Author: Rebecca Lester

Businesses face far more than just income taxes. From sales tax on supplies to payroll taxes on wages, property taxes on facilities, and dividend taxes on distributions, taxes touch nearly every stage of business operations. This analysis examines why governments tax businesses, walks through the full spectrum of business tax obligations using a simplified example, and compares the U.S. tax structure to other developed economies.

Corporate income taxes account for just 8.3% of federal revenue, but this figure tells an incomplete story. Most U.S. businesses operate as flow-through entities—sole proprietorships, partnerships, and S corporations—where income is taxed on individual returns rather than at the entity level. This analysis examines how business income is defined, measured, and taxed across different entity structures, and why understanding these distinctions is essential for evaluating tax policy debates.