Florida S corporations are exempt from state income taxes. However, shareholders must pay federal income tax. S corps may have to pay federal payroll taxes and unemployment tax. Whether S corps pay unemployment tax depends on state law.
How to Form an S Corp in Florida
To form an S corp in Florida:
- Incorporate as a C corporation.
- Elect S corp status with the IRS.
S corps can have 1-100 shareholders. This limits the corporation’s ability to grow.
Unemployment Tax in Florida
Unemployment tax in Florida is paid by employers. It funds unemployment benefits for eligible employees. The tax rate is 0.1% of the first $7,000 in employee earnings per quarter. So an employee earning over $7,000 per quarter pays a maximum of $7 in this tax. Certain non-profits, religious groups, and some agricultural employers are exempt.
New employers pay a 2.7% tax for the first 10 quarters. Then their rate is based on their history of employee benefits charged. Rates range from 0.1% to 5.4%. The rate only applies to the first $7,000 in employee earnings.
The federal government also requires payroll taxes for Social Security and Medicare. That totals 7.65% of earnings. Employers pay half and deduct the other half from employees.
Sales and Use Tax in Florida
Florida has no state income tax withholding. But it does collect sales tax on taxable goods and services purchased here. The use tax mainly covers online or other out of state purchases. It applies even if no tax was collected at purchase. Or if the rate was lower than Florida’s 6%. The goal is to match what would have been collected here.