Special Report

States That Tax Businesses the Most

Evan Comen

Published: March 2, 2018 6:31 pm

Last Updated: January 12, 2020 2:48 am

Since Amazon announced in September 2017 its plans to build a second headquarters, state and local governments have tried to compete by offering the online retail giant a variety of tax break schemes. The flurry of proposals from more than 200 cities has put the spotlight on state business taxes and how they vary across the country.

State tax codes are complex. Several factors, in addition to the corporate tax rate, determine how tax-friendly a state is — and how competitive its business environment is. Every year, the Tax Foundation, a think tank focused on tax policy research and education, ranks each state’s business tax climate based on more than 100 variables.

Based on the Tax Foundation’s 2018 State Business Tax Climate Index, 24/7 Wall St. reviewed the states with the best and worst business tax environments. According to the report, Wyoming is the most tax-friendly state for business, while New Jersey is the worst.

Click here to see the most and least tax-friendly states for business.
Click here to see our detailed findings and methodology.

Source: Thinkstock

1. Wyoming
> State sales tax rate: 4.0% (tied–11th lowest)
> Property taxes collections per capita: $2,109 (9th highest)
> Dec. unemployment rate: 4.2% (22nd highest)
> Top individual income tax rate: None
> Top corporate income tax rate: None

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2. South Dakota
> State sales tax rate: 4.5% (14th lowest)
> Property taxes collections per capita: $1,301 (24th lowest)
> Dec. unemployment rate: 3.5% (tied–19th lowest)
> Top individual income tax rate: None
> Top corporate income tax rate: None

Source: Paxson Woelber / Flickr

3. Alaska
> State sales tax rate: None
> Property taxes collections per capita: $2,639 (4th highest)
> Dec. unemployment rate: 7.3% (the highest)
> Top individual income tax rate: None
> Top corporate income tax rate: 9.4%

Source: Thinkstock

4. Florida
> State sales tax rate: 6.0% (tied–16th highest)
> Property taxes collections per capita: $1,184 (22nd lowest)
> Dec. unemployment rate: 3.7% (tied–22nd lowest)
> Top individual income tax rate: None
> Top corporate income tax rate: 5.5%

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5. Nevada
> State sales tax rate: 6.9% (8th highest)
> Property taxes collections per capita: $953 (13th lowest)
> Dec. unemployment rate: 5.0% (tied–4th highest)
> Top individual income tax rate: None
> Top corporate income tax rate: None

Source: Thinkstock

6. Montana
> State sales tax rate: None
> Property taxes collections per capita: $1,465 (17th highest)
> Dec. unemployment rate: 4.1% (tied–23rd highest)
> Top individual income tax rate: 6.9%
> Top corporate income tax rate: 6.8%

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7. New Hampshire
> State sales tax rate: None
> Property taxes collections per capita: $2,861 (2nd highest)
> Dec. unemployment rate: 2.6% (tied–3rd lowest)
> Top individual income tax rate: 5.0%
> Top corporate income tax rate: 8.2%

Source: Thinkstock

8. Utah
> State sales tax rate: 6.0% (25th lowest)
> Property taxes collections per capita: $969 (15th lowest)
> Dec. unemployment rate: 3.1% (tied–12th lowest)
> Top individual income tax rate: 5.0%
> Top corporate income tax rate: 5.0%

Source: Thinkstock

9. Indiana
> State sales tax rate: 7.0% (tied–2nd highest)
> Property taxes collections per capita: $970 (16th lowest)
> Dec. unemployment rate: 3.4% (tied–15th lowest)
> Top individual income tax rate: 3.2%
> Top corporate income tax rate: 6.3%

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10. Oregon
> State sales tax rate: None
> Property taxes collections per capita: $1,350 (25th highest)
> Dec. unemployment rate: 4.1% (tied–23rd highest)
> Top individual income tax rate: 9.9%
> Top corporate income tax rate: 7.6%

Source: Thinkstock

11. North Carolina
> State sales tax rate: 4.8% (15th lowest)
> Property taxes collections per capita: $951 (12th lowest)
> Dec. unemployment rate: 4.5% (tied–15th highest)
> Top individual income tax rate: 5.5%
> Top corporate income tax rate: 3.0%

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12. Michigan
> State sales tax rate: 6.0% (tied–16th highest)
> Property taxes collections per capita: $1,335 (25th lowest)
> Dec. unemployment rate: 4.7% (tied–7th highest)
> Top individual income tax rate: 4.3%
> Top corporate income tax rate: 6.0%

