Doing business in the Granite State?

Here are some tax things you need to know.

New Hampshire levies two separate taxes on companies doing business in the state. The first is the business profits tax (BPT). The BPT has been in place since 1970 and functions much in the same way that corporate income taxes in other states do, meaning that any company engaged in a sufficient level of economic activity in New Hampshire is subject to the BPT.

To determine the BPT owed to New Hampshire, a company, after accounting for relevant deductions, uses a formula specified by law to calculate the amount of the income it, and all its affiliates, have earned nationwide that is attributable to its New Hampshire operations. The income apportioned to New Hampshire is then taxed at the current BPT rate of 7.7 percent. Any company with gross receipts in excess of $50,000 is required to file a BPT return.

For tax years ending on or after Dec. 31, 2022, the BPT rate decreases from 7.7 percent to 7.6 percent. Beginning for tax years ending on or after December 31, 2022, the gross receipts threshold increases from $50,000 to $92,000 and requires the NH Department of Revenue Administration to adjust the threshold biennially based on inflation.

The second business tax is the business enterprise tax (BET). The BET was instituted in 1993 in response to revenue reports showing that only a small percentage of businesses operating in New Hampshire were paying the BPT. State BPT revenues also varied greatly from year to year, presenting a challenge to budget writers.

The BET is a more unusual form of business taxation as it is levied not on profits but on a business’s “taxable enterprise value base,” which is unique in the United States. This enterprise value base is the sum of three factors: compensation paid to employees, owners and directors; interest expenses; and dividends paid out.

This means that a business can owe BET even if it does not show any net accounting profits. From the State’s perspective, BET obligations also tend to show less variation from year to year.

To determine the BET a company owes, it must perform a series of calculations — similar to those outlined for the BPT — to establish the amount of its enterprise value base subject to taxation. It then multiplies that amount by 0.6 percent, the current tax rate for the BET. Like the BPT, all businesses in NH are obligated to pay the BET unless they do not meet the filing requirement limits. BET is not required for businesses with less than $220,000 in gross receipts or an enterprise value base threshold of less than $111,000.

For tax years ending on or after Dec. 31, 2022, the BET tax rate decreases from 0.6 percent to 0.55 percent. For taxable periods ending on or after December 31, 2022, the gross receipts threshold increases from $220,000 to $250,000 and the enterprise value base threshold increases from $111,000 to $250,000.

Defining what a company or business is, what gross receipts are, what is considered compensation paid and more add to the complexity of taxation here in the Granite State. It is important to work with your tax professional to see how these threshold and rate changes may affect you in 2022.