When It Comes to Business Taxes, Location Matters

New Study Has the Bottom Line on Tax Costs in All 50 States

Map of the U.S.A. via WikipediaWashington, D.C. — Taxes are a big cost for many businesses, and vary widely based both on state and market sector. Now, for the first time, the Tax Foundation has created a measurement of the bottom-line tax liability a firm would face doing business in each of the fifty states. In addition, the study measures the tax differences between companies in different industries and between new and existing companies within each state.

Location Matters: A Comparative Analysis of State Tax Costs on Business is a guide for anyone making decisions about new manufacturing facilities, corporate headquarter relocations, or state government affairs. It highlights the sometimes surprising differences in how different kinds of businesses are taxed within the same state.

“Corporate taxes on the state level rarely treat all comers equally, leading to sometimes dramatic disparities in the cost of doing business,” said Tax Foundation president Scott Hodge. “Tax preferences and incentive deals can distort the playing field based on how long a business has been operating, whether it’s a manufacturing or retail operation or whether it’s moved from another state to set up shop.”

The states which ranked best overall (for mature firms) were led by Wyoming at #1, followed, in descending order, by South Dakota, Georgia, Nevada, and Ohio. Lowest ranked states included Pennsylvania, which came in last at #50, followed by Hawaii, West Virginia, Kansas, and Rhode Island.

Widespread interest in corporate tax burdens has led to a number of studies from a variety of think tanks, media organizations, and research groups. None of these studies, however, provide comparisons of actual state business tax burdens. Location Matters takes a detailed look at the state’s tax system, comparing how different the tax burden is for a retail store compared to a corporate headquarters, manufacturing plant, or research and development facility.

In order to produce the Location Matters guide, the Tax Foundation collaborated with KPMG LLP, the U.S. audit, tax and advisory firm. Tax Foundation economists modeled seven hypothetical firms, and KPMG calculated each entity’s tax bill in each state. The study accounts for basically all business taxes and applies major tax incentives applicable by firm type.

“The Location Matters report should provide companies with an easy-to-use reference that will help shape their overall location decisions,” said KPMG Principal W. Hartley Powell of the firm’s Global Location and Expansion Services practice. “The report offers a comprehensive calculation of real-world tax obligations by firm types for all 50 states, making it a useful tool as companies work through the complexities of maintaining existing operations and establishing new operations.”

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To learn more, visit: www.taxfoundation.org

AFS/GMS via Tax Foundation

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