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13. Texas
> State sales tax rate: 6.3% (13th highest)
> Property taxes collections per capita: $1,635 (14th highest)
> Dec. unemployment rate: 3.9% (23rd lowest)
> Top individual income tax rate: None
> Top corporate income tax rate: None

14. Tennessee
> State sales tax rate: 7.0% (tied–2nd highest)
> Property taxes collections per capita: $830 (7th lowest)
> Dec. unemployment rate: 3.2% (13th lowest)
> Top individual income tax rate: 5.0%
> Top corporate income tax rate: 6.5%

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15. Delaware
> State sales tax rate: None
> Property taxes collections per capita: $828 (6th lowest)
> Dec. unemployment rate: 4.6% (tied–10th highest)
> Top individual income tax rate: 6.6%
> Top corporate income tax rate: 8.7%

Source: Thinkstock

16. Missouri
> State sales tax rate: 4.2% (12th lowest)
> Property taxes collections per capita: $960 (14th lowest)
> Dec. unemployment rate: 3.5% (tied–19th lowest)
> Top individual income tax rate: 6.0%
> Top corporate income tax rate: 6.3%

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17. Washington
> State sales tax rate: 6.5% (tied–9th highest)
> Property taxes collections per capita: $1,364 (24th highest)
> Dec. unemployment rate: 4.5% (tied–15th highest)
> Top individual income tax rate: None
> Top corporate income tax rate: None

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18. Colorado
> State sales tax rate: 2.9% (6th lowest)
> Property taxes collections per capita: $1,365 (23rd highest)
> Dec. unemployment rate: 3.1% (tied–12th lowest)
> Top individual income tax rate: 4.6%
> Top corporate income tax rate: 4.6%

Source: Thinkstock

19. West Virginia
> State sales tax rate: 6.0% (tied–16th highest)
> Property taxes collections per capita: $852 (9th lowest)
> Dec. unemployment rate: 5.5% (3rd highest)
> Top individual income tax rate: 6.5%
> Top corporate income tax rate: 6.5%

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20. Idaho
> State sales tax rate: 6.0% (tied–16th highest)
> Property taxes collections per capita: $928 (11th lowest)
> Dec. unemployment rate: 2.9% (7th lowest)
> Top individual income tax rate: 7.4%
> Top corporate income tax rate: 7.4%

Source: Scott Taylor / Flickr

21. Arizona
> State sales tax rate: 5.6% (23rd lowest)
> Property taxes collections per capita: $986 (18th lowest)
> Dec. unemployment rate: 4.5% (tied–15th highest)
> Top individual income tax rate: 4.5%
> Top corporate income tax rate: 4.9%

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22. Massachusetts
> State sales tax rate: 6.3% (13th highest)
> Property taxes collections per capita: $2,181 (8th highest)
> Dec. unemployment rate: 3.5% (tied–19th lowest)
> Top individual income tax rate: 5.1%
> Top corporate income tax rate: 8.0%

Source: Thinkstock

23. Kansas
> State sales tax rate: 6.5% (tied–9th highest)
> Property taxes collections per capita: $1,435 (19th highest)
> Dec. unemployment rate: 3.4% (tied–15th lowest)
> Top individual income tax rate: 4.6%
> Top corporate income tax rate: 7.0%

Source: Thinkstock

24. Mississippi
> State sales tax rate: 7.0% (tied–2nd highest)
> Property taxes collections per capita: $916 (10th lowest)
> Dec. unemployment rate: 4.6% (tied–10th highest)
> Top individual income tax rate: 5.0%
> Top corporate income tax rate: 5.0%

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25. Nebraska
> State sales tax rate: 5.5% (tied–22nd lowest)
> Property taxes collections per capita: $1,757 (12th highest)
> Dec. unemployment rate: 2.7% (4th lowest)
> Top individual income tax rate: 6.8%
> Top corporate income tax rate: 7.8%

Source: Thinkstock

26. Pennsylvania
> State sales tax rate: 6.0% (tied–16th highest)
> Property taxes collections per capita: $1,405 (21st highest)
> Dec. unemployment rate: 4.7% (tied–7th highest)
> Top individual income tax rate: 3.1%
> Top corporate income tax rate: 10.0%

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27. Hawaii
> State sales tax rate: 4.0% (tied–11th lowest)
> Property taxes collections per capita: $980 (17th lowest)
> Dec. unemployment rate: 2.0% (the lowest)
> Top individual income tax rate: 8.3%
> Top corporate income tax rate: 6.4%

