htm

 

I hope this information was useful. If it was, your feedback is greatly appreciated.

 

Best Regards,

 

Steve

StevenMcGrathCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 39
Experience: 12+ years of state tax experience, MST, CPA
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