While all corporations in the U.S. pay federal income taxes at the same rate—currently 21 percent—corporate tax rates vary quite a bit from state to state. Forty-four states levy a corporate income tax, four states levy a gross receipts tax instead of corporate income taxes, and two states have neither. Which states are those? We break down the full list below, but first we'll give you a hint:
Wyoming and South Dakota don't have a corporate income tax, making them arguably some of the best states to start a business in. So how does your state stack up?
Read on to find the corporate income tax (or gross receipts tax) rates for each state and learn about a few unique tax breaks available to businesses that pay taxes there.
Corporate Income Taxes by State
Corporate income taxes are levied on businesses structured as corporations, not pass-through businesses like sole proprietorships, partnerships, LLCs, and S corporations. Those types of businesses pay taxes at individual income tax rates, which vary by state as well.
Here’s an overview of the corporate tax climate in all 50 states, plus the District of Columbia.
Corporations doing business in Alabama pay a flat corporate income tax rate of 6.5 percent on net business income.
All businesses registered or doing business in Alabama also pay a Business Privilege Tax. The Business Privilege Tax rate depends on how much taxable income the business has, and it’s assessed per $1,000 of net worth.
The breakdown is as follows:
- Less than $1 of taxable income: tax of $0.25 per $1,000 of net worth
- $1 to $200,000 of taxable income: tax of $1 per $1,000 of net worth
- $200,000 to $500,000 of taxable income: tax of $1.25 per $1,000 of net worth
- $500,000 to $2.5 million of taxable income: tax of $1.50 per $1,000 of net worth
- $2.5 million or more of taxable income: tax of $1.75 per $1,000 of net worth
For example, if an Alabama corporation has taxable income of $425,000 and a net worth of $2 million in 2021, the business will owe $27,625 in corporate income tax ($425,000 x 6.5 percent). It will also owe the Business Privilege Tax of $2,500 ($2 million / $1,000 x $1.25).
The Alabama Department of Revenue hosts Business Essentials for State Taxpayers (BEST) Seminars to help business taxpayers understand their state tax filing obligations. You can find a webinar schedule and other resources on the BEST Seminars webpage.
Alaska has a progressive corporate income tax rate structure, meaning the higher the business’s taxable income, the higher the rate it pays. Currently, those rates are:
|Alaska Corporate Tax Rate||Applies to Taxable Income Over|
For further guidance on paying corporate income taxes in Alaska, check out the State of Alaska Department of Revenue.
Corporations registered or doing business in Arizona pay a flat corporate income tax rate of 4.9 percent of taxable income or $50, whichever is greater.
However, the state offers several tax credits to help corporations lower their tax burden. You can find details on all of these credits in the Instructions for Arizona Form 120, but they generally apply to businesses that:
- Engage in research and development
- Invest in green energy
- Employ National Guard members or recipients of Temporary Assistance for Needy Families (TANF) benefits
- Donate to Arizona school districts or organizations that provide scholarships and tuition grants to Arizona private schools
Check out the Arizona Department of Revenue’s guide, Business Basics: A Guide to Taxes for Arizona Businesses, for more information on other taxes businesses in Arizona may be required to pay.
Corporations registered or doing business in Arkansas are subject to a corporate income tax and a corporate franchise tax.
For 2021, Arkansas’ progressive corporate income tax rates are:
|Arkansas Corporate Tax Rate||Applies to Taxable Income Over|
Arkansas corporations can reduce their income tax burden by taking advantage of Business Incentive Tax Credits. The state offers dozens of potential credits for businesses that create jobs, provide affordable housing, offer apprenticeships or work-based learning programs, invest in alternative energies, provide child care facilities for employees, and more.
The corporate franchise tax applies to corporations and LLCs. For corporations, the tax is 0.3 percent of the company’s outstanding stock value, subject to a minimum tax of $150.
California also has both a corporate income tax and a franchise tax, so businesses may need to pay one of those taxes.
For 2021, corporations registered or doing business in California pay a flat corporate income tax rate of 8.84 percent. One exception is banks and financial institutions. For those businesses, the corporate tax rate is 10.84 percent. If the corporation does not make a profit, then it pays a flat alternative minimum tax (AMT) of 6.65 percent of its alternative minimum taxable income (AMTI).
