State and city gross receipts taxes may apply to traders in unexpected ways. Learn which jurisdictions pose risks, which offer exemptions, and how to plan.

Most traders focus on federal tax planning, including qualifying for Trader Tax Status (TTS), making a Section 475(f) mark-to-market election, and selecting the correct entity (or sole proprietorship) for health, retirement, QBI benefits, and SALT cap workaround strategies. But state and local entity-level and sole proprietorship taxes can add unexpected costs.

Traders occupy a gray area in state and local tax law. They may file a Schedule C (sole proprietor business) for deducting expenses, but trading gains and losses are reported elsewhere: capital gains on Form 8949/Schedule D or, if electing Section 475 MTM, ordinary gains and losses on Form 4797. Crucially, traders have no customers or gross receipts — they trade their own capital for net gains or losses. By contrast, dealers (who must use Section 475 MTM) hold securities as inventory, serve customers, and generate gross receipts from sales.

Trading with TTS is not a “business” for purposes of state and local gross receipts taxes (GRT). Traders do not have customers like broker/dealers do. They trade for their own account, just more actively than passive investors. They are not listed as a type of business for GRT or business license purposes, nor are they explicitly excluded from GRT. If traders are deemed included, they should have zero gross receipts because they derive no revenues from customers. If state authorities nevertheless attempt to include trading income in GRT, it should be based on net trading gains — not gross proceeds — and must factor in offsetting trading losses. Washington State has suggested otherwise, which is why its B&O tax poses a special risk to traders. This mirrors issues we explored in our Los Angeles Business Tax post, where traders argued their gross receipts were $0.

This distinction explains why many gross receipts taxes were not designed to capture proprietary traders, though enforcement sometimes pushes into this uncertain area. Traders should document the lack of customer revenue whenever responding to city or state notices. There is also a risk of misclassification—especially when using S-Corps for Section 475—since some cities treat all S-Corps as businesses subject to GRT unless proven otherwise. For a real-world example, see our coverage of Los Angeles City’s business tax and traders.

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How Traders Typically File

• Sole proprietors (most traders with TTS): File Schedule C for expenses on Form 1040.

• LLCs taxed as partnerships: Sometimes used for the PTET SALT cap workaround or to qualify for investment partnership state exemptions.

• S-Corps: Useful for deducting officer health insurance premiums and making retirement plan contributions, but at risk for entity-level taxes in certain jurisdictions. (e.g., CA 1.5% franchise tax, IL 1.5% replacement tax, and NYC General Corporation Tax (GCT) 8.85% all on net income.)

👉 Entity choice drives state and local tax exposure.

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State and Local Case Studies

Many GRT regimes have substantial thresholds ($1M or more) and relatively low tax rates, which makes it unlikely the states and cities will capture or significantly harm most traders.

*Note: This section focuses on PTEs (S-Corps, LLCs, partnerships) and sole proprietorships, since traders rarely use C-Corps. Most states already impose separate corporate-level taxes on C-Corps — see Tax Foundation: State Corporate Income Tax Rates for details. Many states and cities assess GRT to C-Corps.

Gross Receipts / Excise-Type Taxes

Delaware – Gross Receipts Tax

• Applies to: PTEs and sole proprietorships

• Delaware Division of Revenue – Gross Receipts Tax

• Tax type: Gross receipts tax

• Rates: Range from 0.0945% to 0.7468%, depending on industry.

• Exemption: $100,000 per month, or $300,000 quarterly, or $1.25M annually.

• Trader impact: Trading gains are likely exempt, as they are not receipts from goods or services.

Hawaii – General Excise Tax (GET)

• Applies to: PTEs and sole proprietorships

• Hawaii Dept. of Taxation – GET

• Tax type: 4% general excise on gross income (goods/services). Straddles the line between sales tax and GRT.

• Exemption: None.

• Trader impact: Trading gains are likely exempt, not being “services.”

