If you’re looking to reduce business taxes, consider these six states that do not impose a corporate income tax: South Dakota, Wyoming, Nevada, Texas, Washington, and Ohio. Instead, some of these states rely on alternative taxes like gross receipts taxes to generate revenue. Here’s a quick breakdown:
- South Dakota & Wyoming: No corporate income tax, no gross receipts tax, and low sales tax rates (4.2% and 4%, respectively).
- Nevada: No corporate income tax but imposes a commerce tax on businesses earning over $4 million annually.
- Texas: Uses a franchise tax on gross receipts instead of corporate income tax.
- Washington: Applies a Business & Occupation (B&O) tax on gross receipts.
- Ohio: Replaced corporate income tax with the Commercial Activity Tax (CAT), a flat-rate gross receipts tax.
These states offer tax-friendly environments but vary in their overall tax structures. For example, South Dakota and Wyoming stand out with no substitute taxes, while others offset the lack of corporate income tax with alternative taxes like gross receipts or higher sales taxes. Consider your business model and revenue structure to determine which state aligns best with your goals.
6 States with No Corporate Income Tax
As of 2025, six states stand out for not imposing a corporate income tax: South Dakota, Wyoming, Nevada, Texas, Washington, and Ohio. While they all avoid the traditional corporate income tax, each state has its own method of generating revenue. South Dakota and Wyoming are unique in that they levy neither a corporate income tax nor a gross receipts tax. On the other hand, Nevada, Ohio, Texas, and Washington rely on gross receipts-based taxes to fund their budgets. Here’s a closer look at how these states manage their tax systems.
South Dakota
South Dakota keeps things simple when it comes to taxes. The state has no corporate or individual income taxes and maintains relatively low property taxes. To fund public services, it relies heavily on a 4.2% sales tax and various excise taxes. Agriculture and tourism play a significant role in supporting the state’s economy, helping to offset the lack of income tax revenue.
Wyoming
Wyoming offers one of the most business-friendly tax climates in the country. Like South Dakota, it does not impose corporate or individual income taxes and keeps property taxes low. The state generates revenue primarily through a 4% sales tax and taxes on natural resources, known as severance taxes. This approach makes Wyoming particularly attractive to businesses.
Nevada
Nevada eliminates corporate, franchise, and inventory taxes, but it does impose a commerce tax – a type of gross receipts tax – on businesses earning more than $4 million annually. The state also benefits from a 6.85% sales tax and significant revenue from its gaming industry. Together, these revenue streams allow Nevada to maintain its tax-friendly reputation while funding public services.
Texas
Texas opts out of corporate income tax and instead applies a franchise tax (also called a margin tax) on gross receipts above a certain threshold. This is supplemented by a 6.25% sales tax and revenue from the state’s oil and gas production. This tax structure works well for businesses with lower profit margins, making Texas a popular choice for companies of all sizes.
Washington
Washington takes a different route by forgoing both corporate and individual income taxes. Instead, it uses a business and occupation (B&O) tax, which is a gross receipts tax on business activities. The state also has a base sales tax of 6.5%, with local jurisdictions able to add up to an additional 3%. This setup tends to favor businesses with high sales volumes and lower profit margins.
Ohio
Ohio has replaced its corporate income tax with the Commercial Activity Tax (CAT), a flat-rate gross receipts tax. This system creates a predictable tax environment, particularly benefiting businesses with higher profit margins and lower sales volumes. The CAT, combined with varying sales tax rates across the state, forms the backbone of Ohio’s revenue strategy.
Tax Structure Overview
The table below provides a quick comparison of the tax structures in these six states:
| State | Corporate Income Tax | Alternative Tax | Sales Tax | Key Revenue Sources |
|---|---|---|---|---|
| South Dakota | None | None | 4.2% | Sales tax, excise taxes |
| Wyoming | None | None | 4% | Natural resource taxes, property taxes |
| Nevada | None | Commerce tax (gross receipts) | 6.85% | Gaming revenues, sales tax, commerce tax |
| Texas | None | Franchise tax (margin tax) | 6.25% | Sales tax, oil and gas royalties |
| Washington | None | B&O tax (gross receipts) | 6.5% (plus up to 3% local) | Sales tax, B&O tax |
| Ohio | None | Commercial Activity Tax (CAT) | Varies | Gross receipts tax (CAT) |
Understanding these differences can help you align your business with the right state tax strategy for your needs.
