15 states with the lowest business taxes

In this article, we look at 15 states with low business taxes. If you want to see more states in this selection, go to 5 states with the lowest business taxes.

Business tax refers to the various taxes levied by the government on companies and organizations. These taxes are used to support public services and infrastructure, and are usually based on a company’s revenue, profits, or number of employees. The types of business taxes can vary depending on the location of the company, but some common examples are the corporate income tax imposed on the profits generated by companies; Value Added Tax (VAT) is levied on the value added to goods and services during production and distribution; Payroll taxes for wages and salaries of employees; and property taxes imposed on the value of personal property or real estate. It is important for businesses to understand their tax obligations and plan accordingly, to avoid fines, penalties and legal problems. Tax professionals such as accountants or lawyers can provide assistance in ensuring compliance with all relevant tax laws and regulations.

Corporations can be heavily impacted by taxes, which can affect their financial performance and competitiveness. According to Walmart Inc. (NYSE:WMT), Amazon.com, Inc. (NASDAQ:AMZN) and Target Corp. (NYSE:TGT) have faced rising costs due to higher payroll taxes. In certain states. Similarly to Tesla, Inc. (NASDAQ: TSLA ) and General Motors Company (NYSE: GM ), companies that operate large facilities and require large amounts of land, have been hit by high property taxes in certain states.

Photo by Scott Graham on Unsplash

Our method

To determine the level, we referred to a report issued by the Washington, DC-based Tax Foundation. In the year Established in 1937, the body produces an annual government business tax climate index. The report includes individual income tax, sales tax, corporate tax, property tax and unemployment tax to assess each state’s business tax environment and assigns a score between 0 (least favorable) and 10 (most favorable). The five components are not given equal weight like other indices; Instead, the weight assigned to each component is based on the degree to which the scores of the 50 states differ from the average score.

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15 states with the lowest business taxes

15. Idaho

2023 State Business Tax Climate Index Score: 5.51

Idaho imposes a state sales tax rate of 6.00%, and local jurisdictions may impose an additional 3.00% sales tax. This brings the average combined state and local sales tax rate to 6.02%. The company’s corporate income tax rate has also reached 6 percent. All individuals required to file a federal income tax return must file a state tax return. If a part-year resident has more than $2,500 in total income from Idaho sources, or if a nonresident has more than $2,500 in Idaho income, they must file an Idaho tax return. Property taxes in Idaho are determined by the county government, and capital gains are taxed as regular income.

14. Tennessee

2023 State Business Tax Climate Index Score: 5.51

In Tennessee there is a 6.50% corporate income tax as well as a gross receipts tax. The state sales tax rate stands at 7.00%, and local jurisdictions can add up to 2.75% sales tax. The average state and local sales tax rate is 9.55%. Beginning January 1, 2023, eligible farmers, harvesters, and nursery operators will be exempt from sales and tax, allowing them to purchase agricultural construction materials, fencing materials, and most other tangible personal property tax-free. Sales tax still applies to vehicles driven on public roads, household goods, and gasoline or diesel fuel.

13. Texas

2023 State Business Tax Climate Index Score: 5.51

In Texas, a 6.25% sales and use tax is applied to most goods and services that are sold, rented or leased. Local jurisdictions such as cities, counties and transit authorities may impose an additional 2% sales and use tax, bringing the maximum combined rate to 8.25%. Texas does not have a corporate income tax, but it does have a gross receipts tax. Gross receipts tax is based on the location of the business in incorporated cities and towns, the amount is determined by the local population.

12. Michigan

2023 State Business Tax Climate Index Score: 5.57

In Michigan, individuals are taxed at a flat rate of 4.25% of their income, while companies are taxed at 6.00% of their corporate income. The state sales tax rate is 6.00%, with no additional local sales tax. Michigan is known for having high property taxes compared to the rest of the country, as evidenced by its high average effective property tax rate. This rate, the total property tax rate paid as a percentage of the home’s market value, is 1.32% for Michigan residents.

11. Missouri

2023 State Business Tax Climate Index Score: 5.59

Missouri has a flat corporate income tax rate of 4 percent, making it one of only 11 states with a corporate tax rate of 5 percent or less. The state has a multi-tiered income tax rate starting at 1.5% and ending at 5.4%. Some municipalities also charge income tax at the local level. The state sales tax stands at 4.225%, which can be increased by local authorities to 5.763%. The average combined local sales tax in Missouri stands at 8.29%. Per capita income tax collected by state and local income taxes is $1,132.

10. North Carolina

2023 State Business Tax Climate Index Score: 5.60

North Carolina’s flat corporate income tax rate is 2.5 percent. This is the lowest corporate tax rate charged by any state in the entire US. The state is on track to eliminate corporate taxes starting in 2025 and could achieve this goal by 2030 under the leadership of the Republican Party. The party was responsible for implementing the first cut in corporate income tax in 2013.

9. Indiana

2023 State Business Tax Climate Index Score: 5.63

Indiana’s flat single-bracket corporate income tax rate is 4.9 percent. This means that all corporations pay the same amount regardless of their income. In addition, Indiana offers a corporate income tax credit to businesses located in enterprise zones or investing in certain qualified properties. There are also exemptions and deductions for certain business types and activities. The state has lowered its corporate tax rate from 8.5% in June 2012 to 4.9% in July 2021.

8. Utah

2023 State Business Tax Climate Index Score: 5.64

Utah has a flat corporate tax rate of 4.85% under one bracket. By 2022, the state has proposed a ten bps reduction in corporate income tax to reach a level of 4.85%. Corporate income tax rates are similar to individual income tax rates. In addition, the state imposes a 6.1% sales tax that can increase to 2.1% in local municipalities and counties.

7. Nevada

2023 State Business Tax Climate Index Score: 5.96

Nevada does not have a corporate income tax, but a gross receipts tax is in place. The state sales tax rate is 6.85% and the local sales tax can be as high as 1.53%, which is an average combined state and local sales tax rate of 8.23%. Also, there is no individual income tax. Although there is no state corporate income tax in Nevada, certain state business taxes may still apply. Modified Business Tax (MBT) is a type of payroll tax that is calculated based on the total wages paid by a business in a given quarter. Effective July 1, 2023, the revised business tax (MBT) rate will change to 1.17% for general business and 1.554% for financial institutions and mining.

6. New Hampshire

2023 State Business Tax Climate Index Score: 5.96

Individuals in New Hampshire are subject to a flat 5% tax on their interest and dividend income. New Hampshire does not have a state sales tax and local sales taxes do not apply. New Hampshire’s business profits tax is based on the income generated by businesses operating in the state. Beginning in 2023, the business profits tax rate is 7.6% and applies to gross income above $92,000. From 2024, the tax rate will be reduced to 7.5%. In addition, New Hampshire’s business enterprise tax is based on an “enterprise value tax base,” which is the sum of compensation and interest payments made by a business or the gross receipts of the business. The tax rate is set at 0.55%. For a business to be subject to business enterprise tax, both its gross receipts and its taxable value must exceed $250,000 from 2023..

According to Walmart Inc. (NYSE:WMT), Amazon.com, Inc. (NASDAQ:AMZN) and Tesla, Inc. (NASDAQ:TSLA) is among the corporations most affected by tax changes across states.

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Disclosure: None 15 states with the lowest business taxes Originally published on Insider Monkey.