Six states impose no traditional corporate income tax: Wyoming, South Dakota, Nevada, Ohio, Texas, and Washington.1Tax Foundation. State Corporate Income Tax Rates and Brackets, 2026 Only two of them, Wyoming and South Dakota, also skip a statewide gross receipts tax. The other four collect from businesses through a levy on total revenue instead of net profit, which can cost more than a conventional income tax when margins are thin. And none of the six protects you from tax in other states where your company actually does business.
Wyoming and South Dakota: The Only Two With Neither Tax
Wyoming and South Dakota impose neither a corporate income tax nor a statewide gross receipts tax.1Tax Foundation. State Corporate Income Tax Rates and Brackets, 2026 South Dakota’s Department of Revenue confirms the state does not impose a corporate income tax at all.2South Dakota Department of Revenue. Taxes Both states also fall within the group of eight that levy no personal income tax, which matters for LLC and S-corporation owners whose business profits would otherwise flow onto a state personal return.3Tax Foundation. State Individual Income Tax Rates and Brackets, 2026
These states fund themselves through sales taxes, property taxes, severance taxes on resource extraction, and various fees. For a company whose operations, employees, and customers are genuinely located in Wyoming or South Dakota, the state income tax line simply disappears from the budget. The catch is that “incorporated in Wyoming” and “operates in Wyoming” are two different things, a distinction covered further down.
The Four States With Gross Receipts Taxes Instead
Nevada, Ohio, Texas, and Washington each skip a traditional corporate income tax and collect from businesses through a gross receipts tax, which applies to total sales rather than profits.4Tax Foundation. Gross Receipts Taxes by State, 2024 A business that loses money for the year can still owe one of these taxes because the tax hits revenue before expenses come out. High-volume, low-margin companies often pay more under this model than they would under a 5% or 6% income tax elsewhere.
Texas Franchise Tax
Texas calls its version the franchise tax, sometimes the margin tax. For the 2026 report year, businesses with total revenue at or below $2,650,000 owe nothing.5Texas Comptroller. Franchise Tax Above that threshold the general rate is 0.75% of taxable margin, with a reduced 0.375% rate for qualifying retailers and wholesalers. Taxable margin is total revenue minus whichever of these produces the lowest tax: cost of goods sold, total compensation, 30% of total revenue, or a flat $1 million.6Texas Comptroller. 2026 Franchise Tax Instructions An EZ computation rate of 0.331% is available to businesses with $20 million or less in annualized total revenue that prefer a simpler calculation.
Nevada Commerce Tax
Nevada’s Commerce Tax applies only to businesses with Nevada gross revenue above $4,000,000 in the taxable year.7Nevada Department of Taxation. Instructions for Commerce Tax Return Rates run from 0.051% to 0.331% depending on the business category.4Tax Foundation. Gross Receipts Taxes by State, 2024 Below the $4 million threshold you don’t file a Commerce Tax return at all. Separately, Nevada requires every business operating in the state to hold a state business license, at $500 per year for corporations and $200 for other entity types.8Nevada Secretary of State. State Business License – FAQ
Ohio Commercial Activity Tax
Ohio’s Commercial Activity Tax is one of the lighter gross receipts levies at a flat 0.26% of taxable gross receipts. Starting in 2025, the exclusion threshold jumped to $6 million, so businesses with Ohio taxable gross receipts at or below that amount are completely excluded from the tax.9Ohio Department of Taxation. Commercial Activity Tax (CAT) That threshold takes most small and midsize Ohio businesses out of the CAT entirely.
Washington Business and Occupation Tax
Washington’s Business and Occupation (B&O) tax varies by activity. Retailing is taxed at 0.471% of gross receipts, manufacturing at 0.484%, and service activities at 1.5%.10Washington Department of Revenue. Business and Occupation (B&O) Tax The 1.5% service rate stings: a consulting firm or software company with $2 million in Washington revenue owes $30,000 in B&O tax whether or not it turned a profit. Washington offers a Multiple Activities Tax Credit to prevent double taxation when a company both manufactures and sells goods in the state, but there is no general small business exemption from the B&O.
Why Your Incorporation State Isn’t the Whole Answer
This is where planning around state taxes usually goes sideways. Incorporating in Wyoming does not exempt you from corporate income tax in every state where your company actually operates. If your business has employees in California, owns property in New York, or generates significant sales in Illinois, each of those states can require you to file returns and pay tax on the income earned within its borders.
