The first three tax filings for a new business are based on the business owner's estimation of gross receipts and are rectified or "Trued Up" as actual gross receipts are recorded. The process for establishing your Business License tax typically follows the below timeline:
The new business owner(s) estimates their gross receipts for the first year of business (this is dependent on when the business opens eg. If a business opens 06/10/2024 they will estimate their income for the period of 06/10/2024-12/31/2024 to create their assessed value for the business license tax).
After filing their actual gross receipts earned for their first year in business, the original estimated assessment is updated to reflect the actual gross receipts for that first year of business. This can create a balance due, or a credit owed on the Business License Tax paid at account opening depending on how much the actual gross receipts differ from the initial estimated value.
During the second tax year of business, the owner will need to estimate their gross receipts a second time. This second year will be the first full calendar year the business is in operation.
During the next tax year (2025 using the example from bullet #1.) the business will file their return using their actual gross receipts, since this is their first full calendar year in business the assessed value from the prior year will be adjusted to reflect a full year of gross receipts received. This adjustment can create a balance due, or a credit owed on the prior year depending on how much the actual gross receipts differ from the updated estimated value.
The gross receipts for the first full year of business are used to assess the value of the third calendar year's Business License Tax owed.
During the third tax year (2026 using the example from bullet #1 and #4) this value is verified, and the second full calendar year's gross receipts are used to assess the Business License Tax.
After this third-year adjustment, no more adjustments will be made to prior year business license taxes as the business will have established it's assessed value.
We are aware of the complexity of the process above and are here to field your questions!