Tax Policy Comparison of No Corporate Income Tax States
Understanding how states without corporate income tax generate revenue is crucial for assessing their overall tax impact on your business. These differences can help businesses choose the state that aligns best with their financial and operational priorities.
State-by-State Tax Comparison
Here’s a breakdown of key tax policies across the six states with no corporate income tax:
| State | Corporate Income Tax | Substitute Taxes | Individual Income Tax | Sales Tax Rate | Industry-Specific Fees |
|---|---|---|---|---|---|
| South Dakota | No | None | No | 4.5% | Minimal |
| Wyoming | No | None | No | 4% | Minimal |
| Nevada | No | Gross Receipts Tax | No | 6.85% | Gaming taxes |
| Texas | No | Franchise Tax | No | 6.25% | Franchise fees |
| Washington | No | Business & Occupation Tax | No | 6.5% | Industry-specific fees |
| Ohio | No | Commercial Activity Tax | Yes | 5.75% | Minimal |
This table highlights the unique tax structures of these states, providing a foundation for evaluating their impact on different types of businesses.
South Dakota and Wyoming emerge as the most tax-friendly states. Neither imposes corporate or individual income taxes, nor do they rely on substitute taxes. Additionally, their sales tax rates – 4.2% in South Dakota and 4% in Wyoming – are among the lowest, making them particularly appealing for retail-focused businesses.
Nevada, Texas, and Washington take a different approach by eliminating individual income taxes but implementing revenue-based substitute taxes. Nevada uses a gross receipts commerce tax, Texas imposes a franchise tax, and Washington applies a Business & Occupation (B&O) tax. These structures can be advantageous for certain business models but may pose challenges for others.
Ohio stands apart by maintaining an individual income tax alongside its Commercial Activity Tax (CAT), which is also based on gross receipts. Businesses operating in Ohio need to carefully weigh the combined tax burden.
Sales tax rates vary significantly among these states. Nevada’s rate of 6.85% is the highest, potentially increasing costs for consumer-facing businesses. In contrast, Wyoming offers the lowest rate at 4%, providing some relief for businesses that rely heavily on retail operations.
Substitute taxes, such as gross receipts taxes in Nevada, Washington, and Ohio, can be particularly challenging for high-revenue, low-margin businesses since they are calculated on total sales rather than profits. However, businesses with high margins and lower revenue may find these systems more favorable compared to traditional corporate income tax structures.
For digital and remote businesses, states like Wyoming and Nevada stand out due to their lack of physical presence requirements, streamlined compliance processes, and privacy protections. These factors make them attractive options for online entrepreneurs.
Finally, industry-specific taxes, such as gaming taxes in Nevada and specialized fees in Washington, show how some states focus on particular sectors for additional revenue. Businesses in these industries should carefully account for these costs when planning their tax strategies.
Pros and Cons of Incorporating in No Corporate Income Tax States
Choosing to incorporate in a state without corporate income tax can significantly impact a business’s finances and operational logistics. It’s essential to weigh the advantages and potential challenges before making a decision.
Main Benefits
One of the biggest advantages is the absence of corporate income tax, which allows businesses to keep more of their earnings. These savings can be reinvested into areas like research, marketing, or growth, or distributed to shareholders. For remote entrepreneurs and digital businesses, this can simplify tax compliance and boost profitability.
Some states, such as Wyoming and Nevada, also provide additional perks like robust privacy protections. These features are particularly attractive to holding companies and investment-focused entities looking to minimize exposure and safeguard sensitive information.
Things to Consider
While the absence of corporate income tax is appealing, alternative taxes in these states can still impact a business’s bottom line. For instance:
- Nevada imposes a commerce tax on businesses with revenues exceeding $4 million.
- Washington applies a Business & Occupation (B&O) tax based on gross receipts.
- Texas uses a franchise tax calculated on gross receipts or margins.
Additionally, some states offset the lack of corporate income tax with higher property or sales taxes, as seen in Texas and Washington.