Los Angeles, CA – City Business Tax

• Applies to: PTEs and sole proprietorships

• LA Office of Finance – Business Tax

• Tax type: Gross receipts ($4.25 per $1,000, or 0.425%).

• Exemption: ≤ $100k receipts.

• Trader impact: Traders may argue $0 receipts due to no customers. See GreenTraderTax: Los Angeles Business Tax and Traders: Why Gross Receipts May Be $0

Nevada – Commerce Tax

• Applies to: Business entities with Nevada gross revenue over $4,000,000 (certain statutory exemptions apply)

• NV Dept. of Taxation – Commerce Tax

• Tax type: Gross receipts tax.

• Rate: 0.051%–0.331% over threshold.

• Exemption/Threshold: ≤ $4M Nevada gross revenue; entities at or below $4M generally have no filing requirement.

• Trader impact: Many traders fall below the $4M threshold. Nevada law also provides a passive entity exemption (including certain partnerships that only earn investment income). Treatment of own‑account trading gains as “gross revenue” is not explicit; facts and classification matter.

New Mexico – Gross Receipts Tax

• Applies to: PTEs and sole proprietorships

• NM Taxation & Revenue Dept. – Gross Receipts Tax

• Tax type: Gross receipts tax. Straddles the line between sales tax and GRT.

• Rate: Base 5.375%, with local add-ons up to 9.5%.

• Exemption: None.

• Trader impact: Trading gains are likely exempt.

Ohio – Commercial Activity Tax (CAT)

• Applies to: PTEs and sole proprietorships

• Ohio Dept. of Taxation – CAT

• Tax type: Gross receipts tax.

• Rate: 0.26% over threshold.

• Exemption: ≤ $6M receipts (2025).

• Trader impact: Trading gains are likely exempt.

Oregon – Corporate Activity Tax (CAT)

• Applies to: PTEs and sole proprietorships

• Oregon Dept. of Revenue – CAT

• Tax type: Gross receipts tax.

• Rate: $250 plus 0.57% above $1M receipts.

• Exemption: ≤ $1M receipts.

• Trader impact: Receipts from sales of capital assets (IRC §§1221/1231) are excluded from commercial activity; Section 475 MTM ordinary income may not be excluded if total Oregon receipts exceed $1M.

Philadelphia, PA – BIRT and NPT

• Applies to: PTEs and sole proprietorships

• Philadelphia Dept. of Revenue – BIRT

• Tax type: Gross receipts and net income tax.

• Rates: 0.1410% on receipts; 5.71% on net income.

• NPT: 3.74% (residents); 3.43% (nonresidents).

• Exemption: $100k exclusion repealed in 2025.

• Trader impact: Traders may argue for zero gross receipts; NPT is not owed if no customers.

San Francisco, CA – City Gross Receipts Tax

• Applies to: PTEs and sole proprietorships

• SF Treasurer – Gross Receipts Tax

• Tax type: Activity-based, 0.16%–0.65% by category.

• Exemption: ≤ $5M receipts (Prop M, effective for 2025 filings).

• Trader impact: Traders may argue for zero gross receipts.

Washington State – Business & Occupation (B&O) Tax

• Applies to: PTEs and sole proprietorships

• WA Dept. of Revenue – B&O Tax

• Tax type: Gross receipts tax (Service & Other 1.5%).

• Exemption: Small business credit may be reduced to $0.

• Trader impact: Gray area; risky if losses are not allowed. See GreenTraderTax: Washington’s B&O Tax Targets Traders After New Ruling

Washington Cities – Local B&O Taxes

• Applies to: Businesses in cities like Seattle and Tacoma

• Tax type: City-level B&O or gross receipts taxes, in addition to state B&O

• Trader impact: Gray area; risky if losses are not allowed.

Other California Cities – Local Gross Receipts Taxes

• Applies to: Businesses in cities like Beverly Hills, Oakland, San Mateo, Santa Monica

• Tax type: Local gross receipts or business activity taxes, varying by city

• Trader impact: Similar arguments as in Los Angeles — traders may be able to claim zero gross receipts.