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28. Maine
> State sales tax rate: 5.5% (tied–22nd lowest)
> Property taxes collections per capita: $1,918 (11th highest)
> Dec. unemployment rate: 3.0% (tied–9th lowest)
> Top individual income tax rate: 10.2%
> Top corporate income tax rate: 8.9%

29. Illinois
> State sales tax rate: 6.3% (13th highest)
> Property taxes collections per capita: $2,007 (10th highest)
> Dec. unemployment rate: 4.8% (6th highest)
> Top individual income tax rate: 3.8%
> Top corporate income tax rate: 7.8%

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30. North Dakota
> State sales tax rate: 5.0% (18th lowest)
> Property taxes collections per capita: $1,121 (21st lowest)
> Dec. unemployment rate: 2.6% (tied–3rd lowest)
> Top individual income tax rate: 2.9%
> Top corporate income tax rate: 4.3%

Source: Thinkstock

31. Virginia
> State sales tax rate: 5.3% (20th lowest)
> Property taxes collections per capita: $1,457 (18th highest)
> Dec. unemployment rate: 3.7% (tied–22nd lowest)
> Top individual income tax rate: 5.8%
> Top corporate income tax rate: 6.0%

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32. Oklahoma
> State sales tax rate: 4.5% (14th lowest)
> Property taxes collections per capita: $623 (2nd lowest)
> Dec. unemployment rate: 4.1% (tied–23rd highest)
> Top individual income tax rate: 5.0%
> Top corporate income tax rate: 6.0%

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33. Kentucky
> State sales tax rate: 6.0% (tied–16th highest)
> Property taxes collections per capita: $737 (5th lowest)
> Dec. unemployment rate: 4.4% (tied–18th highest)
> Top individual income tax rate: 6.0%
> Top corporate income tax rate: 6.0%

Source: Thinkstock

34. New Mexico
> State sales tax rate: 5.1% (19th lowest)
> Property taxes collections per capita: $731 (4th lowest)
> Dec. unemployment rate: 6.0% (2nd highest)
> Top individual income tax rate: 4.9%
> Top corporate income tax rate: 6.2%

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35. Alabama
> State sales tax rate: 4.0% (tied–11th lowest)
> Property taxes collections per capita: $522 (the lowest)
> Dec. unemployment rate: 3.5% (tied–19th lowest)
> Top individual income tax rate: 5.0%
> Top corporate income tax rate: 6.5%

Source: Thinkstock

36. Georgia
> State sales tax rate: 4.0% (tied–11th lowest)
> Property taxes collections per capita: $1,087 (20th lowest)
> Dec. unemployment rate: 4.4% (tied–18th highest)
> Top individual income tax rate: 6.0%
> Top corporate income tax rate: 6.0%

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37. South Carolina
> State sales tax rate: 6.0% (tied–16th highest)
> Property taxes collections per capita: $1,080 (19th lowest)
> Dec. unemployment rate: 4.1% (tied–23rd highest)
> Top individual income tax rate: 7.0%
> Top corporate income tax rate: 5.0%

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38. Wisconsin
> State sales tax rate: 5.0% (tied–18th lowest)
> Property taxes collections per capita: $1,657 (13th highest)
> Dec. unemployment rate: 3.0% (tied–9th lowest)
> Top individual income tax rate: 7.7%
> Top corporate income tax rate: 7.9%

Source: Thinkstock

39. Arkansas
> State sales tax rate: 6.5% (tied–9th highest)
> Property taxes collections per capita: $675 (3rd lowest)
> Dec. unemployment rate: 3.7% (tied–22nd lowest)
> Top individual income tax rate: 6.9%
> Top corporate income tax rate: 6.5%

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40. Iowa
> State sales tax rate: 6.0% (tied–16th highest)
> Property taxes collections per capita: $1,525 (15th highest)
> Dec. unemployment rate: 2.8% (tied–6th lowest)
> Top individual income tax rate: 9.0%
> Top corporate income tax rate: 12.0%

Source: Thinkstock

41. Rhode Island
> State sales tax rate: 7.0% (tied–2nd highest)
> Property taxes collections per capita: $2,307 (7th highest)
> Dec. unemployment rate: 4.4% (tied–18th highest)
> Top individual income tax rate: 6.0%
> Top corporate income tax rate: 7.0%