Gross receipts taxes, in particular, can be challenging because they are based on total sales rather than profits. This means even businesses with slim margins might face hefty tax bills. Companies operating across multiple states may also encounter added compliance complexities, especially if they establish a nexus in states with different tax obligations. Aligning your business model with the tax structure of a chosen state is crucial to avoid unexpected costs.
Best Business Types for These States
Certain types of businesses are better positioned to thrive in no corporate income tax states. High-margin, lower-revenue businesses – like consulting firms, professional service providers, and software companies – often benefit the most. Remote and digital businesses, such as e-commerce ventures and tech startups, also find these states appealing due to their operational flexibility and simplified compliance requirements.
States like Wyoming and Nevada are particularly popular with holding companies and investment vehicles because of their strong privacy protections, which can help reduce overall tax exposure. Similarly, professional service firms like law practices and accounting firms, which typically generate high profits relative to their revenues, are well-suited to these tax-friendly environments.
On the other hand, businesses with high sales volumes but low profit margins – such as retail stores or manufacturers – may find gross receipts taxes less favorable. Conducting a thorough analysis of all potential tax obligations is essential to determine whether incorporating in a no-tax state aligns with your financial goals.
For location-independent entrepreneurs, services like BusinessAnywhere simplify the process of incorporating remotely. They offer a range of tools, including business registration, registered agent services, virtual mailboxes, and ongoing compliance support – all designed to help remote businesses operate smoothly from anywhere.
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How to Incorporate in No Corporate Income Tax States
Incorporation Steps
Start by deciding on your business structure – most commonly an LLC for flexibility or a corporation if you’re looking to attract investors. Next, pick a unique name that complies with state regulations. For instance, Wyoming requires LLC names to include "Limited Liability Company" or "LLC", while Nevada restricts certain words. You can usually check name availability on your state’s Secretary of State website.
Appoint a registered agent with a physical address in your chosen state. This person or service will handle legal notices and official correspondence for your business. If you’re working remotely, professional registered agent services are available and typically cost between $100 and $200 annually.
File the necessary formation documents with the Secretary of State. For LLCs, this means submitting Articles of Organization, while corporations need to file Articles of Incorporation. Filing fees vary significantly – Wyoming charges $100 for LLC formation, whereas Nevada’s fees can climb to $300 due to extra business license requirements.
Get an Employer Identification Number (EIN) from the IRS. This is crucial for opening business bank accounts and managing taxes. It’s a federal requirement, no matter which state you incorporate in, and you can complete the process online through the IRS website or with professional assistance.
Meet state-specific requirements, such as filing annual reports or registering for franchise taxes. For example, Texas requires an initial franchise tax report, and Washington mandates Business & Occupation tax registration, even if your business hasn’t yet generated revenue.
To simplify the process, consider using a service like BusinessAnywhere, which can handle all these steps online for you.
Using BusinessAnywhere for Incorporation
BusinessAnywhere streamlines the incorporation process with a user-friendly digital platform. Their $0 business formation service means you only pay the state filing fees, making it an affordable option for entrepreneurs worldwide.
The platform handles everything online, from filing Articles of Organization to securing your EIN. Remote entrepreneurs benefit from the included registered agent service, which provides a legal U.S. address in all 50 states. Better yet, the first year of registered agent service is free when you register your business.
Virtual mailbox services are another perk. These provide a U.S. business address with unlimited mail scanning and global forwarding. Plans start at $20 per month, making it easier to manage banking and official correspondence.
The platform’s 24/7 online dashboard keeps you on top of critical compliance deadlines, corporate documents, and other business needs. For ongoing regulatory requirements, services like BOIR (Beneficial Ownership Information Report) filing are available for $37.
For international entrepreneurs, BusinessAnywhere offers an ITIN application service, enabling non-U.S. individuals to file taxes and open financial accounts. Combine this with EIN applications for $97, and you’ve got everything you need to establish a U.S.-based business.
With transparent pricing and no hidden fees, BusinessAnywhere has become a trusted choice for entrepreneurs in over 80 countries. Their "Excellent" rating on Trustpilot underscores the platform’s reliability for managing remote businesses.
Why Remote Entrepreneurs Choose These States
Incorporating in states with no corporate income tax offers more than just tax savings – it reduces overall business costs. Lower filing fees, fewer compliance expenses, and simplified reporting mean you can focus more resources on growing your business instead of dealing with administrative tasks.
