Benjamin Franklin is credited with saying, “Nothing is certain, but death and taxes.” While there may be certainty around both of those inevitabilities, there is often great uncertainty among business owners and managers about how tax policy (and tax and non-tax business incentives) affects different types of business operations — and, ultimately, their operation’s tax burden.
State and local tax costs are only one important location-sensitive cost factor for businesses. Other factors include cost of labor, utilities, transportation and facilities. That means the finances of two business operations in the same location will be affected differently depending on the combination of these factors. Specifically, business operations differ in types of activities, amount of property, payroll and sales associated with a physical location, as well as income streams, profitability and corporate structure.
Furthermore, given state and local tax authorities’ varying approaches to levying taxes, businesses typically face a combination of corporate net income taxes, gross receipts taxes, franchise taxes, property taxes, unemployment insurance taxes, and sales and use taxes. Depending on a state’s specific tax policy and tax rates, some or all of these items may ultimately impact the total amount of taxes a business owes.
Finally, the actual tax bill will frequently be affected by the availability of local and business incentives. These incentives, often provided to foster new job creation and investment, can be used to offset taxes and lower overall operating costs.