As a business owner in Texas or New Mexico, it’s important to understand the difference between state and federal taxes. Knowing how each one works can help you avoid trouble with the IRS and save money at the same time.
At Marcus, Fairall, Bristol + CO., PLLC, a trusted accounting firm in El Paso, we help businesses stay on top of both state and federal tax rules. To learn more, call (915) 775-1040 today.
What Are Federal Taxes?
Federal taxes are paid to the U.S. government. Every business in the country must follow federal tax rules, no matter where they are located. These taxes help pay for things like the military, Social Security, Medicare, and national parks.
The main types of federal taxes include:
- Income tax – Paid on the profits your business makes.
- Employment taxes – Includes Social Security, Medicare, and unemployment taxes if you have employees.
- Excise taxes – Applied to certain goods and services like fuel or alcohol.
- Self-employment tax – If you’re a sole proprietor or partner, you may have to pay this instead of regular employment taxes.
An accounting firm like Marcus, Fairall, Bristol + CO., PLLC can help you figure out which federal taxes apply to your business and when to pay them.
What About State Taxes?
State taxes are paid to the state where your business operates. Every state has different tax rules, which can be confusing. That’s why it’s helpful to work with an accounting firm that understands the local tax laws in both Texas and New Mexico.
Texas: No State Income Tax for Businesses
Texas is one of the few states that does not have a state income tax for individuals or most businesses. However, businesses in Texas do need to pay the Texas Franchise Tax. This tax is based on your company’s gross receipts, not profits. Even if your business didn’t make much money, you might still owe franchise tax.
The Texas Comptroller collects this tax each year. The rules can be tricky, so having an experienced accounting firm on your side is a smart move.
New Mexico: Business Income Tax Applies
If your business is located in New Mexico or if you earn income there, it’s a different story. New Mexico does have a state income tax for businesses. This means that in addition to federal taxes, you must pay tax on your business income to the state.
New Mexico also requires businesses to collect Gross Receipts Tax (GRT) on many goods and services. This is similar to sales tax but broader. Understanding which items are taxable can be difficult, so it’s a good idea to talk to an accounting firm with knowledge of New Mexico tax laws.
Key Differences Between State and Federal Taxes
Here are a few major differences you should keep in mind:
- Who you pay – Federal taxes go to the IRS. State taxes go to the state’s tax office (Texas Comptroller or New Mexico Taxation and Revenue Department).
- What’s taxed – Federal taxes focus on profits, employment, and specific goods. State taxes may include income, franchise, and gross receipts.
- Tax rates – Rates vary by state. Federal rates are the same across the country.
- Filing rules and deadlines – Each state has its own filing deadlines and forms, which can be confusing without help from a skilled accounting firm.
What If You Operate in Both States?
Some businesses operate in both Texas and New Mexico. For example, your business might be based in El Paso but also serve customers in Las Cruces. In that case, you may need to pay taxes in both states.
You might owe New Mexico gross receipts tax if you perform services or sell products there. You may also need to file income taxes in New Mexico, even though your home office is in Texas.
The rules can be complicated, but a qualified El Paso accounting firm like Marcus, Fairall, Bristol + CO., PLLC, can help make sure you’re in compliance and not overpaying.
Why You Need Professional Help
Filing taxes is not always simple, especially if your business operates in more than one state. Even small mistakes can lead to big penalties. That’s why it’s important to work with an experienced accounting firm that knows both state and federal tax laws.
At Marcus, Fairall, Bristol + CO., PLLC, we work with business owners in El Paso and the surrounding areas to:
- Understand which taxes they owe.
- File paperwork on time.
- Claim the right deductions.
- Stay in compliance with all tax laws.
- Our accounting firm takes the guesswork out of taxes so you can focus on running your business.
Accounting Firm in El Paso
Federal and state taxes are both important, but they work in different ways. Texas has no state income tax but does have a franchise tax. New Mexico taxes business income and requires gross receipts tax on many transactions. Understanding the rules for each state can help you make smart decisions and avoid problems.
If you have questions about your taxes or want to make sure your business is on the right track, Marcus, Fairall, Bristol + CO., PLLC is here to help. Our team of experts can guide you through the process and make tax season less stressful. Call (915) 775-1040 today.