The legal concept is called nexus. A state can tax your business once you have a sufficient connection to it, whether through physical presence like an office, warehouse, or employees, or through economic activity like exceeding a sales threshold. The Multistate Tax Commission’s widely adopted factor presence standard treats $50,000 in property, $50,000 in payroll, or $500,000 in sales within a state as enough to create nexus for business activity taxes.11Multistate Tax Commission. Factor Presence Nexus Standard for Business Activity Taxes Individual states set their own numbers, but those figures reflect the general range.
Sales tax works the same way after the Supreme Court’s 2018 decision in South Dakota v. Wayfair. Most states now require remote sellers to collect and remit sales tax once they exceed $100,000 in sales within the state, with no physical presence needed. A company incorporated in tax-free South Dakota but selling online across the country can easily trigger filing obligations in dozens of states. Your incorporation state determines where you file your annual report and pay entity-level fees. It does not shield you from income tax in every state where you earn revenue.
Pass-Through Entities Face a Different Question
Most small businesses are not C-corporations. They operate as LLCs, S-corporations, partnerships, or sole proprietorships. These pass-through structures generally don’t pay a separate entity-level corporate income tax. Profits flow to the owners’ personal returns, and nearly all states with income taxes follow the federal treatment.
For pass-through owners, the relevant question is often whether the state imposes a personal income tax rather than a corporate one. Eight states levy no individual income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming.3Tax Foundation. State Individual Income Tax Rates and Brackets, 2026 If you live in one of these states and your LLC earns income there, the profits face no state-level income tax at either the entity or personal level. But if you live in Wyoming and your LLC earns income in Colorado, Colorado will tax your share of those profits on your personal return. Nexus rules apply just as forcefully to pass-through income as they do to corporate income.
Gross receipts taxes in Nevada, Ohio, Texas, and Washington generally apply regardless of entity type. A Texas LLC with revenue above $2,650,000 owes franchise tax just like a Texas corporation would.5Texas Comptroller. Franchise Tax
Other State Costs That Don’t Disappear
No corporate income tax doesn’t mean no taxes or fees. Every state collects revenue somehow, and the costs outside the income tax line add up quickly.
- Unemployment insurance. Every state requires employers to pay into the unemployment insurance system, with rates set by payroll size and claims history. This applies in Wyoming, South Dakota, and every other state where you have employees.
- Workers’ compensation. Most states require employers to carry coverage, either through a state fund or private insurer, and premiums vary by industry and claims experience.
- State business licenses. Nevada’s mandatory license runs $500 per year for corporations and $200 for other entities, on top of the Commerce Tax.8Nevada Secretary of State. State Business License – FAQ
- Sales tax collection. Wyoming, South Dakota, Nevada, Texas, Ohio, and Washington all impose sales taxes on consumer transactions. If you sell taxable goods or services, you collect and remit even though you owe no corporate income tax.
- Industry-specific taxes. States that rely on natural resources often impose severance taxes on oil, gas, and mineral extraction. Wyoming’s severance taxes on mining and energy production are a major revenue source that directly affects companies in those sectors.
The absence of a corporate income tax usually means these other levies are higher to compensate. Projecting your total state burden requires looking past the income tax line.
Annual Filings Keep the Entity Alive
Every state requires corporations and LLCs to maintain their registration through periodic filings, whether or not the state taxes income. Missing these deadlines is one of the fastest ways to lose the liability protection the entity was formed to provide.
Annual reports update the state on officers, registered agent, and principal address. Fees vary widely. Wyoming charges a minimum of $60, scaling upward based on Wyoming-located assets. South Dakota requires annual reports for active entities and charges a $50 late fee per delinquent report.12South Dakota Secretary of State. Annual Report Instructions Across all 50 states, annual report fees range from $0 to over $800, and some states tie the fee to authorized shares or total assets rather than charging a flat amount.
Failing to file can lead to administrative dissolution, which strips the entity of its legal standing. For partnerships registered as LLPs, losing that registration means reverting to a general partnership where every partner is personally liable for business debts. Reinstating a dissolved entity typically requires paying all back fees plus penalties, and in some states the liability protection is not retroactively restored for the period the entity was out of compliance.
Every state also requires a registered agent with a physical address in the state to accept legal documents. If you incorporate in Wyoming but don’t live there, you’ll need to hire a professional registered agent service, typically $100 to $300 per year for single-state coverage. Businesses registered in multiple states pay for an agent in each one.
Federal Tax Applies No Matter Where You Incorporate
The federal corporate income tax rate is a flat 21% of taxable income for C-corporations, and state tax savings don’t reduce it.13Office of the Law Revision Counsel. 26 U.S. Code 11 – Tax Imposed Pass-through entity owners report their share of business income on their federal personal returns at their individual rate. Choosing a state with no corporate income tax removes a state layer of tax. It never removes the federal one.