The following are explanations of commonly used business terms referenced on this website:
Administrative Dissolution: Corporations and LLCs must file an annual report with the Idaho Secretary of State’s office. The form is mailed to the business address of record and cannot be forwarded by the Post Office. If the form is not returned by the due date, the Secretary of State will withdraw the business’s legal protection from liability afforded by being a corporation or LLC. This is known as administratively dissolving the business. When a business is administratively dissolved, the owners become personally liable for the actions of the business. The business then operates like a sole proprietorship.
Annual Budget: For an existing business, this is a realistic budget for the current fiscal year based on past income and expenditures. It includes anticipated changes in income and spending. For a start-up business, this is a realistic estimate of the income and costs of doing business for a year.
At-risk Job Applicant or Employee: An employee or job applicant whose past behavior or another circumstance makes him/her a possible security risk. This includes ex-offenders, ex-addicts, those dishonorably discharged from the military, welfare recipients, those with a poor credit history and young workers who lack a work history.
Auditorium District Tax: See Greater Boise Auditorium District Tax below.
Bankruptcy: A legal proceeding involving a person or business that is unable to repay outstanding debts. The bankruptcy process begins with a petition filed by the debtor (most often) or on behalf of creditors (less frequent). The court appoints a trustee to sell the debtor’s assets to repay outstanding debts. Upon the successful completion of bankruptcy proceedings, the debtor is relieved of debt obligations incurred before the bankruptcy filing.
Bar Codes: See UPC Codes below.
Beer and Wine Taxes: Remitted by wholesalers to the Idaho State Tax Commission. See the Taxes section of this website for details.
Bridge Loan: A short-term loan, usually associated with the purchase or remodel of real estate and usually for a term of less than one year. It enables a borrower to close quickly and work out permanent financing later.
Business Entity Form: The legal structure of a business, such as LLC, partnership or corporation. Businesses register their entity type with the Idaho Secretary of State’s office. For help in choosing an entity form, see Legal Structure.
Business License: A license to do business in a specific city or county. Some Idaho cities license all businesses. Others license only certain activities, such as taxis and eating and drinking establishments. City business licenses are obtained from the city clerk’s office and county business licenses from the county clerk’s office. (Note: Obtaining a local business license is not the same as registering a business legal form (entity) or name, both of which are administered by the Secretary of State’s office.) You must register your business before applying for a business license or other permits.
Business Plan: A business plan contains all the information about your business: name, location, number of employees, how the business is organized, management team, the business purpose, products and/or services and how they will be rendered, target markets, equipment needs, financial projections, and other pertinent information. Anything pertaining to your business should be included in the business plan. The marketing plan may also be included.
Cash Flow Projections: A month-by-month future projection of income and expenditures over a period of time, usually a year. The projections for an existing business are based on current cash flow patterns. Projections for a start-up are estimated.
Cigarette and Tobacco Taxes: Remitted by wholesalers to the Idaho State Tax Commission. See the Taxes section of this website for information.
City Sales Tax: A local option tax collected by a city in addition to the state sales tax. Click here to find a list of Idaho cities that collect local sales tax.
Coin Operated Amusement Device Annual Decals: Sales tax is prepaid on coin-operated amusement devices (such as video games) by the owner, who purchases a yearly “amusement device decal” from the Idaho State Tax Commission for each device. Owners of coin-operated vending machines also pay sales tax in this way.
Completed Operations Insurance: Contractors and manufacturers may need this insurance to protect against damage or injury occurring after the completion of a project and caused by a mistake or product defect.
Contents Insurance: Covers inventory, supplies and equipment in a rented building. The building owner should have property insurance to cover the actual building.
Cookie: A small piece of information sent by a web server (the site you are viewing) and stored on a web browser (your computer) so it can later be read back. This is useful because the browser “remembers” bits of specific information, such as your choices when filling out a form or survey. Some cookies are temporary; others are permanent and you must remove them from your computer when you delete files. This website uses temporary cookies to remember your selections when you go through the Business Wizard or the Resource Wizard.
County Sales Tax: A sales tax collected by a county in addition to the state sales tax. No Idaho counties currently levy sales tax.