Privacy protections are another major draw. Wyoming allows anonymous ownership through nominee services, while Nevada offers robust asset protection laws. These features are especially appealing to consultants, digital agencies, and other online service providers who value discretion in their operations.
Banking and financial advantages also play a role. States like Wyoming and Nevada are widely recognized by financial institutions, which can make opening business accounts easier for remote entrepreneurs.
Finally, these states are ideal for businesses planning to scale. The absence of corporate income tax becomes increasingly beneficial as your revenue grows. Their flexible business structures can accommodate everything from single-member LLCs to complex corporations.
For digital nomads running e-commerce stores, offering consulting services, or developing software products, these states’ tax benefits, combined with the streamlined incorporation process provided by platforms like BusinessAnywhere, create an ideal environment for modern, remote businesses.
Key Takeaways
Choosing to incorporate in states with no income tax can bring financial perks, but it’s essential to understand the broader tax picture. States like South Dakota and Wyoming stand out because they impose neither corporate income tax nor gross receipts tax. Meanwhile, states such as Nevada, Texas, Washington, and Ohio use alternative business taxes instead of a traditional corporate income tax structure.
Keep in mind that overall tax burdens go beyond income taxes. Factors like sales taxes, property taxes, and gross receipts taxes can significantly impact your costs. For example, Texas has a 6.25% sales tax combined with a franchise tax, while Washington pairs its 6.5% sales tax with a Business & Occupation tax. Carefully evaluate all potential tax liabilities before making a decision. Despite these complexities, the process of incorporation itself remains fairly straightforward.
Many remote entrepreneurs are drawn to these states for their ease of compliance and streamlined incorporation processes. Online platforms often simplify the steps, offering services like business registration, registered agent support, and EIN applications.
When deciding where to incorporate, consider the nature of your business. For instance:
- High-sales, low-margin businesses might benefit from states with gross receipts taxes, like Ohio.
- Businesses seeking minimal administrative costs may find states like South Dakota more appealing.
- Industries such as e-commerce, consulting, and software often enjoy reduced compliance burdens and lower tax obligations in these states.
Lastly, don’t forget about federal requirements. Regardless of where you incorporate, you’ll need to secure an EIN, file federal tax returns, and potentially explore S-Corp elections to reduce self-employment taxes.
FAQs
How do gross receipts taxes in states like Nevada and Texas affect businesses with high revenue but low profit margins?
Gross receipts taxes, like those implemented in Nevada and Texas, are calculated based on a business’s total revenue rather than its profits. This taxation model can place a heavier strain on businesses with high sales but slim profit margins, as they owe the tax regardless of whether they turn a profit. For these companies, the financial burden can be more pronounced compared to traditional corporate income taxes, which are based on net income.
To address these challenges, businesses often need to closely monitor their expenses and explore ways to adjust their tax structure. While states with gross receipts taxes may offer advantages, such as the absence of corporate income taxes, it’s crucial to evaluate how this approach fits within your company’s financial framework.
What are the advantages of incorporating a business in states without corporate income tax, like Wyoming or South Dakota?
Incorporating in states such as Wyoming and South Dakota can be a smart move for businesses aiming to save on taxes. These states don’t impose corporate income or gross receipts taxes, which means businesses can hold onto more of their profits. Plus, their simplified tax systems help cut down on the time and effort spent managing tax-related paperwork.
Beyond tax savings, these states are known for their business-friendly policies. They offer strong privacy protections, straightforward regulations, and cost-effective incorporation processes. This combination makes them appealing choices for entrepreneurs and remote business owners who want to streamline operations and reduce costs.
What are the privacy benefits for remote businesses in states like Nevada and Wyoming?
States like Nevada and Wyoming provide robust privacy safeguards, making them appealing options for remote and digital businesses. These states often ensure that personal information, such as business ownership details, remains confidential, restricting public access to sensitive data.
For entrepreneurs, digital nomads, and remote business operators, this level of privacy can minimize unwarranted scrutiny and enhance personal security. Choosing to incorporate in these states can be a smart move for those looking to protect their privacy while managing a U.S.-based business.
