How much you’ll have to struggle with taxes and tangled regs depends more on where your company is located than on anything else.
The “State Business Tax Climate Index” from the Tax Foundation has graded all states on a 1-to-10 scale, making it easy to see which states will give your company a hard time – the “tax toughies” — and where compliance is an easier goal.
Much of the score is based on total tax rates and the number of changes a state made, but the rankings also take factors like ease of contacting DOR or appealing an assessment into effect.
The five easiest states to deal with:
- Wyoming (7.67)
- South Dakota (7.54)
- Nevada (7.45)
- Alaska (7.36), and
- Florida (6.90).
Surprisingly, of the five states without a sales tax (or changes to track) to weigh them down, Alaska was the only one to crack the top five – most likely because of increased tax audit pressure and difficulty getting responses from its Dept. of Revenue.
The scores took a nosedive for the five lowest-performing states:
- Rhode Island (4.18)
- Vermont (4.17)
- California (3.71)
- New York (3.59), and
- New Jersey (3.33).
Reading the results
As tempting as it is to cheer if your state’s in the top rankings, staying in compliance is a challenge, no matter where your company’s located.
Even if frequent rate changes in one state take up the bulk of your time, it’s crucial to shore up your defenses in all states in case of an eventual audit.
One common issue: Once-exempt items and services are now taxable, as states try to find more revenue.
Info: The Tax Foundation’s “2012 State Business Tax Climate Index.”