How Your Corporation Will Be Taxed

In this guide, you'll learn about the main Alaska taxes that apply to corporations, including sales, self-employment, corporate and federal taxes.

How your corporation is taxed will depend on whether it's an Alaska S Corporation or C Corporation.

Alaska Taxes for Corporations

The state of Alaska is a little different in that there is only one type of tax that you must pay to the AK Department of Revenue: corporate income tax.

Important: All of these taxes apply whether you have a C Corp or an S Corp.

Alaska State Income Tax

Alaska is one of nine states that do not have personal income taxes.

Alaska State Corporate Income Tax

Alaska levies a corporate income tax on Alaska taxable income which is based on federal taxable income with certain Alaska adjustments.

Tax rates are graduated in ten brackets from 0% to 9.4% in increments of either $24,000 or $25,000 of taxable income. The 0% rate applies to taxable income of $25,000 and below, while the 9.4% rate applies to taxable income of $222,000 and over.

Alaska Sales and Use Tax

These tax types are similar enough that they're often categorized together. It's still important to understand the differences between them.

Sales Tax

In most states, If you sell physical products (such as electronics, books, cars, furniture, appliances, raw materials, etc.) or certain services, you may be required to collect a sales tax at the point of purchase. Alaska is different in that it doesn't levy a sales tax however some local jurisdictions do impose a local sales tax.

Although there is no sales tax rate for the state, local taxing jurisdictions, such as cities and counties, may impose a sales tax rate of up to 15 percent. Currently local tax rates range from 0 to 7 percent throughout Alaska. Any local sales tax a business collects is usually paid to the municipality in which the business is located.

Use our sales tax calculator to get an idea of what you'll need to pay, but always check with your accountant and your local municipality or borough to find out whether your business is required to collect sales tax and ensure you remain in compliance.

Use Tax

If you purchase physical products outside the state for use in Alaska from a seller who doesn't charge Alaska sales tax, you may need to pay use tax. You may also hear this referred to as sales and use tax.

For example, if you buy products for your corporation from a company in a state that either doesn't have a sales tax or has a sales tax that is lower than the local municipality sales tax, you'll be responsible for paying the use tax.

The use tax rate would be the same rate as the sales tax rate within the local jurisdiction and you'll pay it directly to your local municipality.

Federal Taxes for Corporations

Federal taxes can be complicated, so speak to your accountant or professional tax preparer to ensure that your Alaska corporation is paying the correct amount, and that you're paying the correct individual amount.

Federal Self-Employment Tax

Whether and how you pay this tax depends on whether you have a C Corp or an S Corp.

Federal Taxes for C Corps

All shareholders who earn wages or a salary from a C Corporation must pay self-employment tax. This tax is administered by the Federal Insurance Contributions Act (FICA) and covers Social Security, Medicare and other benefits. The current self-employment tax rate is 15.3 percent.

You’ll be able to deduct some of your business expenses from your income when calculating how much self-employment tax you owe.

Federal Taxes for S Corps

The Internal Revenue Service allows a corporation to be treated as an S Corporation for tax purposes, provided your business meets certain requirements. This can help you reduce the amount of self-employment tax you pay by allowing you to declare some of your income as salary and other income as distributions or withdrawals.

You do this by filing Form 2553, also known as an S Corp Election form, with the IRS. Bizee can also file the form for you. Use our S Corp Tax Calculator to get an idea of how much money you could save with this election.

Consult with your accountant or tax advisor for more information on reducing your self-employment tax through an S Corporation tax election.

Federal Income Tax

You must pay regular federal income tax on any wages or salary your corporation pays you, regardless of its type. The amount of income tax you pay depends on your earnings, current income tax bracket, deductions and filing status.

Speak to your accountant or tax professional for more information.

Regardless of the state where your corporation is based, corporate taxes can get pretty complicated. We provide some basic information here, but we strongly encourage you to consult with a tax professional to ensure your corporation pays the right taxes in the right amounts to help you avoid penalties, fines and worst of all, tax audits.

Taxes Specific to S Corporations

You must pay federal income tax on both your salary and any distributions you take from the business.

Employee and Employer Taxes

If you pay employees, there are some slightly different tax implications. Speak to your accountant to get clear guidance for your unique situation.

Employer Payroll Tax Withholding

All employers are required to withhold federal taxes from their employees’ wages. You’ll withhold 7.65 percent of their taxable wages, and your employees will also be responsible for 7.65 percent, adding up to the current federal tax rate of 15.3 percent.

Speak to your accountant for more information.

Employees May Need to File Tax Returns

Regardless of whether you withhold federal and state income tax, your employees may need to file their own tax returns.

Employee Insurance and Other Requirements

You may also need to pay insurance for any employees, such as employee compensation insurance or unemployment tax.

Other Taxes and Duties

Depending on your industry, you may be liable for certain other taxes and duties. For example, if you sell gasoline, you may need to pay a tax on any fuel you sell. Likewise, if you import or export goods, you may need to pay certain duties.

Speak to your accountant about any other taxes or duties you may need to withhold or pay.

Estimated Taxes

Most corporations must pay estimated taxes throughout the year — on a quarterly basis — depending on the amount of profit and income you expect to make. Per the IRS:"Corporations must generally make estimated tax payments if they expect their estimated tax (income tax less credits) to be $500 or more."The most common types of estimated tax are:

Learn more on the IRS website, and speak to your accountant for more information. Or use Bizee's Business Tax Filing service.

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