In this article, we will take a look at the 5 states with the lowest business taxes. If you want to see more states in this selection, go to the 15 States with the Lowest Business Taxes.
5. Montana
2023 State Business Tax Climate Index Score: 6.08
In Montana, individuals are subject to a graduated income tax with rates from 1% to 6.75%. The corporate income tax rate is 6.75%. Montana does not impose a state sales tax, and there are no local sales taxes. Starting in 2024, the individual income tax in Montana will have only two rates: 4.7% (applied to taxable income up to $20,500 for single filers and $41,000 for joint filers) and 6.5% (applied to taxable income above $20,500 for single filers and $41,000 for joint filers).
4. Florida
2023 State Business Tax Climate Index Score: 6.85
Florida has a single-bracket corporate income tax rate of 5.5%. The state lowered its corporate tax rate from 5.5% to 4.458% from the start of 2019 till the end of 2020 and further slashed it to 3.535% during 2021 before bringing it back to 5.5% at the start of 2022. The cut in corporate income tax was in line with numerous other states. The initial tax cut was made on the back of roaring tax collection during a booming economic phase. Meanwhile, the second corporate tax cut came during the COVID-19 pandemic to give relief to corporations.
3. Alaska
2023 State Business Tax Climate Index Score: 7.23
In Alaska, there is no individual income tax, but the state imposes a tax on business income through a progressive corporate tax system, with tax rates that currently range from 0% to 9.4%. The first $25,000 of taxable income is taxed at 0%, and the tax rate increases gradually until reaching 9.4% for taxable income portions of $222,000 or more. Although the state does not have a state sales tax, there is a maximum local sales tax rate of 7.5%, and the average combined rate of state and local sales tax is 1.76%.
2. South Dakota
2023 State Business Tax Climate Index Score: 7.49
South Dakota does not impose any corporate tax or any gross receipt tax. Along with Wyoming, South Dakota has been able to phase out corporate taxes. It is one of those states that does not charge any personal income tax as well. The state has a sales tax of 4.5% that can be increased by as much as 4.5% further by local authorities. The average combined state and local sales tax stands at 6.4%. The state charges a 30-cent tax per gallon of gasoline and collects $1,720 per capita through the collection of state and local general sales tax.
1. Wyoming
2023 State Business Tax Climate Index Score: 7.76
Wyoming does not charge any corporate tax nor any gross receipts tax. The state imposes a sales tax of 4% that can be further increased by as much as 2% only by local authorities. The state does not levy an individual income tax. The Cowboy State generates most of its tax revenue by imposing heavy property taxes and taxing businesses that are involved in the extraction of natural resources like coal. Wyoming is one of the states with the lowest taxes across the US, and thus it results in the lowest burden of per capita personal taxes.
Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also take a peek at the 12 Top Performing Energy Stocks in January and the 15 Most Valuable Retail Companies in the World.