Crowdfunding: A financing trend designed primarily to raise start-up funds or funds to launch a new product by securing many small donations from the public. For more information, see the FAQs page on this site.
DBA: An abbreviation for “Doing Business As,” also called ABN, “Assumed Business Name.” For information, see Assumed Business Name on this website.
Employee: Also called “worker;” a person who has entered into the employment of, or who provides a service for an employer for payment. An employer usually has the right of control over how, when, and where an employee performs her/his duties.
Employer: Someone who hires others (employees) to perform work in a business, trade, or profession.
Employer Identification Number (EIN): All businesses (except sole proprietorships with no employees) must secure a Federal Employer Identification Number (EIN), also called a Tax Identification Number. The number is used to report employee tax withholdings and on tax returns. Your bank and/or corporations and businesses for whom you perform work may require you to have an EIN even if you are a sole proprietor without employees. You must provide your EIN number if another business is required to include it on their tax return. For information, see the IRS website: Apply for an Employer Identification Number On-line and Publication 1635, Understanding Your EIN. If you change your business name or entity type, you may need a new EIN.
Employment Practices Liability Insurance (EPLI): Protects against wrongful termination and discrimination lawsuits.
Employment Taxes: Employers are required to withhold certain federal and state taxes from employee earnings, including:
- Federal and State Income Tax
- Social Security and Medicare Taxes (FICA)
- Federal Unemployment (FUTA) Taxes
- State Unemployment (SUTA) Taxes
To learn about your federal tax responsibilities as an employer, see IRS Publication 15, Circular E, Employer’s Tax Guide. If you have agricultural employees, see IRS Publication 51, Circular A, Agricultural Employer’s Tax Guide. For information on state tax withholding, contact the Idaho State Tax Commission.
If you are not sure whether people working for you are employees or independent contractors, see IRS Publication 15-A, Employer’s Supplemental Tax Guide. If you misclassify workers, you could be subject to fines and back taxes.
Estate Tax: A Federal tax charged on the transfer of property after the death of the original property owner.
Estimated Income Tax – Individuals (Federal): Payments must be made by individuals who expect to owe $1,000 or more in personal income taxes and who do not have at least 90% of the tax withheld by an employer. Sole proprietors, owners of limited liability companies, members of partnerships, and S corporation shareholders may need to pay estimated taxes. Individuals receiving passive income from interest, dividends, rental property, royalties and other sources may also need to make payments. Payments are made four times a year using form 1040-ES. For information, see IRS Publication 505, Tax Withholding and Estimated Tax.
Estimated Income Tax – Individuals (Idaho):Individuals are not required to make state estimated tax payments, though they may do so voluntarily to reduce their state tax liability. To pay state estimated taxes, complete Form 51, Estimate of Idaho Individual Income Tax.
Estimated Income Tax – Corporations: Corporations expecting to owe $500 or more in federal taxes must make estimated income tax payments. Corporations may also be required to pay quarterly estimated taxes to the Idaho State Tax Commission using Form 41ES.
Excise Taxes:The Internal Revenue Service collects federal excise tax on the following:
- Telephone communications
- Air transportation
- Motor fuels
- Heavy truck sales
- Windfall profit tax on domestic crude oil production
- Environmental tax on the receipt of hazardous materials
- Environmental tax on manufacturing petroleum and chemicals
- Highway use tax by heavy trucks and buses
- Production, sale, or importing of alcohol, tobacco, or firearms
- Luxury tax on the purchase of high-end passenger cars, yachts, and other consumer luxury goods
Excise tax is also collected on some activities, such as the use of indoor tanning salons. For more information, see IRS Publication 510.
Exempt Employee: An employee who is exempt from overtime payments, often a supervisor or one who travels regularly for business, such as a salesperson. Federal regulations, not the employer, determine whether an employee is exempt or non-exempt from overtime pay.
Factoring: A method of raising working capital by selling accounts receivables to a bank or another lender at a discounted rate. The purchaser then manages and collects payments.
Federal Tax Deposit Coupon: Coupons are used for depositing employment taxes. The IRS automatically sends a coupon book when a business applies for an Employer Identification Number (EIN). If the business has no employees, the coupons can be cancelled.
