A few states recognize an entity's S corporation status, such that taxable income flows through directly to shareholders, but they also assess a state-level tax on the entity.

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This is true. Some states recognize an entity's S corporation status but still assess a state-level tax on the entity, despite the income flowing through directly to shareholders. It is important for businesses to research the tax laws of the states they operate in to understand their tax obligations.

A Few States Recognize an Entity's S Corporation Status, Such