State Corporate Income and Gross Receipts Tax Rates
What You Need to Know if You Do Business in Multiple States
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New Jersey is known to be one of the highest taxed states in the nation. Even so, when it comes to a state’s corporate income tax rate, Iowa ranks the highest at 12 percent.  

Forty-four states levy a corporate income tax. Alaska, Connecticut, Iowa, Minnesota, New Jersey, and Pennsylvania, as well as the District of Columbia have the highest marginal corporate income tax rates in the U.S. at 9 percent or more. Arizona, North Carolina, North Dakota, Colorado, Mississippi, South Carolina, and Utah are at or below 5 percent.  

Of the states that levy a corporate income tax, North Carolina has the lowest rate at a flat 3 percent. Twenty-seven states and the District of Columbia have a single-rate corporate tax rate.  

Some states tax gross receipts instead of income. These include Nevada, Ohio, Texas, and Washington. The IRS defines gross receipts as the total amounts the organization received from all sources during its annual accounting period, without subtracting any costs or expenses. In addition to receipts from selling products or services, gross receipts can also include goods that were bartered, canceled debt, interest and dividends received, real estate and personal property rents, promissory notes, lost income payments, kickbacks, damages, and economic injury payments.  

Generally, taxable income is the gross income of an individual or corporation, less any allowable tax deductions. In other words, it is the amount of your income that is subject to income tax. Income can be in the form of gross income, operating income, pretax income, and net income.

Delaware and Virginia impose both a corporate income tax and a gross receipts tax. South Dakota and Wyoming are the only states that have neither a corporate income or gross receipts tax.  

Several states and the District of Columbia have or will reduced their corporate tax rate including North Carolina (from 4 to 3 percent), Arizona (from 5.5 to 4.9 percent), New Mexico (6.6 to 6.2 percent and then to 5.9 percent in 2018) and Indiana (from 6.25 to 6 percent on July 1, 2017 and then to 4.9 percent in 2021). The District of Columbia reduced its corporate income tax rate from 9.2 to 9 percent.  

Please feel free to call us at 610.828.1900 if you do business in multiple states and have questions. Contact either Michael Sexton, CPA, CCIFP, Director – Tax Services (Michael.Sexton@MCC-CPAs.com) or me (Marty.McCarthy@MCC-CPAs.com).  We are always happy to help.

Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code.  We strongly advise you to seek professional assistance with respect to your specific issue(s).                                                                   

Martin C. McCarthy, CPA
Managing Partner
McCarthy & Company, PC