Wyoming’s business-friendly tax systems and regulations are just some of the many reasons startups love to incorporate in the state.
Unlike most states, the equality state has no corporate or personal income taxes. Wyoming also doesn’t have gross receipt taxes, which leaves most people wondering how they tax startups.
If you plan on starting a business in Wyoming, you’re in the right place. This blog will discuss how the equality state taxes businesses and explore its low corporate tax rates.
Wyoming’s Corporate Tax Requirements & Exemptions
Before discussing how startups in Wyoming are taxed, let’s check some of the state’s tax requirements for businesses.
Even though companies operating in Wyoming don’t have corporate or personal income, they still have to pay for the following:
State sales tax
Luckily, Wyoming’s business tax rates are relatively low compared to other places. The state’s sales tax is only 4%, while its property taxes are at an average of 9.5% for commercial properties to 11.5% for industrial properties.
Wyoming determines your property taxes depending on its market value, not its taxable value. A property’s market value is measured by its price if sold. In comparison, the taxable value is calculated as taxes due for that property.
It’s also worth noting that Wyoming requires all businesses to renew their licenses. Since the state doesn’t impose income taxes, they get most of their revenue from annual license and renewal fees.
In terms of tax exemptions, there are plenty of advantages Wyoming offers. Some of the well-known examples include manufacturing and data center sales tax exemptions. These reliefs help companies increase their tax savings.
The state also doesn’t levy taxes for estates and intangible assets. Suppose an entrepreneur decides to leave an estate to a surviving family member. In that case, they don’t have to pay any inheritance taxes to get them.
How Does Wyoming Tax Its Businesses?
Wyoming taxes a business depending on its entity and activity. Here are a few excellent examples.
It’s common for some entrepreneurs to create LLCs to hold onto certain assets, like IPs, stocks, bonds, and more. These businesses are typically known as holding companies.
Holding companies don’t have to pay anything if their properties are mainly intangible. However, they do have to pay property taxes if they own any land.
These companies must also file an annual report and pay a fee based on their assets’ location. The fees will typically cost a minimum of $60. If your LLC has $300,000 in assets within the state, you must pay $60 for your annual reports.
Some businesses outside Wyoming want to enjoy their tax benefits without moving there. But the state can only tax their company if they have a nexus.
A nexus refers to the ample presence a business needs to have in a state to be taxed. They must create a nexus in Wyoming to get the same tax treatment as domestic businesses. For example, they can get a virtual office within the state.
Once they have a nexus in Wyoming, they can get the tax exemption the state offers.
E-commerce or online businesses in Wyoming only gather sales taxes if they have a physical store in the state. This regulation comes from a Supreme Court ruling in 1992. According to that ruling, state governments can’t require retailers to collect sales tax if they don’t have any physical presence.
Companies that only sell their products through platforms like Amazon or their website cannot collect sales taxes from their customers. They can only do it once they have a physical presence in Wyoming.
Federal law allows non-US residents to incorporate their businesses wherever they like. But since most of these startups aren’t in Wyoming, they get the same tax treatment as online businesses.
They’re not required to pay state sales taxes, but they do have to pay federal taxes, depending on their entities.
A corporation in Wyoming led by a non-US resident will get the same tax treatment as a US corporation. Additionally, their foreign earnings will be taxed according to the regulations of the US treasury.
Meanwhile, LLCs formed in Wyoming will only be taxed if their income comes from the US. State law says an LLC’s income from local sources will be taxed by 30%, and the IRS will refund any amount they overpaid.
The IRS can’t tax any revenue they make outside of the country.
Advantages of Forming LLCs in Wyoming
Aside from Wyoming’s business taxes and low rates, the state also offers many other advantages to LLCs.
For instance, LLC members and owners can stay anonymous while they run their companies in Wyoming. The state doesn’t have a formal information-sharing agreement with the IRS, allowing LLCs to enjoy privacy.
Because their identities aren’t part of public records, they have strong legal protections from liabilities. People wouldn’t be able to sue the company members and owners. The state also has excellent charging order protections.
These regulations help protect the LLC owner’s personal assets from any debt the company may get.
Lastly, Wyoming has flexible regulations for profit distributions. Suppose a member owns a 5% interest in the company. In that case, they can receive up to 50% of their profits if indicated in the company’s operating agreement.
With plenty of tax breaks and strong legal protections, Wyoming has created the perfect environment startups need to be successful.
Start A Business in Wyoming Today
Wyoming’s business-friendly tax climate makes it popular among budding entrepreneurs. If you still need help setting up shop in the equality state, NCH is here for you.
NCH is Nevada’s leading provider of business formation services. From business entity formation to tax planning, we provide our clients with all the support they need to jumpstart their businesses in Wyoming.
Our business specialists can also guide you in incorporating your startup. We’ll help you find the most appropriate legal entity by discussing its advantages and disadvantages.
Visit our website here or call us at 800-508-1729 for more information.