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Does your startup owe income taxes in other states?
by
Kruze Consulting
Last updated:
Published:
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\u2019s income based on the amount of business conducted in that state.
How do states calculate a startup\u2019s 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\u2019s physical presence in the state, the state looks at a business\u2019s 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\u2019ll 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 for 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
