Best State to Start a Business for Tax Purposes

To start a business in the USA and make it successful, you might first find a favorable economic environment that includes various tax benefits.

Taxation is not just a mere formality but rather one of the most essential factors of operating a company, and finding a favorable business climate is conducive to the steady growth of any business and its success. 

This is why choosing a suitable state for business is so crucial, although preemptively analyzing each state’s tax system is just as important if you want to avoid unexpected complications. 

This article offers a Top-10 list of the best states for business taxes according to Tax Fund’s rankings of tax rates in America while also covering the lowest business taxes by state, small business tax rates, plus the types of state and local taxes imposed by each state.

The Most Tax-Friendly States for Business


If you want to open a business in Wyoming, you won’t have to worry about gross receipts tax. This state has no corporate or personal income tax requirements.

Curiously, even though Wyoming sales taxes is one of the main sources of revenue, the state imposes a low sales tax rate currently set at 4%.

Exemptions can be claimed for purchases and rentals of manufacturing machinery, grocery food, pollution control equipment, medical goods and services, janitorial services, newspapers, software, digital products, and computer equipment.

Thanks to small business tax deductions and a beneficial tax environment, Wyoming works as a rather convenient location to start a business.

  • Corporate tax rate: 0%;
  • Individual income tax rate: 0%;
  • Sales tax rate: 4% (can add up to 6% in some municipalities);
  • Average effective property tax rate: 0.57% (national average is 1.19%);
  • Unemployment rate: 5.4%percent.

South Dakota

South Dakota is another state with no corporate or individual income tax.

Despite the rate of new entrepreneurs being only 290 per 100 000 population, the state legislature maintains auspicious conditions for business development. 

For one, South Dakota startup costs are lower compared to other states. Plus, South Dakota state’s tax climate is fairly mild, making it a fitting choice for starting a business.

One noteworthy exemption is the sale of products/services to Tribal governments, specifically the Cheyenne River Sioux, Crow Creek Sioux, Oglala Sioux, Rosebud Sioux, and Standing Rock Sioux Tribes.

Moreover, the Governor’s Office of Economic Development offers a free business start-up packet for anyone who wishes to create a business. Together with GOED’s loan plans, this packet aims to help promising entrepreneurs launch a business in the state of South Dakota.

  • Corporate tax rate: 0%;
  • Individual income tax rate: 0%;
  • Sales tax rate: 4.5% (can add up to 6.5% in some municipalities);
  • Average effective property tax rate: 1.22%;
  • Unemployment tax rate: 3%.


If you decide on doing business in Alaska, you could potentially save money on state-level sales tax and personal income tax. Neither is applied in this state, hence why tax professionals in Alaska include it in the top three states for starting a business.

Keep in mind that you will be paying business taxes the rate of which could go up to 9,4% depending on your business income.

  • Corporate tax rate: 9.4%;
  • Individual income tax rate: 0%;
  • Sales tax rate: 0% (municipalities can charge up to 7%);
  • Average effective property tax rate: 1.18%;
  • Unemployment: 6.7%.


Economic conditions for starting a business in Florida are quite agreeable. The state’s attractive tax structure is primarily due to the lack of personal income tax.

At the same time, the corporate tax rate is set at 4.5%, placing Sunshine State’s taxes among the lowest in the country.

Another factor that makes taxes in Florida cost-effective is the low unemployment insurance tax. Today more and more entrepreneurs choose to launch a startup in Florida after assessing the state’s potential pros and cons.

  • Corporate tax rate: 4.458%;
  • Individual income tax rate: 0%;
  • Sales tax rate: 6%;
  • Average effective property tax rate: 0.83%;
  • Unemployment: 4.7%.


If you choose to form a business entity in Montana, you might be able to save money thanks to the low cost of starting a business and startup-friendly reduced Montana tax rates.

To be more specific, Montana’s corporate tax rate does not exceed 6,75%, while the personal income tax rate is set at 6,9%. The state imposes no sales tax.

Montana’s Department of Commerce also encourages the development of small businesses, offering newcomers plenty of educational resources.

