![]() ![]() And Oregon allows a 35 percent deduction for the greater of compensation or cost of goods sold. Nevada allows a firm to deduct 50 percent of its Commerce Tax liability over the previous four quarters from payments for the state’s payroll tax. Texas’ Margin Tax allows for a choice of deducting compensation or the cost of goods sold. The tax base and allowable expenditures vary depending on the design of the gross receipts tax. Ohio and Oregon have flat rates of 0.26 percent and 0.57 percent, respectively. Washington’s Business and Occupation Tax has the highest top rate of 3.3 percent, followed by Delaware’s Manufacturers’ and Merchants’ License Tax with a top rate of 1.9914 percent. Differential rates attempt, albeit somewhat crudely, to adjust for these differences on an industry-by-industry basis. Businesses and industries with lower profit margins or more stages in the production process-each one taxed separately-are hit harder by gross receipts taxes than are high-margin businesses that are vertically integrated, meaning that more of the work is done in-house (resulting in less exposure to the tax because there are fewer transactions). Although they have been dismissed for decades as inefficient and unsound policy, they have returned in recent years as states seek to limit revenue volatility and to replace revenue lost by eroding corporate income tax bases.Īs the map indicates, states often designate multiple gross receipts rates, typically by industry, to mitigate some of the economic costs associated with these taxes. Gross receipts taxes gained popularity among states in the 1930s but began to be repealed or struck down as unconstitutional by state courts in the 1970s. South Carolina converted a local gross receipts tax into a tax on net income (profits) in 2020. ![]() Seven states (Delaware, Nevada, Ohio, Oregon, Tennessee, Texas, and Washington) currently levy gross receipts taxes, while several others, including Pennsylvania, Virginia, and West Virginia, permit local taxes imposed on a gross receipts base. These taxes are imposed at each stage of the production process, leading to tax pyramiding. Gross receipts taxes are applied to a company’s gross sales, without deductions for a firm’s business expenses, like compensation and cost of goods sold. Shifting from state gross receipts taxes would represent a pro-growth change to make tax codes friendlier to businesses and consumers alike, which is especially necessary in an increasingly mobile economy. Today’s map looks at which states levy a gross receipts tax, which is often considered one of the most economically damaging taxes. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |