Income types for businesses

Overview

You must report all income that your business earned during a tax year. Depending on a type of income, it may be taxable.

Generally, income earned by a business in connection with its regular trade or business is subject to California tax if the business has sufficient contact with the State. Common income types that may be subject to tax include income from sales of goods, provision of services, rental income, and interest/dividend income.

Gross income

Gross income is gross receipts minus returns and allowances, minus costs of goods sold. Generally, gross receipts is all revenue that your business received during a given year from:

• Sales of goods
• Provision of services
• Other income producing assets or activities

Calculate gross receipts by adding all revenue received within a tax year without subtracting returns, allowances, costs of goods sold, or any other business expenses.

How to report

Federal return

Report your income when you file your federal return.

State return

Begin your California return with your federal taxable income. Include state adjustments based on the type of your business.

Business type	Form(s)	Where to include
Corporation	100: Corporation Tax Booklet 100S: S Corporation Franchise or Income Tax Booklet 100W: Corporation Tax Booklet Water's-Edge Filers	Schedule F
Partnership	565: Partnership Tax Booklet	Income section
Limited Liability Company	568: Limited Liability Company Tax Booklet	Schedule B
Sole-proprietorship	540: Personal Income Tax Booklet 540NR: Nonresident or Part-Year Resident Booklet	Schedule C (federal)
Charities and nonprofits	199: California Exempt Organization Annual Information Return	Receipts and Revenues section

Visit Forms to get prior year forms.

Rental income

Rental income includes money collected by your business, a landlord, from third parties, tenants, for:

• Using real property, e.g., apartment, building, etc.
• Using personal property, e.g., car, boat, clothing, etc.

Income can be:

• Amounts received from tenants for the monthly rent of property
• Payments by a tenant for cancellation of a lease

You must pay tax on any profit from renting out property.

Rental income from a business is a type of business gross income. Visit Gross income for more information.

Interest/dividends

Interest and dividends are a type of gross income and should be included in your total income. Visit Gross income for more information.

Sale of capital assets

Most property you own and use for business purposes or investment is a capital asset. Capital assets can be tangible or intangible property.

Common tangible property includes:

• Buildings
• Equipment
• Inventory

Common intangible property includes:

• Stocks
• Bonds
• Patents
• Trademarks

Proceeds from a sale of capital assets are a type of gross income. Visit Gross income for more information.

Other income types

Your business may have to report other income types not listed here. Consider working with a tax professional.

1099s (information returns)

An information return is a tax document that banks, financial institutions, and other payers send to your business and the IRS. It reports non-employment income paid to your business during a tax year.

Common income types reported on a 1099 include:

• Interest
• Dividends
• Proceeds from stock sale
• Cancellation of debt
• Proceeds from sale of real property

Visit 1099s (information returns) for more information.