Federal income taxes may be your primary concern and your greatest tax liability, but as a business owner you may have other tax obligations as well. You may owe state income and franchise taxes, employment taxes, sales and use taxes, and excise taxes.
For more information about various other taxes, see IRS Publication 15, Circular E, Employer's Tax Guide; IRS Publication 15-A, Employer's Supplemental Tax Guide; IRS Publication 15-B, Employer's Guide to Fringe Benefits; and IRS Publication 510, Excise Taxes.
State Income Taxes
You may owe state income taxes on your business profits in each state in which you do business. Your obligation does not depend on where the business is set up. For example, if you incorporate your business in Nevada but operate in California, you owe income taxes to California, the state in which you do business. (And you may owe a tax or fee to Nevada as well.)
Generally, state income taxes usually depend on having a nexus (connection) to the state. This is based on having a physical presence there, which may be evidenced by maintaining an office or sending a sales force into the state; merely shipping goods into the state without some additional connection is not enough to establish a business presence within the state. You may have a nexus to more than one state, no matter ...