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42. Louisiana
> State sales tax rate: 5.0% (tied–18th lowest)
> Property taxes collections per capita: $839 (8th lowest)
> Dec. unemployment rate: 4.6% (tied–10th highest)
> Top individual income tax rate: 6.0%
> Top corporate income tax rate: 8.0%

Source: Thinkstock

43. Maryland
> State sales tax rate: 6.0% (tied–16th highest)
> Property taxes collections per capita: $1,491 (16th highest)
> Dec. unemployment rate: 4.0% (24th lowest)
> Top individual income tax rate: 5.8%
> Top corporate income tax rate: 8.3%

Source: Thinkstock

44. Connecticut
> State sales tax rate: 6.4% (12th highest)
> Property taxes collections per capita: $2,774 (3rd highest)
> Dec. unemployment rate: 4.6% (tied–10th highest)
> Top individual income tax rate: 7.0%
> Top corporate income tax rate: 9.0%

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45. Ohio
> State sales tax rate: 5.8% (24th lowest)
> Property taxes collections per capita: $1,203 (23rd lowest)
> Dec. unemployment rate: 4.7% (tied–7th highest)
> Top individual income tax rate: 5.0%
> Top corporate income tax rate: None

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46. Minnesota
> State sales tax rate: 6.9% (tied–6th highest)
> Property taxes collections per capita: $1,411 (20th highest)
> Dec. unemployment rate: 3.1% (tied–12th lowest)
> Top individual income tax rate: 9.9%
> Top corporate income tax rate: 9.8%

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47. Vermont
> State sales tax rate: 6.0% (tied–16th highest)
> Property taxes collections per capita: $2,339 (6th highest)
> Dec. unemployment rate: 2.8% (tied–6th lowest)
> Top individual income tax rate: 9.0%
> Top corporate income tax rate: 8.5%

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48. California
> State sales tax rate: 7.3% (the highest)
> Property taxes collections per capita: $1,385 (22nd highest)
> Dec. unemployment rate: 4.3% (21st highest)
> Top individual income tax rate: 13.3%
> Top corporate income tax rate: 8.8%

Source: Aurelien Guichard / Flickr

49. New York
> State sales tax rate: 4.0% (tied–11th lowest)
> Property taxes collections per capita: $2,581 (5th highest)
> Dec. unemployment rate: 4.6% (tied–10th highest)
> Top individual income tax rate: 8.8%
> Top corporate income tax rate: 6.5%

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50. New Jersey
> State sales tax rate: 6.9% (tied–6th highest)
> Property taxes collections per capita: $3,065 (the highest)
> Dec. unemployment rate: 5.0% (tied–4th highest)
> Top individual income tax rate: 9.0%
> Top corporate income tax rate: 9.0%

While the corporate income tax rate may be the largest tax consideration for businesses, other elements of a state’s tax code can affect its business climate. The Tax Foundation’s rank considers the structure and rates of each state’s corporate income tax, individual income tax, sales tax, unemployment insurance tax, and property tax.

The majority of the 10 most tax-friendly states do not levy one of the three major taxes — corporate income tax, individual income tax, or sales tax. Wyoming, South Dakota, and Nevada, for example, which respectively rank first, second, and fifth on this list, have no corporate or individual income tax. Montana, New Hampshire, and Oregon, which respectively rank sixth, seventh, and 10th, have no sales tax.

Still, states that levy all three major taxes can still have a competitive business climate. Utah and Indiana, which rank eighth and ninth, levy all three major taxes but at a relatively low rate. States on the other end of the list, meanwhile, tend to have relatively high tax rates and complex tax codes.

As the response to Amazon’s open call for location proposals indicates, state tax systems have a heavy impact on business investment. In a similar vein, there are several examples of businesses fighting various tax increases by threatening to close operations in a state. General Electric moved its headquarters from suburban Connecticut to Boston after the state passed a budget that raised corporate tax burdens in 2015. While tax competition can make it difficult for state lawmakers to balance budgets, it can also help create and preserve the conditions for a competitive business environment.

Based on the Tax Foundation’s 2018 State Business Tax Climate Index, 24/7 Wall St. reviewed the states with the best and worst business tax environments. Property tax collections per capita are from this report and are for fiscal 2014. The highest tier in each state’s individual and corporate income tax structures as well as state sales tax rates were obtained from The Tax Foundation’s 2017 Facts and Figures report. Seasonally adjusted unemployment rates for December 2017 are from the Bureau of Labor Statistics. All data are for the most recent period available.