Federal Unemployment Tax (FUTA): Part of the federal and state program that pays unemployment compensation to workers who lose their jobs. Only the employer pays FUTA tax. Payments are made using IRS Form 940 or 940-EZ, Employer’s Annual Federal Unemployment (FUTA) Tax Return. The taxes are used to administer the Unemployment Insurance and Employment Services Programs in Idaho and other states.
FICA: The Federal Insurance Contributions Act (FICA) tax is a tax imposed on both employees and employers to fund Social Security and Medicare. Self-employed individuals contribute to Social Security and Medicare by paying self-employment tax on their net earnings.
Fidelity Bond: A type of insurance that protects employers against employee dishonesty, theft, negligence, fraud and/or embezzlement. The bond can cover all employees, such as bank employees, or individuals within a business. Specialty fidelity bonds can be purchased to cover specific individuals and occupations, such as janitors or trust or pension fund managers. Fidelity bonds are purchased from insurance companies.
Financial Statements: Statements detailing the business’s financial status, including an income statement, balance sheet, and cash flow statements, and may include other statements appropriate to the business, such as accounts receivable and accounts payable statements.
First Degree of Consanguinity: A near relative of an employer who is exempt from Workers Compensation coverage. See Workers Compensation Exemptions.
Foreign Corporation or LLC: A corporation or LLC registered in another state that desires to conduct business in Idaho while maintaining the original registration in their home state. See Legal Structure on this website for information.
Gambling, Wagering and Betting Taxes: Businesses that accept bets, sell lottery tickets, or run a betting pool or lottery must register with the Internal Revenue Service (IRS) and pay an occupational tax and an excise tax on wagering using IRS Form 11-C, Occupational Tax and Registration Return for Wagering. To report the tax due, use IRS Form 730, Monthly Tax Return for Wagers. The National Indian Gaming Commission regulates gambling, wagering and betting occurring on Reservations in Idaho.
Gasoline and Fuels Taxes: Motor fuels are taxed at both the Federal and state level. Idaho is a member of the International Fuels Tax Agreement (IFTA), which provides a cooperative and simplified reporting system for interstate motor carriers.
Gift Tax: A Federal tax on gifts of money or property given during the lifetime of the giver. The one who gives the gift pays the tax, not the recipient.
Grant: Money given to a business, community organization, non-profit or individual for a specified purpose with no expectation of repayment. Most grant programs are competitive and for highly specialized purposes. Grants are rarely available to for-profit businesses.
Greater Boise Auditorium District Tax: A 5% Greater Boise Auditorium District tax (lodging tax) is imposed on the user or occupant of a hotel or motel room, campground or other lodging facility in the Boise metropolitan area. Funds are used to promote economic growth and build, operate, and maintain public gathering spaces, such as sports arenas and convention centers.
Heavy Vehicle Use Tax: Trucks, truck tractors, and buses having a gross weight of 55,000 pounds or more must pay a federal excise tax, reported using IRS Form 2290, Heavy Vehicle Use Tax Return.
Hotel/Motel Tax: See Travel and Convention Hotel/Motel taxes below.
Identification Number for Tax Reporting: All businesses and owners must have a taxpayer identification number for the proper processing of tax returns. Sole proprietors and single member LLCs who have no employees may be able to use their Social Security number. Other businesses must use an Employer Identification Number (EIN). The number is used on all tax returns and other documents sent to the IRS and Idaho State Tax Commission. It must also be furnished to other persons or businesses who are required to include your number on their tax return. These may include:
- Companies from whom you receive interest, dividends, or royalty payments
- Businesses for whom your company performs work
- Individuals and companies for whom you provide dependent care services (such as day care or elder care)
- Certain other amounts paid to you totaling $600 or more per year, including independent contractor payments
- Banks – you may need an EIN to open a business bank account
If you contract with the federal government, you must have an EIN. See Employer Identification Number (EIN) above for more information.
Illegal Drug Tax: Idaho imposes a controlled substance tax, taxing the manufacture and possession of marijuana and other controlled substances according to Idaho Code 63, chapter 42.
