What Local Taxes Does a Small Business Have to Pay?

By Bill Stilwell · Last reviewed October 17, 2026

The short answer

Local governments can tax your business too. Depending on where you are, that can include local sales tax rates added to the state rate, a city or county business tax, tax on business equipment, and other special taxes. Call or check the websites of your city, your county, and your state revenue department to find out which ones apply to you.

What this means

The Small Business Administration (SBA) puts it simply: tax laws vary by location. Your state sets the main rules, but cities, counties, and special districts (like a transit or school district) can add their own taxes.

Local taxes you may run into include:

Local sales tax. Added on top of the state rate. In Texas, for example, local governments can add up to 2% to the 6.25% state rate.
City or county business tax. Some places charge a yearly business license tax, sometimes based on your gross receipts, which means your total sales before expenses.
Business personal property tax. Some states and counties tax equipment, furniture, and tools a business owns.
Local income or payroll taxes. A few cities and counties tax wages or business income.
Special taxes. Examples include lodging taxes, restaurant taxes, or district taxes in certain areas.

Made-up example: Maple Street Pet Grooming opens a shop inside city limits. The owner finds out the city charges a yearly business tax based on sales, and the county sends a form each year asking for a list of grooming tables and dryers for property tax. She adds both deadlines to her calendar.

Why it matters

Local bills arrive on their own schedule. Missing one can mean penalties, interest, or a lien.
Some local taxes tie to your license. An unpaid local tax can hold up a business license renewal (see 9.5.6 License and Permit Renewals).
Wrong sales tax rates cost money. Charging only the state rate when a local rate applies means you owe the difference yourself.

Who this applies to

Almost every business, but which taxes apply depends on your exact address and where you do the work. Service-area businesses that work in many towns should check whether a city taxes work done inside its limits. Home-based businesses still owe local taxes where they live. Rules vary by state and city, so check with your state revenue department and your local government offices.

How to do it

List every place you do business. Your home or shop address, plus the towns where you work or deliver.
Check your state revenue department for local sales tax rates and any local taxes it collects for cities and counties. Many states offer a rate lookup by address.
Call or visit your city’s finance or tax office and ask what business taxes apply to your type of business.
Check with your county about business personal property tax and any county business tax.
Ask about local wage taxes if you have employees.
Register for each one that applies and save the account numbers.
Put every filing and payment date on your calendar (see 10.9.1 Financial Calendar).
Recheck when you move, open a new location, or start working in new towns.

What proof to keep

A written list of the local taxes you checked, who you talked to, and what they said
Registration letters and account numbers
Every return and payment confirmation
Equipment lists you sent to the county, if property tax applies

Common mistakes

Only checking the state. Local taxes are often run by the city or county, not the state.
Using a mailing address instead of the work address to look up rates.
Ignoring the county property tax form because the business is small. Some counties estimate a value if you don’t file.
Forgetting new service towns. Expanding your service area can add new local obligations.
Treating a business license fee and a business tax as the same thing. Some places charge both.

When to get help from a pro

Certified public accountant (CPA) or local tax specialist: if you work in many cities, have employees in a city with a wage tax, or own a lot of equipment. Questions to ask:

Which local taxes apply at my address and where I do my work?
Do I owe business personal property tax, and how do I report it?
How should I track local rates for jobs in different towns?

Bill’s note

[Bill: add a short note. For example, what you found when you called your city and county about SiteSmarty, or a local tax that surprised a client.]

How I did this for SiteSmarty

[Date I did this:]
[What I actually did, step by step: which offices I called or checked, and what local taxes apply to SiteSmarty]
[What it cost and how long it took:]
[What surprised me or what I’d do differently:]
[Screenshot or photo to add, with private info blurred: city or county tax account page]
[Result so far:]

Questions people ask

Do I have to charge local sales tax? If you make taxable sales in a place with a local rate, usually yes. Your state’s rate lookup shows the combined rate by address.

Does my city charge a business tax? Some do and some don’t. Call your city’s finance office or check its website.

Do I pay tax on my business equipment? In some states and counties, yes. Check with your county assessor.

How do I find out which local taxes apply? Start with your state revenue department, then check with your city and county offices.

Audit check

Question: Has the business confirmed every local tax that applies at its location and work areas, and is it registered and current on each?
Pass looks like: A written list of local taxes checked. Registrations in place. Correct local sales tax rates on invoices. Returns and payments on time.
Fail looks like: Never checked with the city or county. State rate only. County property tax forms ignored. Late notices on file.
Evidence to collect: Local tax list, registration letters, sample invoices showing rates, returns, and payment confirmations.

Where this fits

Do this first: 10.2.3 Use Tax

Do this next: 10.2.5 Resale and Exemption Certificates

Sources

SBA, "Pay taxes" (checked October 17, 2026)
Texas Comptroller, "Texas Sales and Use Tax Frequently Asked Questions: Use Tax" (state and local rates) (checked October 17, 2026)
California Department of Tax and Fee Administration, "Use Tax" (local rate lookup) (checked October 17, 2026)

This page explains general rules and Bill's own experience. It is not legal, tax, or insurance advice. Talk to a qualified professional about your situation.