Today we continue the series of maps 2023 State Business Tax Climate Index With a map showing the ranking of states indexSales and excise component. The rate and structure of a sales tax can make a country more or less attractive to a business for two main reasons: (1) some states apply sales tax to the business’s products, which increases production costs, and (2) as sales tax rates. Increasingly, consumers may reduce their purchases or shift their shopping to lower tax jurisdictions. The sales tax component is 23.5 percent of each state’s total revenue index score.
An ideal sales tax applies to a broad base of final consumer goods and services, with few exceptions, and is imposed at a low rate. Broad-based, low-rate tax structures minimize tax-induced economic distortions that can occur when people change their behavior due to tax differences. In addition, sales tax credits narrow the tax base, increasing the sales tax rate on goods and services that remain taxable or forcing greater reliance on less economically efficient taxes.
It is important to note that a well-structured sales tax applies only to the end user at the point of sale. This does not apply to the sale of machinery, raw materials and other business products, as these taxes increase production costs and are ultimately passed on to consumers in the form of higher prices. States that avoid taxing businesses do better index.
this section index It also looks at how states impose sales taxes on remote sellers. While most states have adopted appropriate safe harbors for small sellers and have a single point of administration for all state and local sales taxes, several have been penalized for deviating from this practice, imposing significant compliance costs on out-of-state retailers.
As shown on the map, the highest score is for the sales tax component 2023 year index These are the states without sales tax: New Hampshire, Delaware, Montana, Oregon, and Alaska. (They don’t get perfect scores because each state imposes excise taxes with varying degrees of competitiveness, and Alaska allows local sales taxes.) The next highest-scoring states are Wyoming, Wisconsin, Maine, Nebraska, Idaho, Michigan, and Virginia. – Has well-structured sales taxes and modest excise rates.
States that do poorly in this component have high sales tax rates, high excise rates, and complex sales tax administration. They also apply sales tax to a variety of businesses while exempting end-user purchases. The lowest scoring states are Alabama, Washington, Louisiana, California and Tennessee.
To learn more about your state’s score on the sales tax component, click here.
To see if your state’s sales tax structure has become more or less competitive in recent years, see the following table.
|State Business Climate Index Sales and Excise Tax (2020–2023)|
|State||2020 rank||2021 rank||2022 rank||2023 rank||Change from 2022 to 2023|
|District of Columbia||36||34||37||39||-2|
Note: 1 is the best, 50 is the worst. All scores are for fiscal years. DC’s score and rank do not apply to other states.
Source: Tax Foundation.