What are tax payments?

Introduction to tax payments

Next to treasury payments and account payable (AP) payments, tax payments are one of the most common types of corporate payments. These are payments made to tax authorities to fulfill a company's legal tax obligations and are a crucial part of a company's operations. Failing to make them for any reason can lead to significant legal and financial repercussions, including costly penalties and a loss in standing with financial authorities.

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Main types of tax payments

The nature of a company’s tax payments depends on the tax jurisdictions in which it operates. Tax systems are designed, administered, and enforced by national governments, though many countries have tax laws that require corporations to pay taxes on their worldwide income, regardless of where the income is earned. Some of the common types of tax payments include:

• Income tax
• Sales tax
• Property tax
• Corporate tax
• Tariffs on imported goods

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How to manage tax payments

Tax payments are usually managed by qualified tax experts. In-house teams are more common at larger companies while smaller businesses may use an external accounting firm or tax advisors. Companies may also use tax software that integrates with their ERP, accounting system, and treasury management system in order to align tax payments with their cash flow cycles to maintain liquidity.