State Corporate Taxes
Companies incorporated in the United States not only have to pay tax at the federal level, but they are also expected to pay corporate tax at the state level. 45 out of 50 states in the United States levy state taxes. This tax rate is not very high. It accounts for anywhere between 2% and 12% of the total income generated by the company. Also, for the states also, the corporate income tax is not a major source of revenue. On average, states earn about 7% of their total revenues from state income taxes. In 2019, this worked out to a total of $46 billion. This is a paltry sum as compared to the average of 30% earned from personal income taxes.
However, the corporate taxes levied at the state level are still important. In this article, we will have a closer look at the concept of state-corporate taxes as well as how they impact corporations.
When are Companies Liable to Pay State Income Tax?
Not all companies are liable to pay state corporate tax. In order for the tax to be levied, certain preconditions have to be met. They are as follows:
How Companies Avoid State Corporate Tax?
Big companies are known for not paying state corporate tax. They avoid taxes using a wide variety of ways. Some of them have been listed below:
The continuous onslaught by many companies has meant that states have seen their corporate tax revenue dip during the previous years. However, that does not seem to matter to them since they are generating revenue from personal taxes. Many analysts are not able to understand the extent of revenue loss because all the revenue lost is notional. This means more companies are coming to the state, and the revenue is remaining the same. The loss is not really a loss but rather a failure to grow. Hence pointing it out to the general public has become a challenging task.
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