S-Corporation Fees and Taxes State by State

I. Overview: Entity-Level Tax Structures for S-Corporations

Under federal law, an S-corporation is a pass-through entity: federal income tax generally is not paid at the corporate level and instead flows through to the shareholders. States, however, vary widely in how they treat S-corporations. Some impose franchise or privilege taxes, minimum fees, or alternative entity-level taxes despite the federal pass-through treatment. Others rely solely on shareholder-level income taxation and modest administrative fees. Annual or biennial reporting and filing fees are nearly universal, even where no substantive entity-level tax applies.

States generally fall into the following categories at the entity level:

• No entity-level income or franchise tax, only nominal filing and reporting fees

• Entity-level franchise, privilege, margin, or gross receipts taxes applicable to S-corporations

• Optional pass-through entity (PTE) taxes, allowing an election to pay tax at the entity level with a credit to owners

• States with unique or hybrid tax structures (for example, gross receipts taxes in lieu of income tax)

The breakdown below reflects current, publicly available state-level tax and fee structures.

II. S-Corporation Entity Taxes and Fees – All 50 States

States With No Significant Entity Tax Beyond Filing or Report Fees

These states generally do not impose a state corporate income tax or franchise tax on S-corporations. Shareholders pay personal income tax where applicable, and the S-corporation is responsible primarily for compliance filings and modest administrative fees.

• Alaska – Biennial statement filing; no franchise or corporate income tax on S-corps

• Arizona – Annual report fee; no specific franchise tax on S-corps

• Colorado – Annual report fee; no franchise tax

• Florida – Annual report fee; no franchise tax on S-corps and no personal income tax

• Idaho – Annual report (no fee); no franchise or entity-level income tax

• Minnesota – No annual renewal fee; no entity-level tax beyond reporting

• Mississippi – Annual report; no entity-level franchise or corporate tax on S-corps

• Ohio – No corporate income tax; no typical entity-level tax beyond filing requirements

• South Dakota – Annual report fee; no income or franchise tax

• Utah – Annual renewal fee; no franchise tax on S-corps

• Virginia – Annual registration fee; no franchise tax on S-corps

• Wisconsin – Annual report; no franchise tax applied to S-corps

• Wyoming – Annual license tax only; no income or franchise tax

Many other states effectively fall into this category where S-corporation income is not taxed at the entity level, but filing and reporting fees still apply.

States With Franchise, Privilege, or Minimum Entity-Level Taxes

These states impose some form of recurring entity-level tax, fee, or minimum charge on S-corporations, in addition to standard filing and reporting obligations.

• Alabama – Annual reporting and filing fees; historical business privilege tax largely eliminated for small S-corps

• Arkansas – Franchise tax based on capital stock, subject to a minimum amount

• California – Minimum franchise tax of $800 annually, plus a 1.5% tax on net income (first-year exemptions may apply)

• Connecticut – Annual report and franchise tax with a minimum fixed amount

• Delaware – Franchise tax based on authorized shares, plus annual report fee

• Illinois – Franchise tax in phase-out period; minimum tax and annual report fees still apply

• Louisiana – Minimum franchise tax applies

• Maine – Annual report fee; no significant franchise tax, but compliance required

• Maryland – Annual filing fee functioning similarly to a franchise tax

• Massachusetts – Minimum annual corporate excise tax applies to S-corps

• Nebraska – Corporation occupation tax based on capital or income

• New Hampshire – Business Profits Tax and Business Enterprise Tax may apply, depending on revenue levels

• New Jersey – Corporate business tax with minimum amounts, plus annual report fee

• New Mexico – Franchise tax with biennial reporting requirements

• New York – S-corporation filing fee based on gross receipts

• North Carolina – Franchise tax based on capital base, with annual reporting

• Oklahoma – Annual franchise tax tied to capital and net worth

• Oregon – Minimum excise tax at the entity level

• Rhode Island – Minimum corporate tax applies

• South Carolina – License tax and capital-based components

• Tennessee – Franchise and excise taxes apply to S-corps

• Texas – Franchise (margin) tax applies above revenue thresholds

• Vermont – Minimum corporate income tax applies

• Washington – No income or franchise tax, but gross receipts (B&O) tax applies

• West Virginia – License tax imposed at the entity level

These taxes are imposed in addition to routine annual or biennial filing and compliance fees required to maintain good standing.

III. States With Special Pass-Through Entity (PTE) Election Taxes

Several states allow S-corporations to elect to pay an entity-level tax, commonly referred to as a PTE tax. When elected, the entity pays the tax and the shareholders receive a corresponding credit on their individual returns. These elections are often used to mitigate the federal SALT deduction limitation, though eligibility and mechanics vary by state.

States offering some form of elective PTE tax include, among others:

• Hawaii

• Iowa

• Kansas

• Massachusetts

• Maryland

The availability of a PTE election adds complexity, as the effective tax treatment depends on whether the election is made for a given year and how the state structures the credit mechanism.

IV. Additional Considerations in State Tax Structures

Nexus and Multistate Activity

An S-corporation conducting business in multiple states may establish tax nexus in those jurisdictions. Nexus can trigger entity-level taxes, franchise taxes, or gross receipts taxes even in states that otherwise impose minimal entity-level taxation.

Local Taxes

Certain municipalities impose additional taxes on S-corporations. A notable example is New York City, which applies separate business taxes to entities operating within city limits.

Personal Income Tax

Entity-level taxes and fees are separate from shareholder-level obligations. Even in states with little or no entity-level tax, shareholders may owe state personal income tax on their distributive share of S-corporation income.

V. Summary and Practical Implications

At the state level, S-corporation costs generally fall into three categories:

• Nominal compliance costs (formation, annual or biennial reports, filing fees)

• Entity-level taxes (franchise, margin, excise, or gross receipts taxes)

• Optional PTE tax elections that shift tax payment to the entity level

States with minimal entity-level taxation include Alaska, Arizona, Colorado, Florida, Idaho, Minnesota, Mississippi, Ohio, South Dakota, Utah, Virginia, Wisconsin, and Wyoming. Other states, including California, Texas, Tennessee, Oregon, North Carolina, New Jersey, New York, and Rhode Island, impose more substantial ongoing entity-level taxes or minimum fees.

VI. Conclusion

For S-corporation planning, it is essential to distinguish between:

• Routine compliance and reporting costs

• Mandatory entity-level taxes and minimum fees

• Optional entity-level tax elections available in certain states

Understanding these distinctions is critical for accurate cost forecasting, multistate compliance, and overall tax planning.