Corporations calculate AMTI by starting with their California net income then adding back “preference items,” such as:
- Tax-exempt interest from municipal bonds
- Depletion, which is common in investments in businesses involved in oil, gas, or other minerals
- Intangible drilling costs, which are common in investments in businesses that develop oil and gas wells
Corporations subject to the corporate income tax don’t have to pay the franchise tax, but they do have to pay the state AMT.
All other businesses incorporated, registered, or doing business in California (such as LLCs and S corporations) must pay a franchise tax of 1.5 percent of net income, subject to a minimum of $800.
Learn more about paying taxes in California from the Franchise Tax Board.
Corporations registered or doing business in Colorado pay corporate income taxes at a flat rate of 4.55 percent of taxable income.
Colorado taxable income is generally based on the business’s federal taxable income. However, the state allows businesses to make some state-specific adjustments and tax credits outlined in the Colorado Corporate Income Tax Guide.
Some corporate taxpayers can pay Colorado’s gross receipts tax as an alternative to the state income tax. To qualify:
- The business’s only activity in Colorado must be making sales (i.e., the corporation doesn’t have any Colorado employees or own property in the state)
- The business must have Colorado sales of $100,000 or less, and
- The business doesn’t own or rent real estate in Colorado
Connecticut charges corporate income tax (which it calls a corporation business tax) at a flat rate of 7.5 percent of taxable income.
Connecticut allows corporate taxpayers to offset their tax liability with several business tax credits. You can get more details on each credit from the Connecticut State Department of Revenue Services, but these tax credits generally benefit businesses that:
- Invest in machinery and equipment
- Create jobs and develop the state’s workforce
- Perform research and development within the state
- Rehabilitate historic homes and neighborhoods
Delaware is unique because it allows businesses to incorporate in the state, even if they don’t conduct business in Delaware. Delaware-based corporations that don’t conduct business in the state do not have to file a Delaware corporate income tax return.
For most small businesses, it makes more sense to incorporate in their home state, but establishing a Delaware corporation may make sense for large companies looking to attract angel investors or venture capitalists.
However, Delaware corporations must still file an annual report and pay Delaware’s franchise tax. The rate is based on the number of authorized shares it has. Corporations with 5,000 authorized shares or less pay an annual report fee of $50 and the minimum tax of $175, for a total of $225 per year.
Corporations with more shares pay the $50 report fee plus:
- $250 for 5,001 to 10,000 shares
- $85 for each additional 10,000 shares (or portion thereof)
The maximum annual tax is $200,000.
Corporations that conduct business in Delaware pay corporate income taxes at a flat rate of 8.7 percent.
You can learn more about filing corporate income taxes in Delaware via the Delaware Division of Revenue.
District of Columbia
The District of Columbia assesses a corporate franchise tax on incorporated businesses, including S corporations and C corporations.
The corporate franchise tax rate is 8.25 percent of taxable income, subject to a $250 minimum if DC gross receipts are $1 million or less, or $1,000 for corporations with DC gross receipts greater than $1 million.
You can find more information on the corporate franchise tax at DC.gov.
Florida assesses a corporate income/franchise tax on all corporations located in or conducting business in the state. While the official corporate tax rate in the state is a flat 5.5 percent, Florida House Bills 7093 and 7127 automatically lower corporate income tax rates if net income tax revenues exceed projections in a given fiscal year. As a result, the corporate income tax rate was lowered to 3.535 percent in 2021. However, that rate rose back to 5.5 percent as of January 1, 2022.
Florida offers several tax credits against the corporate income tax, including credits toward paying salaries in Florida, paying taxes or other assessments, and making certain types of investments in the state. You can find a comprehensive list of state tax incentives on the Corporate Income Tax Incentives webpage.
Georgia levies a corporate income tax at a flat rate of 5.75 percent of taxable income.
Corporations may also have to pay a net worth tax based on the business’s net worth. Corporations with a net worth of $100,000 or less don’t have to pay a tax but must still file a tax return. The maximum net worth tax is $5,000 for companies with a net worth over $22 million. You can find the complete net worth tax tables and information on corporate tax credits in the IT-611 Corporation Income Tax Booklet.
Corporations registered or doing business in Hawaii are subject to the following corporate income tax rates:
|Hawaii Corporate Tax Rate||Applies to Taxable Income Over|
Corporations registered or doing business in Idaho must pay a 6.5 percent corporate income tax on Idaho taxable income, subject to a $20 minimum, plus a $10 “permanent building fund tax” assessed on each corporation operating or authorized to do business in the state.