Independent Contractor: A person who provides a service for a specified amount of money for a specified result. An independent contractor is not subject to control by the person (employer) for whom services are provided except for the end result. See Employee or Independent Contractor to learn the differences between an employee and an independent contractor.
Inventory Tax: A federal tax collected on items held in inventory for future production or sale. Idaho does not collect a state inventory tax.
I-9, Employment Eligibility Verification: Employees must complete Form I-9 as proof of eligibility to work in the U.S. Sole proprietors and partners must also complete an I-9. See Employer Issues “Legal Right to Work in the U.S.” for more information.
Key Person Insurance: Insurance to protect against financial loss to a business caused by the death or long-term disability of a key person, including the owner. Also used as part of a buy/sell agreement when a business has more than one owner. Lenders and/or investors may require this insurance to protect their financial interests in a business. The business, not the insured individual, owns the policy, pays the premiums, and is the beneficiary. The policy terminates with the insured’s death, retirement or termination of employment.
License Tax On Electricity (Kilowatt Hour Tax): The Idaho State Tax Commission collects a one-half mill (.0005) tax per kilowatt of electricity generated by the use of water power. There are exemptions for power used in the generation process, power lost in transmission, and for power sold for use in pumping irrigation water, as well as manufacturing, mining, milling, smelting, refining and processing.
Lien: A legal procedure in which a business, lending institution, government agency, or an individual (creditor) secures the right to detain the property of another (debtor) until some claim, usually financial, is satisfied. A mortgage is a form of lien. The lien holder can repossess the property for non-payment until the debt is paid in full. Liens against equipment are common. Also see Perfection of Security Interest below.
Limited Partner/Silent Partner: An individual whose involvement in a partnership is usually limited to providing capital. He/she is seldom involved in daily business operations.
Local Option City and County Sales Tax: Fourteen resort cities and auditorium districts collect a local sales tax in addition to state sales tax. Currently, no counties assess local option sales tax.
Luxury Tax: A form of excise tax collected on the sale of certain non-essential high value consumer goods, such as luxury automobiles and yachts. See IRS Publication 510 for reporting instructions and information on taxable items.
Manufacturer’s Tax: A form of excise tax imposed on the manufacture or import of certain items. For information and a list of taxable items see IRS Publication 510, chapter 5.
Marketing Plan: A plan detailing how a company’s products and/or services will be marketed. This includes information on target markets and how to reach them, competitor analysis, marketing and advertising methods, anticipated marketing costs, and possible future marketing opportunities. The marketing plan may be included in the business plan.
Mezzanine Financing: A loan for the purchase or renovation of real estate. Mezzanine financing is less expensive than an equity loan and similar to a second mortgage, a subordinated interest in a first mortgage, or a preferred equity interest in the property.
Mine License Tax: Idaho imposes a 1% tax on the value of ores mined or extracted in the state.
National Standard Employer Identification Number: A number used to electronically transmit health insurance claims. The U.S. Department of Health and Human Services recommends that businesses use their Federal Employer Identification Number as their health insurance identification number.
New Hire Reporting: Employers are required by law to report new employees and those returning after an absence of 12 months or more to the Idaho Department of Labor. The information is used to locate parents who are in arrears with child support payments.
Non-exempt Employee: An employee who must be paid overtime after completing 40 hours of work in a continuous 7 day period. Federal regulations, not the employer, determine who is a non-exempt employee based on job duties, not job title.
Officer & Director Insurance: Protects officers and directors of a corporation from liability in the event of a lawsuit.
Oil and Gas Production Tax: A 2.5% tax, paid to the Idaho State Tax Commission, is imposed on the market value of oil or gas produced in Idaho.
Operating Property: Public utilities and railroads are collectively called “operating property.” The Idaho State Tax Commission appraises and values operating property.
Overtime/Overtime Pay: Employees who are paid an hourly wage and who work more than 40 consecutive hours in a seven day period are entitled to overtime pay unless exclusions apply. The U.S. Department of Labor, not the employer, determines who is eligible to receive overtime payments.
