Nevada, Ohio, Texas, and Washington forgo corporate income taxes but instead impose gross receipts taxes on businesses, which are generally thought to be more economically harmful due to tax pyramiding Tax pyramiding occurs when the same final good or service is taxed multiple times along the production process. Seven other states impose top rates at or below 5 percent: Colorado (4.55 percent), Arizona and Indiana (4.9 percent), Utah (4.85 percent), and Kentucky, Mississippi, and South Carolina (5 percent). Two other states (Alaska and Illinois) impose rates greater than 9 percent.Ĭonversely, North Carolina’s flat rate of 2.5 percent is the lowest in the country, followed by rates in Missouri and Oklahoma (both at 4 percent) and North Dakota (4.31 percent). New Jersey levies the highest top statutory corporate tax rate at 11.5 percent, followed by Pennsylvania (9.99 percent) and Iowa and Minnesota (both at 9.8 percent). Though often thought of as a major tax type, corporate income taxes accounted for an average of just 4.93 percent of state tax collections and 2.26 percent of state general revenue in fiscal year 2020. Unlike a sales tax, a gross receipts tax is assessed on businesses and apply to business-to-business transactions in addition to final consumer purchases, leading to tax pyramiding.Ĭorporate income taxes are levied in 44 states and DC. South Dakota and Wyoming are the only states that levy neither a corporate income nor gross receipts tax A gross receipts tax is a tax applied to a company’s gross sales, without deductions for a firm’s business expenses, like costs of goods sold and compensation.Gross receipts taxes are generally thought to be more economically harmful than corporate income taxes. Nevada, Ohio, Texas, and Washington impose gross receipts taxes instead of corporate income taxes.Eleven states- Arizona, Colorado, Indiana, Kentucky, Mississippi, Missouri, North Carolina, North Dakota, Oklahoma, South Carolina, and Utah-have top rates at or below 5 percent.Six states- Alaska, Illinois, Iowa, Minnesota, New Jersey, and Pennsylvania-levy top marginal corporate income tax A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Rates range from 2.5 percent in North Carolina to 11.5 percent in New Jersey. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. Forty-four states levy a corporate income tax A corporate income tax (CIT) is levied by federal and state governments on business profits.
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