1. How do Kansas's Business Taxes Work?
2. Which Businesses Need to Pay Taxes?

Kansas corporate tax rate and business corporate income taxes are taxes levied on taxable income for corporations doing business in the state. It is similar to personal income taxes in Kansas, with both being based on a tiered tax system.

How do Kansas's Business Taxes Work?

Businesses, similar to filing personal income taxes, must file annual tax returns. As businesses, the owners are permitted deductions such as goods, equipment, and employee wages. This is a 4 percent flat rate of federal taxable income, but additional 3 percent surtaxes are charged when businesses have a surplus of $50,000. In comparison to the corporate rate in 2018, Kansas personal income tax has marginal rates that range from 3.1 to 5.7 percent. Corporations owe their tax returns when the tax year ends on April 15.

Which Businesses Need to Pay Taxes?

Businesses operating in Kansas that are flow-through entities such as sole proprietorships, partnerships, or S-Corporations do not report corporate income and pay Kansas and federal income taxesas corporations.

Taxable entities are:

  • Corporations are required to pay taxes on revenues. Owners, as well as shareholders, are required to pay on profits they withdraw from the company. This, in Kansas, is called double taxation at a flat 4 percent rate, with an additional 3 percent surtaxes on any income over $50,000.
  • S corporations are traditional corporations but filed with special forms with the Internal Revenue Service to have S status do not have a separate federal income tax. This corporation has taxable income given to individual shareholders who need to pay federal tax on individual corporation shares. Kansas S corporations do not have to pay income state tax as corporate entities, but those individuals who are S corporation shareholders must pay taxes on any shares.
  • Limited Liability Corporations (LLCs) are pass-through entities that do not have to pay income tax to the federal or Kansas state government. Like S corporations, each individual company member is required to pay state as well as federal taxes on shares of the company income. The exceptions to this are those business owners who choose to have LLCs classified as corporations that will then be required to pay Kansas's corporate income taxes.
  • Partnership income that the corporation distributes to individual partners is in the form of shares. Each individual partner is required to pay both federal and state taxes on his or her income share.
  • Sole proprietorship income is distributed to the business owners and the sole owner will pay income taxes to the state.
  • All incorporated entities, regardless of tax requirements, should file informational tax returns with the Kansas Department of Revenue. Federal business tax returns (Form 1120) recorded with the IRS is essential.
  • Exemptions from Kansas's Corporate Taxes
  • Non-profit organizations recognized by the IRS as 501(c) (3) organizations do not have to file a copy Form 990, the corporate income tax form with the Kansas Department of Revenue. However, most organizations are required to file an annual report with the Kansas Secretary of State's Office.

Specific nonprofit organizations can exempt some or all qualified income from Kansas and federal income taxes. Nonprofit 501(c) corporations do not have to pay Kansas corporate income tax.

Exempt entities include:

  • Tax-exempt religious institutions including churches, mosques, and synagogues can file exemption from corporate income taxes under § 501(c)(3) of the IRS Internal Revenue Code (IRC).
  • Workers' organizations such as labor unions have coverage for exemption to corporate taxation under § 501(c)(4) and § 501(c)(5) of the IRC. This exemption from taxation applies to dues as well as other income.
  • Educational and scientific institutions are tax-exempt. This includes nonprofit schools and colleges and research institutions under § 501(c)(3) of the IRC.
  • Organizations that have a recreational purpose such as social clubs may collect dues as tax-free entities if the group is not for profit. This is covered under § 501(c)(7) in the IRC.
  • Tax-exempt charities are exempt from corporate income taxes. This includes religious and non-religious charities under § 501(c)(3) of the IRC.

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