Perfection of Security Interest: Creditors may use a debtor’s property as collateral for a loan by taking (or perfecting) a security interest in the property. To form a security interest, both parties (creditor and debtor) must create a written security agreement specifically granting a security interest to the creditor. The agreement describes the collateral being used to secure the debt and must be signed by the debtor. Once the agreement is made, the security interest “attaches.” If the debtor defaults on the loan, the creditor may repossess the collateral or foreclose on real property to satisfy the debt.
The creditor who holds a security interest in the real or personal property of a business files a State of Idaho Financing Statement, Form UCC-1, with the Idaho Secretary of State’s office. This places a lien on the assets and protects them against other creditors and/or transfers to another party by the debtor. Only banks, dealers, or individuals who regularly grant loans can file a UCC Financing Statement. More information is available on the Secretary of State’s website.
Pollution Prevention (P2): Pollution Prevention is any activity, including the use of materials, processes, or practices, which reduces or eliminates the creation of pollutants or waste at the source. It includes protection of natural resources by conservation and increased efficiency in the use of raw materials, energy, water, and other resources. For information, visit the Idaho Department of Environmental Quality’s website.
Premium Tax: Insurance companies authorized to do business in Idaho pay this tax to either the Idaho Department of Insurance or the Idaho Industrial Commission. See the Taxes section of this site for information.
Production Exemption: Idaho tax law exempts certain producers and manufacturers from paying sales tax on purchases of materials and supplies used directly in the production process. See Production Exemption for details. Only a very limited number of business activities qualify.
Professional Liability Insurance: Also called Errors and Omissions Insurance, it protects professionals (doctors, lawyers, architects, CPAs) who have greater than average knowledge in a particular area against lawsuits related to their professional expertise. Medical malpractice insurance is an example.
Pro-forma Financial Statements: Financial statements created by a business to project the anticipated financial future of a business. The statements are created using current data and include anticipated changes in sales, revenue, and expenses. Start-up businesses without a financial history create pro-forma statements using estimates of future sales and expenses.
Property Taxes: Paid on both real estate and personal property, such as equipment or machinery, office equipment and software, owned by a business. The tax is collected by county assessors. For information, see the Taxes section of this site.
Registered Agent: A person or business physically located in Idaho that acts as the legal point of contact for a foreign corporation or LLC.
Salaried Employee: Usually a supervisor, manager, or another professional who is paid an annual salary pro-rated by pay period; he/she is not paid an hourly rate. Salaried employees are typically exempt from overtime pay (see exempt and non-exempt employees above).
Sales and Use Taxes: Sales and use tax is imposed on retail sales and rentals of tangible personal property, admission fees, fees for recreation, hotel/motel/campground accommodations, subscriptions, and fabricating and printing labor. Sales tax is prepaid on coin-operated amusement devices (such as video games) and vending machine sales by purchasing a yearly “amusement device decal” for each device.
Use tax is paid on goods put to use, consumed, or stored in Idaho if sales tax was not paid on the goods at the time of purchase. The person who uses, consumes, or stores the goods in Idaho owes use tax unless a sales tax exemption applies. For example, if a restaurant buys food for resale (tax exempt), but uses some of it in a trade show promotion, the business owes use tax on the cost of the food used. Use tax is also paid on internet and mail-order purchases of items used by the business, including business-related magazine subscriptions, and on charitable donations of products if sales tax was not paid at the time of purchase. For more information, see the Taxes section of this site.
Self-employment Tax: Self-employment Tax is the Social Security and Medicare tax collected from self-employed individuals. The tax is due if an individual earns $400 or more from self-employment activities ($108.28 for church employees), including part-time activities, even if he/she pays Social Security taxes through another employer or currently receives Social Security benefits. Self-employment tax is reported annually when personal income taxes are filed (usually April 15) by using IRS Form 1040-SE.
State Unemployment (SUTA) Taxes: Unemployment tax is paid by employers. It provides payments to workers who are unemployed through no fault of their own and who are able to work, available to work, and actively seeking work. Eligibility to receive benefits is set by law. For more information, or to apply for unemployment benefits, contact your local Idaho Department of Labor office. Also visit the Taxes section of this website.
