![]() ![]() Delaware, Oregon, and Tennessee impose gross receipts taxes in addition to corporate income taxes, and several additional states-Pennsylvania, Virginia, and West Virginia-permit gross receipts taxes at the local (but not state) level. In Nevada and Ohio, however, these taxes are imposed at relatively low rates, and this year, Ohio implemented new thresholds that exempt many smaller businesses from gross receipts taxation. , disparate impacts on low-margin businesses, and non-transparency. Gross receipts taxes are a prime example of tax pyramiding in action. This yields vastly different effective tax rates depending on the length of the supply chain and disproportionately harms low-margin firms. 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. Eight other states impose top rates at or below 5 percent: Colorado (4.4 percent), Utah (4.65 percent), Arkansas (4.8 percent), Arizona and Indiana (4.9 percent), and Kentucky, Mississippi, and South Carolina (5 percent). ![]() Going back several years, Iowa shed a top marginal rate of 12 percent (albeit with deductibility for federal taxes paid) and Pennsylvania began phasing its 9.99 percent rate down to-eventually-4.99 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, which levied the highest corporate rate in the country of 11.5 percent from 2021-2023, now has the fourth-highest rate (9 percent), as the state’s 2.5 percentage-point corporation business tax surcharge expired at the end of 2023. Minnesota levies the highest top statutory corporate tax rate at 9.8 percent, followed by Illinois (9.5 percent) and Alaska (9.4 percent). Corporate income taxes accounted for 2.27 percent of general revenue in FY 2020, which is more in line with historical norms. And while these figures are not high, they represent a substantial increase over prior years. Though often thought of as a major tax type, corporate income taxes accounted for only 7.07 percent of state tax collections and 3.32 percent of state general revenue in fiscal year (FY) 2021. 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.
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