Income / Franchise / Replacement Taxes

California – Franchise & LLC Fees

• Applies to: S-Corps and LLCs (not general partnerships)

• CA Franchise Tax Board – S-Corps

• Tax type: 1.5% S-Corp franchise tax on net income; LLC fees $900–$11,790.

• Trader impact: Statutory exposure for LLCs and S-Corps.

Illinois – Replacement Tax

• Applies to: Partnerships and S-Corps; investment partnerships exempt

• IL Dept. of Revenue

• Tax type: 1.5% replacement tax on net income.

• Exemption: Investment partnerships are exempt.

• Trader impact: S-Corps exposed.

Kentucky – Limited Liability Entity Tax (LLET)

• Applies to: LLCs, S-Corps, and similar entities; not sole proprietors.

• KY Dept. of Revenue – LLET

• Tax type: 0.095% gross receipts or 0.75% gross profits; $175 minimum.

• Exemption: Qualified investment partnerships are exempt.

• Trader impact: Trading gains are exempt as QIP. S-Corps can be included in QIP, along with partnerships.

New Hampshire – BPT & BET

• Applies to: PTEs and sole proprietorships

• NH Dept. of Revenue – Business Taxes

• Tax type: Business Profits Tax (BPT) 7.5% on net income;
  Business Enterprise Tax (BET) 0.55% on the enterprise value.

• Exemption: BPT < $109k receipts; BET < $298k enterprise value.

• Trader impact: MTM traders at risk; non-MTM lower risk. See GreenTraderTax: NH Business Taxes for Traders

New York City – GCT & UBT

• Applies to: S-Corps (GCT); partnerships/sole props (UBT)

• NYC Dept. of Finance – UBT

• Tax type: General Corporate Tax (GCT) 8.85% on net income;
  Unincorporated Business Tax (UBT) 4% on net income.

• Exemption: 100% trading partnerships/sole props are exempt from UBT.

• Trader impact: S-Corps exposed to GCT.

Tennessee – Franchise & Excise Taxes

• Applies to: All entities except sole proprietors

• TN Dept. of Revenue – Franchise & Excise

• Tax type: Excise tax 6.5% on net income;
  Franchise 0.25% on net worth (min $100).

• Exemption: FONCE (Family-Owned Non-Corporate Entity) exempts qualifying family-owned non-corporate entities from both taxes. Tennessee does not treat S-Corps as non-corporate, so they are excluded from the FONCE exemption.

• Trader impact: Qualifying partnerships and LLCs can be exempt; S-Corps remain exposed.

Texas – Franchise (Margin) Tax

• Applies to: S-Corps, LLCs, and partnerships (GPs of individuals exempt)

• Texas Comptroller – Franchise Tax

• Tax type: 0.75% margin tax (0.375% retail/wholesale).

• Exemption: ≤ $2.47M receipts with adjustments; GPs of individuals exempt.

• Trader impact: S-Corps/LLCs exposed.

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Bottom Line

State and local gross receipts and entity-level taxes are highly jurisdiction-specific. While many states and cities either exempt or effectively exclude trading gains, others leave the rules ambiguous. Traders should carefully consider their filing status (sole proprietor vs. entity), election choices (e.g., Section 475 MTM), and entity form (S-Corp vs. partnership) to minimize unexpected exposure. In practice, thresholds are high, and most traders will not owe tax; however, gray areas exist in places like Washington, Los Angeles, New Hampshire, and Philadelphia that deserve attention.

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Resources

This post’s facts and thresholds were cross-checked against the Tax Foundation’s 2024 survey of state gross receipts taxes, an authoritative source on state-level GRT regimes.

• Tax Foundation: State Gross Receipts Taxes

• GreenTraderTax blog posts:

  • Washington’s B&O Tax Targets Traders After New Ruling

  • Los Angeles Business Tax and Traders: Why Gross Receipts May Be $0

  • New Hampshire Business Taxes for Traders: BPT and BET Exposure in 2025

  • PTET SALT Cap Workaround Update