When you incorporate a business, the federal corporate tax rate tops out at 35% (depending on the company’s taxable income). State and local corporate taxes can bring that number up close to 50% depending on which state you decide to incorporate in. If you are looking to keep your business tax burden to a minimum, you must consider which state is best to locate your company. You could always contact BASC Expertise, your trusted Mesa accountant for more info..

Here are the top five most business friendly states according to the Tax Foundation’s 2014 rankings. These rankings are based on individual and corporate income tax rates, sales tax, property tax, unemployment insurance rates, and other factors:

5. Florida

Florida has a flat corporate tax rate of 5.5%, which is only 13^th best in the nation. However, they make the top five for a combination of other factors that make it a good place to do business. For starters, Florida has no individual income tax. In addition, it ranks 6^th in unemployment insurance tax, which ranges from 1% to 5.5%.

4. Alaska

Alaska comes in at number four despite being ranked 28^th in corporate taxes with 10 different rates ranging from 1% to 9.4%. Alaska benefits from having no individual state income tax and no state sales tax. Some local municipalities do impose a sales tax, but its average rate is only 1% to 2%. The major benefit to locating in Alaska is its residents receive an annual royalty based on the earnings of the state’s energy investments.

3. Nevada

Nevada benefits heavily from revenues from the gaming industry. This enables the state to be one of only three states to have no corporate income tax as well as no tax on gross sales receipts. The state also has no individual income tax and the 9^th lowest property tax ranking. They do have a relatively high sales tax rate ranging from 6.85% to 8.1%, which is one of the highest rates in the nation.

2. South Dakota

South Dakota also has no individual or corporate income tax and is home to many of the nation’s major financial institutions such as Citigroup. The state also has a state sales tax rate of only 4%, tied for the 7th lowest in the nation. However, their sales tax can be as high as 6% depending on which municipality you are based in.

1. Wyoming

Like Alaska, Wyoming benefits heavily from the energy industry. They earn the distinction of being the Tax Foundation’s most business friendly state because they have no corporate or individual income tax and the 7^th lowest sales tax at 4%. The one drawback to being based in Wyoming is their unemployment insurance tax rate ranges from .7% to as high as 10%, which is 31^st in the nation.

The Tax Foundation ranked Arizona #22 overall, largely due to its corporate tax rate of 4.9% and sales tax rate that can be as high as 10.7%, depending on the municipality you are in. However, the state had the lowest unemployment insurance tax with a rate ranging from zero to 5.5%, and they ranked 6^th lowest in property tax. Arizona also offers a wide range of tax incentives for certain industries that decide to locate in this state, which can virtually eliminate corporate income tax rates altogether. For further information on the tax advantages of locating in Arizona and if it makes sense for your business, speak with a local Mesa accounting firm that can provide you more detailed guidance.