Sole Proprietor Income to Report

What Income Should an Unincorporated (Sole Proprietor) Business Report?

The income that should be reported depends on whether both the owner and the business are resident or non-resident. An owner is a resident when his or her primary residence is within the city limits. A resident business is a business entity having an office, operation, or business site within the City.

• If the owner is a resident and the business is a resident then all income is subject to tax, regardless of where the work was performed.
• If the owner is a resident and the business is a non-resident, all income is subject to tax, regardless of where the work was performed. However, if taxes are paid to a city (other than Middletown) in which the business resides, then Middletown will grant the business a credit up to the amount paid to the other municipality (but not in excess of the 1.75% Middletown tax).
• If the owner is a non-resident and the business is a resident, then only income earned for work performed in the City is taxable.
• If the owner and the business are both non-resident, then only income earned on work performed in the City is taxable.