2019 State Business Tax Climate Index – Sales Taxes
MULTISTATE – The Tax Foundation has released its 2019 State Business Tax Climate Index. This Tax Climate Index is made up of 5 major components.
In this blog, we’re discussing how states rank on sales taxes. 25.3% of each state’s overall score is determined by the Sales Tax component. States can become more attractive to potential businesses based on their Sales Tax Rates and how they are structured.
The Tax Foundation’s Business Tax Climate Index ranks Louisiana as the highest taxed state and New Hampshire as the lowest taxed state in regards to sales tax.
Production costs can be driven upwards in states that apply the sales tax to business input. This increase in sales tax rates may cause consumers to cut back on spending or shop in lower-tax jurisdictions.
Sales taxes levied at a low rate to a broad base of final consumer goods and services are the ideal application. Tax-induced economic distortions are minimized by using a broad-based method with few exemptions, and a low-tax structure. This can happen because tax differentials are less like to cause consumers to alter their purchasing behaviors. The tax base is narrowed by tax exemptions, which drive up the sales tax rate on the goods and services that remain subject to the tax. This causes the rate to be higher than necessary.
Sales tax applied at the point of sale to the end-user is a well-structured sales tax. This is because the sales tax does not apply to production components such as raw materials, the sale of machinery and other business inputs which would drive up the final cost which would then lead to higher sales prices to the consumer. States that avoid taxing business inputs perform better on the Index.
For a detailed map of all states and their rankings, click here.
For more information on the Business Tax Climate Index, click here.
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For sales/use tax compliance questions or audit-related concerns, we are here to help!