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This study presents detailed state-by-state estimates of state and local taxes paid by businesses. It is the 22nd annual report prepared by Ernst & Young LLP in conjunction with the Council on State Taxation (COST) and the State Tax Research Institute (STRI). The estimates presented in this study are for fiscal year 2023 (FY23), which ran from July 2022 through June 2023 for most states.
Businesses paid $1,096.2 billion in state and local taxes in FY23, which was 44.7% of all tax revenue at the state and local level. Businesses paid $595.7 billion in state taxes in FY23, which was a 0.9% increase from the prior fiscal year, and $500.4 billion in local taxes, which was 7.3% higher, for a combined year-over-year growth rate of 3.7% over FY22.
Business taxes include property taxes paid by businesses; sales and excise taxes on intermediate inputs and capital expenditures purchased by businesses; business entity taxes such as the corporate income tax, gross receipts tax, and franchise tax on businesses and corporations; the share of individual income taxes paid by owners of noncorporate businesses (pass-through entities (PTEs)); unemployment insurance taxes; and all other state and local taxes that are the statutory liability of business taxpayers. The following are key findings of the study:
- Business property tax collections grew by 7.7% in FY23 to $394.3 billion.
- Business sales tax collections grew by 6.4% to $240.6 billion.
- Corporate income and gross receipts taxes grew by 1.7% to $131.1 billion, but individual income taxes on business income decreased 22.9% to $61.4 billion resulting in a collective decrease of business income and gross receipts tax collections of 7.7% in FY23.Total state and local taxes paid by businesses in FY23 equaled 4.7% of US private-sector gross state product (GSP).
- Businesses paid on average $2.96 in taxes per dollar of government expenditures, assuming that in-state education spending does not benefit in-state businesses.