Idaho allows businesses to reduce their corporate income tax liability with two primary tax credits:
- Credit for Contributions to Idaho Educational Entities for donations to certain education-based nonprofit organizations (subject to a maximum credit of $5,000)
- Credit for Contributions to Idaho Youth and Rehabilitation Facilities for donations to youth rehabilitation centers and substance abuse centers (subject to a maximum credit of $500)
You can find more information on these credits and the types of organizations that qualify in the Form 41 Instructions.
Illinois corporations pay three taxes: a corporate income tax at a rate of 7 percent, a personal property replacement tax at a rate of 2.5 percent, and an annual franchise tax.
The franchise tax is based on the corporation’s net worth. In its first year in business, the tax is 0.15 percent of paid-in capital (i.e. the amount shareholders have paid for the company’s stock) with a $25 minimum. In following years, the tax is 0.1 percent for the previous 12-months with a $25 minimum and a $2 million maximum.
Starting in 2021, businesses can take an exemption for their first $1,000 of franchise tax liability.
You can find more information on the state’s corporate income tax, personal property replacement tax, and franchise tax from the Illinois Department of Revenue.
Indiana taxes the adjusted gross income of corporations at a flat rate of 4.9 percent as of June 30, 2021.
The state also offers several tax credits that corporations can use to lower their tax liability. These credits cover things like donating to Indiana colleges and universities, conducting research activities in the state, and investing in Indiana enterprise zones. You can find more information on these credits in the IT-20 Booklet.
Iowa taxes corporate income using a series of marginal tax rates. For 2021 tax returns, those rates are:
|Iowa Corporate Tax Rate||Applies to Taxable Income Over|
Iowa also had an alternative minimum tax, but it was repealed in 2021.
You can learn more about Iowa’s corporate income tax from the Iowa Department of Revenue.
Kansas has just two corporate tax brackets. The regular tax rate is 4 percent of net income, and any net income over $50,000 is subject to a 3 percent surtax.
|Kansas Corporate Tax Rate||Applies to Taxable Income Over|
Kansas offers several tax credits that corporations can use to lower their state income tax liability. You can learn more about each of those credits on the Kansas Department of Revenue’s Tax Credits page and the 2021 Corporate Income Tax Instruction Booklet.
Kentucky levies both a corporate income tax and a Limited Liability Entity Tax (LLET).
The corporate income tax rates are here:
|Kentucky Corporate Tax Rate||Applies to Taxable Income of|
|4 percent||$0 to $50,000|
|5 percent||$50,001 to $100,000|
|6 percent||$100,001 and up|
Kentucky’s LLET can be calculated in two ways, and taxpayers can choose the method that results in the lower tax bill:
- $0.095/$100 of Kentucky gross receipts
- $0.75/$100 of Kentucky gross profits
A minimum tax of $175 applies regardless of the method used. Corporations that pay the LLET can apply that amount as a credit toward their regular corporate income tax.
Check out the Kentucky Department of Revenue’s Corporation/LLC/Pass-Through Tax FAQ page for more information on paying business taxes in the state.
Corporations doing business in Louisiana are subject to a corporate income tax and a corporation franchise tax.
For 2021, the corporate income tax rates are:
|Louisiana Corporate Tax Rate||Applies to Taxable Income of|
|4 percent||$0 to $25,000|
|5 percent||$25,001 to $50,000|
|6 percent||$50,001 to $100,000|
|7 percent||$100,001 to $200,000|
|8 percent||$200,001 and up|
For 2021 and 2022, the Louisiana corporate franchise tax rate is $1.50 for each $1,000 of capital employed in the state up to $300,000, and $3 for each $1,000 of capital employed over $300,000. Capital employed is the total assets used by the company to generate revenue in the state.
You can learn more about both taxes and get tax forms from the Louisiana Department of Revenue.
Corporations registered or doing business in Maine must pay a corporate income tax. Maine’s corporate income tax rates are graduated based on the following:
|Maine Corporate Tax Rate||Applies to Taxable Income of|
|3.5 percent||$0 to $350,000|
|7.93 percent||$350,001 to $1,050,000|
|8.33 percent||$1,050,001 to $3,500,000|
|8.93 percent||$3,500,001 and up|
The corporate income tax doesn’t apply to banks and financial institutions that pay Maine’s franchise tax or insurance companies subject to the state’s premiums tax.
