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States with No Income Tax: What You Still Owe

Nine states charge no individual income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Business owners often assume "no income tax" means fewer filing obligations. That assumption is wrong. Every one of these states imposes other taxes and requirements on businesses — franchise taxes, gross receipts taxes, sales tax obligations, annual reports, and state unemployment tax. Here is what you actually owe in each state.

The Nine No-Income-Tax States

*New Hampshire's tax on interest and dividends is being phased out (ended January 1, 2025). Tennessee's Hall Tax on investment income was fully repealed in 2021.

Texas: Franchise Tax

Texas has no income tax but imposes a franchise tax (also called the margin tax) on LLCs, corporations, partnerships, and other legal entities. The tax is due May 15 each year. Businesses with total revenue at or below $2,470,000 can file a No Tax Due Report and owe nothing, but they must still file. Sole proprietors who have not formed an entity are exempt. For the full breakdown, see our Texas franchise tax guide.

Florida: Corporate Income Tax + Annual Report

Florida has no individual income tax, but it does impose a corporate income tax of 5.5% on C-Corporations and entities taxed as C-Corps. S-Corps, partnerships, and sole proprietors are not subject to the corporate income tax. However, every Florida LLC and corporation must file an annual report with the Department of State by May 1 each year. The fee is $138.75 for LLCs and $150 for corporations. Failure to file can lead to administrative dissolution.

Florida also has a 6.0% state sales tax (plus local surtaxes up to 2.5%), and businesses that sell taxable goods or services must collect and remit sales tax monthly, quarterly, or annually depending on volume.

Washington: B&O Tax

Washington imposes the Business and Occupation (B&O) tax, one of the most significant gross receipts taxes in the country. Unlike an income tax, the B&O tax is assessed on gross income — not net profit. That means you owe B&O tax even if your business lost money. Rates depend on your business classification:

• Retailing: 0.471%
• Manufacturing / wholesaling: 0.484%
• Services and other activities: 1.5%

Small businesses with annual gross income below $100,000 may qualify for the small business B&O tax credit, which effectively eliminates the tax. Washington also has a 6.5% state sales tax (plus local additions), and all businesses that sell tangible goods must collect and remit it. Additionally, Washington enacted a 7% capital gains tax on the sale of long-term capital assets exceeding $250,000 — though this primarily affects individuals, not entity-level filings.

Nevada: Commerce Tax

Nevada has no corporate income tax, but businesses with Nevada-sourced gross revenue exceeding $4,000,000 must pay the Commerce Tax. The rate varies by industry, ranging from 0.051% to 0.331%. Businesses below the $4M threshold still must file the Commerce Tax return annually (due August 14) — they just owe nothing. Nevada also requires an annual State Business License renewal ($200 for most entities), due on the anniversary of the original filing date.

Tennessee: Franchise and Excise Tax

Tennessee repealed its Hall Tax on investment income in 2021, but businesses still face the franchise and excise tax. The excise tax is 6.5% of net earnings. The franchise tax is 0.25% of the greater of net worth or the book value of real and tangible personal property owned or used in Tennessee (minimum $100). Both are due April 15 for calendar-year filers. Sole proprietors and general partnerships composed entirely of individuals are generally exempt. Tennessee also has a 7.0% state sales tax — one of the highest in the nation.

Alaska: Unique Among the Nine

Alaska has no individual income tax and no state sales tax, making it the lightest-touch state on this list. However, Alaska does impose a corporate income tax on C-Corporations (rates from 0% to 9.4% on a graduated scale). S-Corps, LLCs, and sole proprietors are not subject to the corporate income tax. Local municipalities in Alaska can and do levy their own sales taxes (up to 7.5% in some areas), so if you sell goods locally, check your borough's requirements. Alaska also requires a biennial business license renewal ($50 for two years).

South Dakota and Wyoming: The Lightest Loads

South Dakota and Wyoming are the closest to truly "tax-free" for businesses. Neither state imposes an income tax, corporate tax, franchise tax, or gross receipts tax. However, both states still require:

• Sales tax collection — South Dakota (4.5%) and Wyoming (4.0%) both have state sales taxes that businesses must collect on taxable sales
• Annual reports — LLCs and corporations must file annual reports to remain in good standing (due dates vary)
• State unemployment tax (SUTA) — If you have employees, you must pay into the state unemployment insurance fund

New Hampshire: Business Profits Tax

New Hampshire is often listed as a "no income tax" state, but it imposes two significant business-level taxes. The Business Profits Tax (BPT) is 7.5% of business income for businesses with gross income over $50,000. The Business Enterprise Tax (BET) is 0.55% of the enterprise value tax base (compensation, interest, and dividends paid). The BET can be credited against the BPT, so you do not pay both in full. Both are due April 15 for calendar-year filers. New Hampshire has no sales tax, but these business taxes can be significant.

Obligations Every State Shares

Regardless of whether your state has an income tax, every business with employees faces these obligations:

• State Unemployment Tax (SUTA): Every state requires employers to pay into the unemployment insurance fund. Rates and wage bases vary by state and your claims history. Quarterly filings are typically required.
• State withholding: In no-income-tax states, there is no state income tax to withhold from employee paychecks, but federal withholding still applies.
• Workers' compensation: Most states require workers' comp insurance. Requirements and costs vary.
• Federal filings: Your federal obligations (Form 941, estimated payments, W-2s, 1099s) remain the same regardless of your state.