Wyoming, South Dakota, Washington, and Nevada top a recent poll of the states with the most business-friendly taxes.
Business.org teamed up with CPA Logan Allec of MoneyDoneRight.com to delve into tax rates and find which states have the most business-friendly taxes.
Top 15 States in Order:
- South Dakota
- North Dakota
The top four states (Wyoming, South Dakota, Washington, and Nevada) have 0% personal income tax rate and 0% corporate tax rate for all brackets, making them good for almost every kind of business.
There’s a mix of known start-up friendly areas (like Texas, Utah, Washington, and Arizona) but there are also a few surprises, such as the Dakotas, Alaska, and Wyoming. Populations might be low, but these states could hold great opportunities for online-based businesses.
States with 0% personal income tax are: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.
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States with 0% corporate income tax are: Ohio, Nevada, South Dakota, Washington, and Wyoming.
California has the highest sales tax rate at 7.25%, as well as the highest personal income tax rates at 13.30% for the highest bracket, but just 1% for the lowest bracket.
The highest corporate tax rates belong to Iowa, at 12%.
Rankings were based on these four factors:
- 2019 State Personal Income Tax Rates (35% of weight): We looked at lowest and highest possible personal income tax rates in each state. Both are important, especially for business owners who may start in one bracket and end in another.
- 2019 State Corporate Tax Rates (35% of weight): Again, we looked at the lowest and highest corporate income tax rates.
- 2019 State Sales Tax Rates (15% of weight): We looked at each state’s sales tax rate.
- 2019 State Average Property Tax Rates (15% of weight): This applies more to brick-and-mortar owners compared to e-commerce businesses, but still an important rate to include.
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To be sure, the Tax Foundation's "State Business Tax Climate Index" also ranked Wyoming atop its survey.
"The absence of a major tax is a common factor among many of the top 10 states. Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate income tax, the individual income tax, or the sales tax," the Tax Foundation explained.
"Wyoming, Nevada, and South Dakota have no corporate or individual income tax (though Nevada imposes gross receipts taxes); Alaska has no individual income or state-level sales tax; Florida has no individual income tax," the Tax Foundation said.
"This does not mean, however, that a state cannot rank in the top 10 while still levying all the major taxes. Indiana and Utah, for example, levy all of the major tax types, but do so with low rates on broad bases."
In the Tax Foundation's survey, New Jersey was in last place at No 50 because of the Garden State's "complex, nonneutral taxes with comparatively high rates."
The Tax Foundation said New Jersey "is hampered by some of the highest property tax burdens in the country, recently implemented the second highest-rate corporate income tax in the country, levies an inheritance tax, and maintains some of the nation’s worst-structured individual income taxes."
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