You can download tax forms and learn more about paying corporate income taxes in Maine via Maine Revenue Services.
Maryland levies a corporate income tax at a flat rate of 8.25 percent of taxable income. The state also allows corporations to take advantage of several tax credits for creating new jobs in Maryland, investing in clean energy technologies and building, and conducting research and development in the state. Details on these credits and more are available on the Comptroller of Maryland’s Business Tax Credits page.
Massachusetts’ corporate tax code is perhaps one of the most complicated in the nation. The state has different tax rates and tax bases for different industries.
Most corporations must pay a corporate excise tax calculated as follows:
- 8 percent of Massachusetts source income, plus
- $2.60 per $1,000 on whatever is higher: the company’s Massachusetts tangible personal property, or taxable net worth
The minimum Massachusetts excise tax for corporations is $456.
However, manufacturers, securities corporations, and financial institutions pay different taxes at different rates. You can learn more about these taxes from the Massachusetts Taxpayers Foundation.
Michigan levies a 6 percent corporate income tax on incorporated businesses registered or doing business in the state.
There is only one corporate tax credit: the small business alternative credit. This tax break offers an alternative tax rate of 1.8 percent of adjusted business income. It’s available to any corporate taxpayer, other than insurance companies and financial institutions, with gross receipts of $20 million or under. The business is disqualified from claiming the credit if any officer or shareholder receives more than $180,000 in compensation.
You can get more information on Michigan’s corporate income tax from the Michigan Department of Treasury.
Corporations doing business in Minnesota pay a corporate income tax, which the state calls a corporation franchise tax. It’s a flat 9.8 percent of Minnesota taxable income.
Minnesota also levies a “minimum fee” for corporations and pass-through businesses registered in the state. The minimum fee is based on the combined value of the company’s business property, payroll, and sales. For 2021, the minimum fee brackets are:
|If Your Total Minnesota Property, Payroll & Sales Is:||Your Minimum Fee Is:|
|Less than $1,050,000||$0|
|$1,050,000 to $2,089,999||$220|
|$2,090,000 to $10,479,999||$630|
|$10,480,000 to $20,959,000||$2,090|
|$20,960,000 to $41,909,999||$4,200|
|$41,910,000 or more||$10,480|
You can get more information on Minnesota’s corporate franchise tax and minimum fee from the Minnesota Department of Revenue.
Mississippi has both a corporate income tax and a corporate franchise tax.
The corporate income tax applies only to businesses structured as C corporations. The state has a graduated income tax rate as follows:
- 0 percent on the first $3,000 of taxable income
- 3 percent on the next $2,000 of taxable income
- 4 percent on the next $5,000 of taxable income
- 5 percent on all taxable income over $10,000
Mississippi’s corporate franchise tax applies to both C corporations and S corporations, and it’s based on an element of the business’s net worth.
The franchise tax is computed as $2.25 per $1,000 of whichever number is higher:
- Capital used, invested, or employed in the state over $100,000, or
- The total assessed value of property in the state
There is a minimum franchise tax of $25.
Get more information on both taxes from the Mississippi Department of Revenue.
Missouri assesses a flat corporate income tax of 4 percent of the business’s taxable income. The state also had a corporate franchise tax, but it was eliminated in 2016.
Missouri offers several corporate tax credits that businesses can use to lower their tax bill, including credits for providing low-income housing and creating jobs in the state. You can find a full list of available credits and details on each at the Missouri Department of Revenue’s Miscellaneous Tax Credits page.
Montana assesses a corporate income tax at a flat rate of 6.75 percent of taxable income with a minimum of $50.
However, multistate corporations that don’t own or rent property in Montana and whose only activity in the state is making sales can pay an alternative tax rate of 0.5 percent of their Montana gross receipts. To qualify for the alternative gross sales tax, the company must have annual gross sales of $100,000 or less in Montana.
You can get more information on Montana corporate income taxes and forms from the Montana Department of Revenue.
Nebraska has both a corporate income tax and a franchise tax known as the corporation occupation tax.
The corporate income tax has two marginal rates:
- 5.58 percent for taxable income between $0 and $100,000
- 7.81 percent of taxable income over $100,000
Nebraska also assesses a corporation occupation tax every other year in even-numbered years. The rate is graduated based on the amount of money shareholders have paid for shares of the company’s stock (also known as paid-in capital). The tax rate ranges from $26 for corporations with $10,000 or less of paid-in capital to $23,990 for corporations with over $100,000 paid-in capital.
