When starting or expanding a business, understanding the tax landscape can be crucial. Some states impose high taxes, making it difficult for businesses to thrive, while others offer a more favorable tax environment. Here’s a rundown of the top 10 worst and best states for business taxes.
Top 10 Worst States for Business Taxes
1. New Jersey
- Corporate Income Tax: 11.5%, highest in the U.S.
- Individual Income Tax: Up to 10.75%.
- Property Tax: Highest in the nation.
- Other: Inheritance tax.
2. New York
- Corporate Income Tax: 6.5%.
- Individual Income Tax: Up to 10.9%.
- Property Tax: High.
- Sales Tax: State rate of 4%, with local rates higher.
3. California
- Corporate Income Tax: 8.84%.
- Individual Income Tax: Up to 13.3%, highest in the nation.
- Sales Tax: Combined rates up to 10.25%.
- Regulatory Environment: Heavy and costly.
4. Connecticut
- Corporate Income Tax: 7.5% plus surcharge.
- Individual Income Tax: Up to 6.99%.
- Property Tax: High.
- Sales Tax: State rate of 6.35%.
5. Massachusetts
- Corporate Income Tax: 8%.
- Individual Income Tax: 5% flat rate.
- Property Tax: High, especially in Boston.
- Sales Tax: 6.25%.
6. Maryland
- Corporate Income Tax: 8.25%.
- Individual Income Tax: Up to 5.75% plus local add-ons.
- Property Tax: High in some areas.
- Inheritance Tax: Yes.
7. Minnesota
- Corporate Income Tax: 9.8%.
- Individual Income Tax: Up to 9.85%.
- Property Tax: High.
- Sales Tax: 6.875% plus local additions.
8. Vermont
- Corporate Income Tax: Up to 8.5%.
- Individual Income Tax: Up to 8.75%.
- Property Tax: High.
- Sales Tax: 6%.
9. Hawaii
- Corporate Income Tax: 6.4% on income over $100,000.
- Individual Income Tax: Up to 11%.
- General Excise Tax: 4% plus county surcharges.
- Property Tax: Relatively low, but high living costs.
10. Rhode Island – Corporate Income Tax: 7%. – Individual Income Tax: Up to 5.99%. – Property Tax: High. – Sales Tax: 7%.
These states have complex and high tax rates, making it challenging for businesses to thrive due to reduced profits, increased compliance burdens, and higher operating costs.
Top 10 Best States for Business Taxes
1. Wyoming
- Corporate Income Tax: None.
- Individual Income Tax: None.
- Sales Tax: Low state rate of 4%.
2. South Dakota
- Corporate Income Tax: None.
- Individual Income Tax: None.
- Sales Tax: State rate of 4.5%.
3. Alaska
- Corporate Income Tax: Low rates, with no tax on incomes up to $25,000 and a top rate of 9.4%.
- Individual Income Tax: None.
- Sales Tax: None at the state level.
4. Florida
- Corporate Income Tax: 5.5%.
- Individual Income Tax: None.
- Sales Tax: State rate of 6%, with local surtaxes.
5. Montana
- Corporate Income Tax: 6.75%.
- Individual Income Tax: Progressive rates up to 6.75%.
- Sales Tax: None at the state level.
6. New Hampshire
- Corporate Income Tax: Business Profits Tax at 7.7% on income over $50,000 and a Business Enterprise Tax of 0.6% on enterprise value tax base.
- Individual Income Tax: None on wages and salaries, but 5% on dividends and interest.
- Sales Tax: None at the state level.
7. Nevada
- Corporate Income Tax: None.
- Individual Income Tax: None.
- Sales Tax: State rate of 6.85%, with local additions.
8. Utah
- Corporate Income Tax: Flat rate of 4.95%.
- Individual Income Tax: Flat rate of 4.95%.
- Sales Tax: State rate of 4.85%, with local additions.
9. Indiana
- Corporate Income Tax: Flat rate of 4.9%.
- Individual Income Tax: Flat rate of 3.23%, with county taxes.
- Sales Tax: State rate of 7%.
10. North Carolina – Corporate Income Tax: Flat rate of 2.5%, the lowest in the country for states that levy a corporate tax. – Individual Income Tax: Flat rate of 5.25%. – Sales Tax: State rate of 4.75%, with local additions.
These states offer a variety of tax advantages, from no corporate or individual income taxes to lower sales taxes, making them attractive locations for businesses looking to minimize their tax burdens and maximize profitability.
Understanding the tax landscape is crucial for any business. By choosing a state with a favorable tax environment, businesses can reduce their operating costs, simplify compliance, and invest more in growth and innovation. Whether you’re starting a new venture or looking to expand, considering these tax-friendly states can give you a competitive edge.
And if you’re looking to save even MORE on taxes, we at Quartermaster have you covered. Just check out www.quartermastertax.com!