District of Columbia Tax Requirements

District of Columbia
Tax Requirements
Susan T. Edlavitch
Venable LLP
Washington, D.C.
Direct Dial: (202) 344-8518
[email protected]
February 13, 2013
DC Tax Requirements
• Combined Business Tax Registration.
o Initial registration with DC Department of
Regulatory and Consumer Affairs (DRCA).
o Form-500 provides information on ownership,
location and type of business, which is needed to
make a determination of an employing unit’s
liability to pay unemployment taxes.
o Form FR-500 can be filed on-line.
• Business License Application and Registration:
General Business Taxes
• Business Income Taxes
o Corporate Franchise Tax
o Unincorporated Business Franchise Tax
o Pub. L. No. 86-272 Safe Harbor: State cannot tax
out-of-state entity if “mere solicitation of orders”
for sale of TPP and orders are approved and
fulfilled from outside the state.
• Sales & Use Taxes
• Other Business Taxes
• Payroll Taxes
Corporate Franchise Tax
• Tax on net income of corporations having DC
• “Nexus” means engaging in a trade, business
or profession in DC.
• Tax Rate: 9.975% of taxable income.
• $250 minimum tax if $1 M gross receipts or
less; $1,000 minimum tax if over $1 M gross
• Form D-20 Annual Return.
Unincorporated Business Franchise Tax
• Tax on net income of unincorporated business having DC
“nexus” with gross receipts > $12,000/year.
• Sole proprietorship, partnership, LLC, joint venture, etc.
• Tax Rate: 9.975% of taxable income.
• Taxable income after 30% salary allowance and $5,000
• $250 minimum tax if $1 M gross receipts or less; $1,000
minimum tax if over $1 M gross receipts.
• Form D-30 Annual Return.
• DC resident Form D-40 excludes allocable share of
previously taxed income from unincorporated business.
Sales & Use Taxes
• Sales tax on all tangible personal property (TPP) and certain
selected services sold or rented to businesses or individuals at
retail in DC.
• 5-Tier Rate Structure: TPP and certain selected services (6%);
liquor off-premises (10%), restaurant meals and liquor onpremises (10%); hotels (14.5%); commercial lot parking (18%).
• Exemptions: Groceries, medications & residential utility service.
• Use tax is imposed at same rate on purchases outside DC and
then brought into DC to be used, stored or consumed, if
purchaser has not paid sale tax to another jurisdiction.
• Sales & Use Tax Returns must be filed monthly (Form FR-800M,
quarterly (FR-800Q) and annually for Oct. 1 through Sept. 30
Other Business Taxes
• Personal Property Tax: Tax on TPP used or held in
storage for business purposes or held for rent to 3rd
parties, subject to $225,000 exclusion (Form FP-31).
• Economic Interest Tax: 2.9% of consideration or FMV
if transfer of (a) 80% of corporate assets consisting of
DC real property or (b) more than 50% controlling
• Gross Receipts Tax: Certain businesses, such as utilities,
toll telecommunications, cable TV, etc.
• Tax on Special Events: Auctions, shows, expositions,
Payroll Taxes
• DC income tax withholding.
• DC Unemployment Compensation Tax
o Taxes payable for first $9,000 of gross wages
paid to each employee annually
o Newly liable employer pays at rate of 2.7% or
average rate paid by all employers during
preceding year, whichever is higher.
• Employer Withholding Tax Return Form FR-900
must be filed monthly, quarterly or annually,
depending on how employer reports.
IRS Circular 230 Disclosure: Taxpayers are urged to consult their own tax
advisors. This presentation is not intended as tax advice for a particular
taxpayer and cannot be used for the purpose of (a) avoiding penalties that may
be imposed on any taxpayer, or (b) promoting, marketing or recommending to
another party any matter addressed herein.
Susan T. Edlavitch
Venable LLP
Washington, D.C.
Direct Dial: (202) 344-8518
[email protected]
February 13, 2013
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