![]() ![]() Six states do no impose any corporate income tax (four impose gross receipts taxes instead, and two – South Dakota and Wyoming – do not levy either of these taxes). Only six states have a higher top corporate tax rate than California (Alaska, Illinois, Maine, Minnesota, New Jersey, and Pennsylvania). Corporate Income Tax: Highest in the WestĬalifornia has the highest corporate tax rate in the Western United States at 8.84 percent. Seven states do not impose a personal income tax, and two others have very limited income taxes (New Hampshire taxes dividend and interest income only, while Washington taxes capital gains income only). Most small businesses are S Corporations, partnerships, or sole proprietorships, and pay their business taxes at the rates for individuals, which makes California’s taxes on small businesses some of the most burdensome in the nation. Hawaii is second, with a top rate of 11 percent. California’s top rate is 13.3 percent (including the 1 percent surcharge for mental health programs, for all personal income taxpayers with taxable income over $1 million). Personal Income Tax: Highest in the NationĬalifornia’s personal income tax has the highest top rate and one of the most highly progressive structures in the nation. ![]() The federal excise tax on gasoline adds another 18.4 cents per gallon to the cost at the pump. According to the nonpartisan Legislative Analyst’s Office, California’s cap-and-trade auction increases the price of gasoline by an additional 23 cents per gallon. California’s state excise on gasoline is 53.9 cents per gallon (as of July 1, 2022). Gasoline Tax: Highest in the NationĬalifornians pay an additional 72.4 cents per gallon at the pump attributable to state and local taxes and fees, which is the highest in the nation. Those 43 states have a major competitive advantage over California when manufacturers are deciding where to launch or expand operations, and where to hire employees to operate the equipment and perform other functions. In 38 other states that impose sales tax, manufacturing equipment is not subject to the tax, and five other states do not impose any sales tax. This partial, limited exemption is scheduled to expire July 1, 2030, which further reduces its usefulness. Taxes on Manufacturing Equipment: More Expensive to Make Products in CaliforniaĬalifornia imposes state and local sales tax on manufacturing equipment, at rates above 10 percent in many areas of the state, with only a partial, limited exemption available for manufacturers that meet specific qualifications (the purchaser must be engaged in a specific type of business, and the equipment must meet state requirements and be used in specific ways). ![]() Click here for the California Department of Tax and Fee Administration’s detailed description of the statewide sales and use tax rate, and here for city and county rates. However, some local governments have been given special dispensation to go above this cap. Local governments are permitted to levy additional sales and use taxes, and the combined rate of the additional local taxes should not exceed 2 percent. ![]() At the state level, California levies a 7.25 percent general sales and use tax, the highest statewide rate in the nation. These rates are a combination of state and local taxes. The total sales tax rate is as high as 10.75 percent in some areas of the state, while the most populous city, Los Angeles, has a total rate of 9.5 percent (as of April 1, 2023). According to studies that provide federal rankings, California has the third-worst state business tax climate in the United States. The California Tax Foundation publication “ California Tax Facts: An Overview of the Golden State’s Tax Structure,” provides a comprehensive look at personal and business income taxes, sales and use taxes, property taxes, gasoline taxes and other taxes imposed in California.įor businesses seeking to create jobs for Californians by locating or expanding in the state, taxes can be a major obstacle. California is a high-tax state, with some of the steepest sales tax, gas tax, personal income tax and corporate tax rates in the United States. ![]()
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