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How Minnesota ranks in taxes for business

Whether we choose to live in Minnesota depends on many factors, including the weather, quality schools, access to social amenities and the ability to find a good job. For some, it also depends on the tax rate.

For a business, it is much more complicated. Does the state have educated employees? And what is the tax environment in the state? A recent study by the Tax Foundation recently ranked our 50 states from best to worst in terms of business taxes.

The Tax Foundation found these states as the best and worst states.

  • #1 Wyoming. The state has no state income tax or corporate tax and a low sales tax. However, the property taxes are 4.81 percent which is one of the highest in the country. The number of businesses in the state has been stable since 2005.
  • #2 South Dakota. The state has no state income tax or corporate tax and a low sales tax. It also has low property taxes and low unemployment insurance rates.
  • #3 Nevada. There is no state income tax or corporate tax but a relatively high sales tax at 6.85 percent.
  • #48 Vermont. The state has very high income tax with the top rate at 8.95 percent. Vermont has high corporate taxes but low sales tax. The property tax for businesses is high at 5.27 percent.
  • #49 New Jersey. Income tax is very high with small businesses facing six brackets, the highest rate of which is 8.97 percent for income above $500,000. The sales tax is high at 7 percent and corporate taxes are high with 9 percent being the highest of three brackets.
  • #50 New York. The income tax for small business owners has a top rate of 8.82 percent for income above $1 million. Corporate taxes are a flat 7.1 percent and sales tax is 4 percent. However, property taxes and excise taxes are very high.

So how does Minnesota stack up? We are in position # 45. Our corporate tax rate is 9.8 percent which is very high. We are also one of nine states with an Alternative Minimum Tax on corporations. We are one of eight states that have an AMT on individuals as well. On the favorable side, our property taxes are relatively low.

Why we choose to live here or locate our businesses here may be the topic of an entirely different type of blog post.

Source: CNN Money, “Taxes – best and worst states,” Jose Pagliery, Oct. 15, 2012

  • At our Minneapolis law firm we represent clients with the full range of federal and state tax issues.
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