Even though Montana’s corporate tax climate is not perfect, it’s still quite advantageous. 

  • Corporate tax rate: 6.75%;
  • Individual income tax rate: ranges from 1 to 6.9%, depending on income;
  • Sales tax rate: 0%;
  • Average effective property tax rate: 0.83%;
  • Unemployment: 3.8%.


The main benefit of choosing Nevada is the laissez-faire approach to taxation. Unlike in other states, businesses in Nevada do not pay typical state levied taxes such as:

  • corporate income tax;
  • personal income tax;
  • federal income tax;
  • franchise tax etc.

That said, keep in mind there are other business taxes in the state of Nevada, including the 6.85% sales tax.

The distinctions of Nevada’s tax structure make the state especially beneficial for high-income earners.

  • Corporate tax rate: 0%;
  • Individual income tax rate: 0%;
  • Sales tax rate: 6.85% (statewide—locally can be as high as 8.265%);
  • Average effective property tax rate: 0.53%;
  • Unemployment: 2.95%.

New Hampshire

If you set up a business in Granite State, you are guaranteed to get multiple tax benefits. For instance, the lack of sales tax and low-income tax can improve business asset management.

At the same time, you will need to pay New Hampshire business taxes with a corporate tax rate of 7.7%.

The business tax climate in New Hampshire is less favorable in specific jurisdictions, but it’s overall reasonably propitious.

  • Corporate tax rate: 7.7%;
  • Business enterprise tax: 0.6%;
  • Individual income tax rate: 0% (5% on dividend and interest income);
  • Sales tax rate: 0%;
  • Average effective property tax rate: 2.05%;
  • Unemployment: 2.8%.


One of the benefits of forming a business in Oregon is the lack of sales tax. Nevertheless, the total tax incidence can exceed 10% due to Oregon’s top individual tax rate set at 9,9%.

The current rates of business taxes in Oregon are likely the reason for the relatively low numbers of new businesses, though it’s worth remembering about the state’s small business deduction and other resources. 

  • Corporate tax rate: 6.6 % on first $1 million of income, 7.6% on income above $1 million;
  • Individual income tax rate: ranges from 4.75% to 9.9%, depending on income;
  • Sales tax rate: 0%;
  • Average effective property tax rate: 0.90%;
  • Unemployment: 4.0%.


Local and state taxes in Utah are set at around 7,18%, placing the state in the middle on paying taxes compared to its neighbors.

Despite that, Utah is still a good state to start a business, appearing on many top-10 lists, mainly because they work well for property taxes.

To conduct business in Utah, corporate tax and Individual income tax must be paid at the rate of 5% and 4.95% respectively. As such, Utah’s tax policies are not the mildest but still pretty moderate.

  • Corporate tax rate: 5%;
  • Individual income tax rate: 4.95%;
  • State sales tax rate: 4.7% (total sales tax rate in Salt Lake City is 6.85%);
  • Average effective property tax rate: 0.58%;
  • Unemployment : ranges from 0.2% to 7.2%.


Indiana’s overall tax position is not particularly significant. Although the majority of tax rates in the state in Indiana are average, it’s still one of the best states for property tax rates and keeps on developing. 

Recent improvements in the sales and property tax categories are especially promotive of business activities in Indiana and the state’s ranking.

  • Corporate tax rate: 4.9%;
  • Individual income tax rate: 3.4% + county tax rates from 0.01 to 0.021%;
  • Sales tax rate: 7%;
  • Average effective property tax rate: 0.81%;
  • Unemployment: 2.5%.


Before launching a small business or startup in the U.S, it’s generally a good idea to look into how the state taxes ranked nationwide to find the best environment.

Despite there being no universally applicable business location, several business-friendly states make entrepreneurship more convenient. 

It’s possible to choose USA tax-free states like Nevada or pick one based on the needs of your business. And given the singular nature of each company’s requirements, it does not necessarily have to be the cheapest state to incorporate in.

Your choice of the best state for taxes may not even be highly ranked on the Tax Index list but meet all the requirements of your business where others do not.