South Dakota and Wyoming levy neither corporate income nor gross receipts taxes. Delaware and Oregon impose gross receipts taxes in addition to corporate income taxes, as do several states, like Pennsylvania, Virginia, and West Virginia, which permit gross receipts taxes at the local (but not state) level. Gross receipts taxes are a prime example of tax pyramiding in action.Īnd nontransparency. 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. Seven other states impose top rates at or below 5 percent: Florida (4.458 percent), Colorado (4.63 percent), Arizona (4.9 percent), Utah (4.95 percent), and Kentucky, Mississippi, and South Carolina (5 percent). Two other states (Alaska and Illinois) levy rates of 9 percent or higher.Ĭonversely, North Carolina’s flat rate of 2.5 percent is the lowest in the country, followed by rates in Missouri (4 percent) and North Dakota (4.31 percent). Iowa levies the highest top statutory corporate tax rate at 12 percent, followed by New Jersey (10.5 percent), Pennsylvania (9.99 percent), and Minnesota (9.8 percent). Though often thought of as a major tax type, corporate income taxes account for an average of just 4.73 percent of state tax collections and 2.27 percent of state general revenue.
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