Surety Bond: Guarantees that a business has the financial capacity to perform the work it has been hired to do. Very common in the construction industry. See the Insurance section of this site for more information.
Tax Incentive/Tax Credit: A credit subtracted from the amount of tax owed by a business or individual at the time taxes are filed. Tax incentives or credits are given for many activities, such as hiring hard to place workers, making accommodations for a disabled employee, and more. See the Taxes section of this site for information and links to available credits.
Tax Payer Identification Number: See Employer Identification Number above.
1099-MISC: Employers who use the services of independent contractors must provide this form to those who earn $600 or more in a calendar year. The recipient will use the form to report income when filing her/his income taxes. The form is provided to the recipient by February 15 of the year following that in which the money was paid. 1099-MISC is also used to report certain other transactions, such as royalty payments, childcare payments and more. See Instructions for Form 1099-MISC and Miscellaneous Income.
Trade Mark: Also called a service mark; this is a logo, symbol, or name used to uniquely identify a product, service or business. Registering a trade mark prevents other businesses from using it. Trade marks can be registered at the state level with the Secretary of State’s office or at the national level with the U.S. Patent and Trademark Office or internationally. For more information visit the FAQs section of this website.
Travel and Convention Hotel/Motel Taxes: In addition to the state sales tax, a statewide travel and convention tax is charged to the user or occupant of a hotel/motel room, bed & breakfast or campground. The tax is collected by the lodging establishment and paid to the Idaho State Tax Commission.
Unclaimed Property: Unclaimed property includes the contents of safe deposit boxes, stocks and bonds, uncashed refund and payroll checks, utility deposits, traveler’s checks, tax refunds, and other financial items whose owner cannot be located. To find out if you or your business has unclaimed property, or to report unclaimed property, visit the Idaho State Treasurer’s website.
Unemployment Insurance Tax: This is a tax, not insurance, paid by the employer. State unemployment taxes are administered by the Idaho Department of Labor. The Internal Revenue Service administers federal unemployment tax. When a worker becomes unemployed, he/she may qualify to draw unemployment insurance. For information, visit the Taxes section of this website.
Uniform Commercial Code (UCC): Businesses (creditors) that hold an interest in the property of another business (debtor) can file public notice of the debt (called a lien) by registering the lien with the Idaho Secretary of State’s office. See Perfection of Security Interest above.
UPC Codes: A bar code placed on a product, including books and magazines, that is scanned at the time of purchase. The code identifies the specific product, the manufacturer, and the selling price. UPC codes are secured by the product owner (not retailers) from GS1 US BarCodes and eCom™ .
Use Tax: See Sales and Use Tax above or visit the Taxes section of this site.
W-2: By January 31, employers must provide employees with a form W-2 showing total wages or salary paid to the employee the previous year and the amount of federal and state taxes, Social Security and Medicare, retirement plan contributions and other deductions withheld. The employee files the W-2 with his/her personal income tax return.
W-4: Employees complete a W-4 when starting a new job or when changes occur in their personal tax status, such as the birth of a child. The form is used to calculate federal and state tax withholdings.
W-9 Request for Taxpayer Identification Number: Businesses that are required to file an information tax return with the IRS must obtain the correct tax payer identification number to report. Examples include businesses that issue 1099s and those that must report real estate transactions, contributions to an IRA, child care payments, cancellation of debt and other monetary transactions. See IRS form W-9.
Wages: Payments made to an employee for work performed. Employees who are paid wages (not a salary) are paid an hourly rate and are paid overtime for time worked in excess of 40 hours in seven consecutive days.
Withholdings: The amount of money an employer withholds from an employee’s pay check for taxes, Social Security and Medicare, health insurance, retirement plan contributions, etc.
Workers Compensation Insurance: Insurance carried by an employer to cover employees and business owners in the event of an on-the-job injury or a job-related illness. Employers are required by law to have workers comp coverage, administered by the Idaho Industrial Commission. Payments cover lost wages, medical expenses, and rehabilitation.
Zoning: A system of land use planning established by cities and counties that divides land into areas for specific uses, including residential homes, manufacturing, mixed business usage, agriculture, industrial, and other designations. Business owners must comply with zoning regulations when choosing a location for their business.