You can get more information on paying taxes in Nebraska from the Nebraska Department of Revenue.
Nevada does not have a corporate income tax. It does, however, assess a Commerce Tax on any business with Nevada gross revenue greater than $4 million.
You can learn more about Nevada’s Commerce Tax via the Nevada Department of Taxation.
New Hampshire levies both a Business Profits Tax (BPT) on corporate taxable income and a Business Enterprise Tax (BET) on a business’s value.
The BPT is currently 7.7 percent of New Hampshire taxable income. However, corporations with $50,000 or less of gross business income are not required to file a BPT return or pay the tax. The BPT rate is scheduled to drop to 7.6 percent in 2023.
The BET is a 0.60 percent tax on a business’s “enterprise value tax base,” which New Hampshire defines as “the sum of all compensation paid or accrued, interest paid or accrued, and dividends paid by the business.” Companies only need to file a BET return if they have gross receipts greater than $222,000 or an enterprise value tax base greater than $111,000. In 2023, the BET rate is scheduled to fall to 0.55 percent.
You can get more information on both taxes from the New Hampshire Department of Revenue Administration.
Corporations registered in or doing business in New Mexico must pay a corporate income tax and a franchise tax.
New Mexico’s corporate income tax has two brackets:
- 4.8 percent of taxable income between $0 and $500,000
- 5.9 percent on income above $500,000
The state offers several tax credits that corporations can use to lower their state tax liability. These credits apply to things like investing in alternative energies, providing affordable housing, and providing child care facilities for employees, among others. You can find more details on all of New Mexico’s tax credits in publication FYI-160, published by the New Mexico Taxation and Revenue Department.
New Mexico’s Corporate Franchise Tax is $50 per year.
New Jersey assesses its Corporation Business Tax at the following rates:
|New Jersey Corporate Tax Rate||Applies to Net Income of|
|6.5 percent||$50,000 or less|
|7.5 percent||$50,001 to $100,000|
|9.0 percent||$100,001 and up|
The state has a minimum corporate business tax based on the company’s New Jersey gross receipts. The minimum tax is calculated based on the following schedule:
- Gross receipts less than $100,000: $500
- Gross receipts between $100,000 and $250,000: $750
- Gross receipts between $250,000 and $500,000: $1,000
- Gross receipts between $500,000 and $1 million: $1,500
- Gross receipts greater than $1 million: $2,000
You can get more information on paying taxes in New Jersey from the Division of Taxation.
New York has a corporate franchise tax, which applies to both C and S corporations.
The corporate franchise tax rate is based on one of the following three tax bases (whichever is largest):
- The business income base. This is based on federal taxable income, with certain state-specific modifications. The default rate is 6.5 percent. However, a lower rate of 4.875 percent applies to qualified emerging technology companies (QETCs) and a 0.0 percent rate applies to qualified New York manufacturers. For corporations with a business income base higher than $5 million, a 7.25 percent rate applies.
- The business capital base. This is the total investment and business capital allocated to New York State after deducting short-term and long-term liabilities (such as mortgages or equipment loans) attributed to those assets. It’s currently taxed at 0.1875 percent, but qualified New York manufacturers, QETCs, and qualified cooperative housing corporations pay 0 percent. The tax is capped at $350,000 for manufacturers and $5 million for all other corporate taxpayers.
- A fixed dollar minimum (FDM) tax. This is based on the corporation’s New York State receipts and ranges from $25 for companies with receipts of $100,000 or less to $200,000 for corporations with receipts greater than $1 billion.
Find more information on New York’s corporate franchise tax from the New York State Department of Taxation and Finance.
North Carolina taxes corporate income at a flat rate of 2.5 percent of taxable income.
North Carolina also assesses a corporate franchise tax on both C corporations and S corporations. The tax applies to whichever of the following three tax bases yields the highest tax:
- Capital stock, surplus, and undivided profits
- 55 percent of appraised value of all tangible property in North Carolina
- Actual investment in tangible property in North Carolina
The tax rate is the same regardless of which tax base applies. It’s $1.50 per $1,000, subject to a minimum of $200.
The North Carolina Department of Revenue has more information on both taxes and state tax forms.
