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Which States Are the Best (and Worst) for Business Taxes?

April 24th, 2012 ::

By Maria Valdez Haubrich

Are you considering where to move your business or open a second location or new headquarters? If so, you’ll want to take a closer look at the latest report from the Tax Foundation, Location Matters: A Comparative Analysis of State Tax Costs on Business.

The “apples to apples” study, done in conjunction with KPMG, created seven imaginary companies of different types and assessed all the taxes they would face in different states. The report considered situations such as manufacturing, retailing, and new startups (eligible for certain tax breaks) vs. mature companies. The study also considered “Tier 1” (major) cities and “Tier 2” (midsized) cities.

The types of taxes considered include:

  • Corporate income taxes
  • Capital taxes
  • Unemployment taxes
  • Sales taxes
  • Property taxes
  • Gross receipts taxes

Tax credits considered include:

  • New jobs tax credits
  • R&D tax credits
  • Payroll withholding tax rebates
  • Property tax abatements

So which states have the lowest tax burdens overall? For mature companies, the winners are Wyoming, South Dakota, Georgia, Nevada, Ohio, Utah, North Carolina, Maryland, Nebraska and Louisiana. The worst states for mature businesses were New Jersey, New York, Indiana, Massachusetts, Illinois, Rhode Island, Kansas, West Virginia, Hawaii and Pennsylvania.

For new companies, the states with the lowest tax rates are Nebraska, Louisiana, Ohio, Wisconsin, Oklahoma, Georgia, Kentucky, Arkansas, Wyoming and Utah. The states with the highest rates for new firms are Massachusetts, Rhode Island, California, Maryland, Colorado, Kansas, Pennsylvania and Hawaii.

Wyoming stands out as having the lowest overall tax cost of any state, followed closely by South Dakota. Wyoming’s score is nearly 52 percent below the national average while South Dakota’s is 44 percent below the average.

There’s much more detail in the report, including a closer look at what types of firms can expect what types of taxes based on their age and location in a Tier 1 or Tier 2 city. View or download the full report here.

Image by Flickr user Eric Fischer (Creative Commons)

 

The views expressed here are the author's alone and not those of Network Solutions or its partners.

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