Which States Have the Lowest Taxes for Small Businesses? Here's the New Data.

Key Points

• BusinessFinancing.co.uk found Minnesota tops the list with a combined state and federal corporate tax rate of about 30.8%, costing businesses roughly $30,800 on $100,000 of profits.
• Six states—Nevada, Ohio, South Dakota, Texas, Washington and Wyoming—charge no local corporate tax, resulting in the lowest state‐level tax burden for small businesses.
• Illinois (30.5%), California (29.8%), Delaware (29.7%) and Massachusetts (29%) round out the top five highest state corporate tax rates on a $100,000 profit.
• Globally, Guyana has the highest small business tax rate at 40%, while the Bahamas, Bahrain and the United Arab Emirates impose no corporate tax on $100,000 of profits.

Corporate tax rates, the percentage of a company's profits that it pays to the government, can widely vary from state to state. Most states (except six: Nevada, Ohio, South Dakota, Texas, Washington, and Wyoming) charge a local corporation tax on profits of $100,000 on top of the federal rate of 21%.

But which state charges the most? To find out, U.K.-based finance site, BusinessFinancing.co.uk, created a hypothetical company and applied every state's tax rules using data from Big Four firms, Deloitte and PricewaterhouseCoopers.

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The fake company was public, in the tech sector, and had a revenue of $1 million. It also had five to nine employees, made a profit of $100,000 a year, and had a 10% profit margin. The owner's salary was $59,000.

Based on this data, the study found that Minnesota businesses would pay the most, about 30.8% on profits of $100,000 (or $30,800) on top of the federal amount. Illinois would pay the second highest, about 30.5%. California (29.8%), Delaware (29.7%), and Massachusetts (29%) rounded out the top five.

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The lowest tax payment was about $21,000 on profits of $100,000. Six states tied for the lowest (besides the six that don't charge anything, of course). Ohio, Nevada, South Dakota, Texas, Washington State, and Wyoming all were tied for the lowest.

The report also looked at global trends and found that the country with the highest tax rate for small businesses was Guyana. The business the study created would have had to pay $40,000 on profits of $100,000.

The countries with the lowest taxes on small businesses were the Bahamas (which charges a small license fee), Bahrain, and the United Arab Emirates, which, per the study's model, did not charge corporate tax on profits of $100,000.

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