North Dakota taxes corporate income based on a series of marginal tax rates:
|North Dakota Corporate Tax Rate||Applies to Taxable Income of|
|1.4 percent||$0 to $25,000|
|3.55 percent||$25,001 to $50,000|
|4.31 percent||$50,001 and up|
North Dakota also offers several corporate tax credits for businesses that donate to nonprofit private schools in the state, invest in alternative energies, employ individuals with developmental disabilities, and more. You can find more information on these in North Dakota’s Business Incentives Database.
Ohio doesn’t have a corporate income tax, but it does have a Commercial Activity Tax (CAT) that applies to all businesses with Ohio taxable gross receipts of $150,000 or more during the calendar year.
The first $1 million in taxable gross receipts are taxed at $150. Receipts above $1 million are taxed at a rate of 0.26 percent.
You can learn more about Ohio’s Commercial Activity Tax via the Ohio Department of Taxation.
Oklahoma’s corporate income tax is a flat rate of 6 percent of the business’s federal taxable income, with certain state-specific adjustments.
Oklahoma also has a corporate franchise tax that applies to both C corporations and S corporations. The franchise tax is $1.25 per $1,000 (or fraction thereof) of assets used to generate profits in the state. The franchise tax is subject to a $250 minimum and a $20,000 maximum.
You can find more information on both of these taxes in the 2021 Oklahoma Small Business Corporation Income and Franchise Tax Forms and Instructions.
Oregon has a corporate excise tax, which essentially operates as a corporate income tax, and a corporate activity tax (CAT). The corporate income tax is based on whatever is higher:
- The calculated tax on the corporation’s income, or
- A minimum tax based on Oregon sales
Corporations with income of $1 million or less pay a 6.6 percent tax. Corporations with income over $1 million pay 7.6 percent on the amount over $1 million.
The minimum tax based on Oregon sales ranges from $150 for companies with under $500,000 in sales to $100,000 for companies with more than $100 million in sales.
For example, say an Oregon corporation has $25 million in sales but takes a lot of deductions to bring its net income down to $400,000. With a 6.6 percent regular tax rate, it would only owe $26,400 in tax. However, for companies with sales of $25 million, the minimum tax is $30,000. It would have to pay the larger amount.
The CAT applies only to taxable Oregon sales over $1 million. It’s calculated as $250 plus 0.57 percent of taxable Oregon sales greater than $1 million.
You can get more information on paying taxes in Oregon from the Oregon Department of Revenue.
Pennsylvania’s corporate income tax has a flat rate of 9.99 percent of taxable income.
The state also offers a variety of tax incentives, credits and programs to eligible businesses. These tax credits encourage economic activity, charitable contributions, and community improvement. You can learn more about paying taxes in Pennsylvania and the state’s available tax credits in The Tax Compendium.
Rhode Island has a corporate income tax with a flat rate of 7.0 percent of taxable income. The minimum corporate income tax is $400.
The state offers several tax credits and incentives designed to promote historic preservation and encourage job creation. You can find more information and forms for claiming these tax credits via the Rhode Island Division of Taxation.
Corporations that conduct business in South Carolina are required to pay a corporate income tax at a rate of 5 percent of South Carolina taxable income.
South Carolina also assesses a corporate license fee on both C and S corporations. The tax is $1.00 for every $1,000 of the corporation’s capital stock and paid-in capital, plus an additional flat charge of $15.
Capital stock includes both common stock and preferred stock, and paid-in capital is the amount shareholders paid for the stock.
There is a minimum corporate license fee of $25. The fee is paid with the annual corporate income tax return.
Find more information on the corporate income tax and license fee on the South Carolina Department of Revenue’s website.
South Dakota is arguably one of the most business-friendly states in the U.S. because it has neither a corporate income tax nor a franchise tax.
One exception is South Dakota’s Bank Franchise Tax, which applies to all financial institutions that engage in business in the state.
You can learn more about the other types of taxes that apply to businesses in South Dakota via the Department of Revenue.
Corporations doing business in Tennessee must pay both a franchise and excise tax.
The franchise tax is based on whatever is higher:
- The corporation’s net worth, or
- The value of property owned or used by the corporation in the state
The rate is $0.25 per $100 (or fraction thereof) of the tax base, subject to a minimum of $100.
The excise tax is a flat 6.5 percent of net earnings from doing business in Tennessee. Both taxes are calculated and reported on the same form (FAE-170).
