State corporate income tax is a lot like federal corporate income taxes. These state taxes are levied by many states on the income of companies that conduct business activities within those states.
A corporation is automatically subject to income taxes in its state of incorporation (usually Delaware for most startups), as long as it does business in that state or has income derived from that state. But if your company also does business in other states, those states can also tax the company’s income based on the amount of business conducted in that state.
How do states calculate a startup’s income tax bill?
A state must show that nexus exists between the state and an out-of-state business before the state can tax that business. States establish their own rules to determine how much business activity within the state by an out-of-state company will create a nexus. Rather than just looking at a company’s physical presence in the state, the state looks at a business’s economic presence.
That economic presence is defined by specific factors, which can include property, payroll, or sales, that exceed certain thresholds during the tax period. These thresholds can vary significantly from state to state. See our state income tax nexus map below to determine the factors that each individual state uses to determine nexus.
Note: State income tax thresholds are different from state sales tax thresholds. For more information on sales tax thresholds, check our state sales tax page.
Know your tax obligations
Overall, the state income tax thresholds for business activities by corporations within a state can have a significant impact on the amount of tax that your startup may be required to pay. And since state tax laws often change, businesses need to stay abreast of new tax regulations.
By understanding these thresholds and the specific tax laws of a state, you’ll be able to make sure that your startup is complying with all applicable state tax laws. If your startup is operating across state lines and you have questions about tax nexus and the potential impact of income or sales taxes on your company, please contact us.
Map of State Income Tax Thresholds fof Startups
| State | Minimum Tax Due | Revenue Threshold | Payroll | Rent |
|---|---|---|---|---|
| Alabama (AL) | None | $500,000 | $50,000 | $50,000 |
| Alaska (AK) | None | $150,000 | $50,000 | $50,000 |
| Arizona (AZ) | $50 | $150,000 | $50,000 | $50,000 |
| Arkansas (AR) | None | $150,000 | $50,000 | $50,000 |
| California (CA) | $800 | $637,252 | $63,726 | $63,726 |
| Colorado (CO) | None | $500,000 | $50,000 | $50,000 |
| Connecticut (CT) | $250 | $500,000 | None | $50,000 |
| Delaware (DE) | $400 | $150,000 | $50,000 | $50,000 |
| Florida (FL) | None | $150,000 | $1 | $50,000 |
| Georgia (GA) | HOLD | $150,000 | $50,000 | $50,000 |
| Hawaii (HI) | None | $100,000 | $50,000 | $50,000 |
| Idaho (ID) | $30 | $150,000 | $50,000 | $50,000 |
| Illinois (IL) | None | $150,000 | $1 | $50,000 |
| Indiana (IN) | None | $150,000 | $50,000 | $50,000 |
| Iowa (IA) | None | $150,000 | $50,000 | $50,000 |
| Kansas (KS) | None | $1 | $50,000 | $50,000 |
| Kentucky (KY) | $175 | $150,000 | $50,000 | $50,000 |
| Louisiana (LA) | None | $150,000 | $50,000 | $50,000 |
| Maine (ME) | None | $150,000 | $50,000 | $50,000 |
| Maryland (MD) | None | $150,000 | $50,000 | $50,000 |
| Massachusetts (MA) | $456 | $500,000 | None | $50,000 |
| Michigan (MI) | None | $350,000 | None | $50,000 |
| Minnesota (MN) | None | $150,000 | $50,000 | $50,000 |
| Mississippi (MS) | $25 | $150,000 | $50,000 | $50,000 |
| Missouri (MO) | None | $150,000 | $50,000 | $50,000 |
| Montana (MT) | $50 | $150,000 | $50,000 | $50,000 |
| Nebraska (NE) | None | $150,000 | $50,000 | $50,000 |
| Nevada (NV) | None | No corporate income/franchise tax | None | None |
| New Hampshire (NH) | None | $150,000 | $50,000 | $50,000 |
| New Jersey (NJ) | $750 | $150,000 | $50,000 | $50,000 |
| New Mexico (NM) | $50 | $150,000 | $50,000 | $50,000 |
| New York (NY) | $25 | $1,000,000 | None | $50,000 |
| North Carolina (NC) | $200 | $150,000 | $50,000 | $50,000 |
| North Dakota (ND) | None | $150,000 | $50,000 | $50,000 |
| Ohio (OH) | None | $500,000 | $50,000 | $50,000 |
| Oklahoma (OK) | None | $150,000 | $50,000 | $50,000 |
| Oregon (OR) | $150 | $150,000 | $50,000 | $50,000 |
| Pennsylvania (PA) | None | $500,000 | None | $50,000 |
| Rhode Island (RI) | $400 | $150,000 | $50,000 | $50,000 |
| South Carolina (SC) | $25 | $150,000 | $50,000 | $50,000 |
| South Dakota (SD) | None | No corporate income/franchise tax | None | None |
| Tennessee (TN) | $100 | $500,000 | $50,000 | $50,000 |
| Texas (TX) | None | $500,000 | None | $50,000 |
| Utah (UT) | $100 | $150,000 | $50,000 | $50,000 |
| Vermont (VT) | $300 | $150,000 | $50,000 | $50,000 |
| Virginia (VA) | None | $150,000 | $50,000 | $50,000 |
| Washington (WA) | None | Business & Operations (B&O) tax based on gross receipts | None | None |
| Washington DC (DC) | $250 | $150,000 | $50,000 | $50,000 |
| West Virginia (WV) | None | $150,000 | $50,000 | $50,000 |
| Wisconsin (WI) | None | $150,000 | $50,000 | $50,000 |
| Wyoming (WY) | None | No corporate income/franchise tax | None | None |