You can learn more about both taxes via the Tennessee Department of Revenue.
Texas does not have a corporate income tax, but it does have a franchise tax that applies to most businesses, other than sole proprietorships and some general partnerships.
The franchise tax rate is 0.75 percent of the taxable margin. Taxable margin is the lowest of the following four amounts:
- 70 percent of total revenue
- 100 percent of total revenue minus cost of goods sold
- 100 percent of total revenue minus compensation
- Total revenue minus $1 million
Businesses whose operations are primarily retail and/or wholesale trade qualify for a special 0.375 percent rate.
You can learn more about Texas’s franchise tax from the Texas Comptroller.
Utah assesses a state income or franchise tax on corporations doing business in the state. In both cases, the rate is 5 percent of taxable income. However, the franchise tax is only levied on Utah-based corporations. The income tax applies to non-Utah corporations doing business there. Companies only have to pay one of these, depending on where they’re headquartered.
The minimum tax is $100.
The Utah State Tax Commission has more information on paying taxes in Utah.
Vermont has a corporate income tax with three marginal tax rates:
|Vermont Corporate Tax Rate||Applies to Net Income of|
|6.0 percent||$10,000 or less|
|7.0 percent||$10,001 to $25,000|
|8.50 percent||$25,001 and over|
There is a minimum tax, which is based on Vermont gross receipts, as follows:
- $300 for gross receipts of $2 million or less
- $400 for gross receipts between $2 million and $5 million
- $750 for gross receipts greater than $5 million
You can find more information about Vermont’s corporate income tax on the Department of Taxes website.
Virginia assesses a flat corporate income tax at a rate of 6 percent of net income.
The state offers several tax credits for corporations, including a research and development tax credit and credits for providing low-income housing. You can find more information on filing a Virginia corporate income tax return and claiming tax credits in the 2021 Instruction for Virginia Form 500.
Washington does not have a corporate income tax, but it does levy a gross receipts tax, known as the Business & Occupation (B&O) Tax, on companies that engage in business in the state.
The B&O tax rates vary depending on business classification. For most businesses, the rate is 0.15 of gross receipts. However, retailers, wholesalers, and manufacturers pay lower rates. You can find a complete list of tax classifications and corresponding rates on the Washington State Department of Revenue’s website.
Corporations doing business in West Virginia pay a flat corporate income tax rate of 6.5 percent of taxable income.
Like many other states, West Virginia allows corporate taxpayers to take advantage of several tax credits to create jobs and make other investments in the state. You can find more information on West Virginia’s corporate income tax from the West Virginia State Tax Department.
Wisconsin taxes corporations via a corporate franchise tax. The franchise tax rate is a flat 7.9 percent of taxable income.
As of 2020, corporations with gross receipts of $4 million or more must also pay an economic development surcharge. The economic development surcharge is whatever is higher:
- $25, or
- 3 percent of the corporation’s total tax before applying any tax credits (found on its corporate franchise tax return)
The economic development surcharge is capped at $9,800.
You can get more information on paying taxes in Wisconsin via the Department of Revenue.
Wyoming is another tax-friendly state for businesses, as it has no corporate income tax. However, the state does charge an annual filing fee to all businesses that register to do business in the state.
That Annual Report License Tax is the greater of:
- $60, or
- $.0002 for every dollar of the company’s assets located and employed in the state
You can learn more about doing business in Wyoming from the Secretary of State.
Corporations Doing Business in Multiple States
The tax rates shown above are easy to figure out for businesses operating solely in one state. But many corporations do business in multiple states and may be required to pay corporate income taxes in multiple states. They calculate the amount due in each state using apportionment rules.
Apportionment is a process for assigning a portion of a corporation’s income to a particular state so the state can charge the right amount of income tax. But it’s not as simple as it sounds. States have various ways of calculating how much of a business’s income is taxable in the state. Most states use one of three apportionment formulas:
- Equally weighted three-factor formula. This takes the state’s payroll, sales, and property into account equally.
- Single-factor formula. This bases state income taxes solely on one factor. For example, a state may base apportionment solely on a company’s sales within the state.
- Weighted three-factor formula. This may give one factor more weight. For example, a state may give sales in the state more weight than payroll or property.
If you’re required to pay corporate income taxes in multiple states, you should consult with a tax professional.
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