Tax planning in the USA starts from the selection of the most favorable state for business registration.

Tax Foundation, an institution dealing with the issues of taxation, has prepared a Tax Climate Index for business in the states and has found that Wyoming has the most favorable tax treatment for business in the USA, while business generators like California and New York remain unfavorable in respect of tax competitiveness of the state. We would like to add that those states are in no need to decrease taxes drastically. New York attracts as it is one of the world capitals and a world business centre. California is the best place to live in the USA, and many businesses are attached to the land (restaurants, hotels, stores, etc.).

The Index defines how well the tax system of the state encourages investment by means of maintaining a wide tax base and low rates. It ranges the states by the most important taxes for business and business investments: corporate tax, individual income tax, sales tax, unemployment tax and real estate tax. By the rates of those taxes the states rating is made up, and then the rating is built by the relative importance of impact of a particular tax on business.

According to the Index, the top ten of the states with favorable tax climate in 2008 includes Wyoming, Nevada, and Texas.

Bringing up the rear in the common table is Rhode Island in the 50^th place. California, New York and New Jersey occupy the 47^th, 48^th, and 49^th lines of the Index respectively. Among other unfavorable states stand: Maine, Minnesota, Nebraska, Vermont, Iowa, and Ohio.

“There is no doubt that the states compete with each other for companies, jobs and labor resources,» said the co-author of this rating, Curtis Dabay. “Taxes matter a lot for business and the states with the best business climate will harvest the crops”.

“The states must be in the permanent search for ways to improve their business climate. If they stand still, they will loose their position as compared to other states which are actively improving their business environment,” added Dabay.

On the whole, the tax policy of the United States is encouraging for business development. There are lots of various preferences allowed to different companies-taxpayers. But you have to be aware of that. That is why, it is best, judging by which business you are going to undertake, to seek advice on tax planning with a Certified Public Accountant. He can suggest a lot of opportunities of absolutely legal saving. But you have to be aware of all those opportunities in advance. As “after the ball” is too late.

For example, if you procure goods from suppliers outside the registration state, you do not have to pay the Sales Tax to the state (VAT). Sales Tax may amount to 5 to 9% of the goods cost (it’s different in different states). If you purchase millions, calculate at once the amount you are saving. Therefore, think of where your main supplier will be located and register the company in a different state, not where you are going to purchase. American VAT is not imposed on trade between companies from different states to develop the interstate goods turnover. That is not only an economic measure, but a political one as well – strengthening of trade connections among the states. Any US President will be deprived of his post for an attempt to build-up a “line of command” (for example, to deprive the citizens of the right to elect the Governor of the state where they reside). That is why action has to be taken within the framework of respect of the society, that is, to stimulate with taxes – not with shoulder straps.

The third major source of your money saving is avoidance of fines and penalties. That is why, you should agree upon a list of obligatory payments with your Certified Public Accountant and make payments in time.

The process of tax planning has to be initiated before company registration. Before making any deal, find out how many taxes you will have to pay on that deal. As experience is accumulated, you yourself will soon know well how the taxation in your field works.

It’s important to remember that payment of taxes in the USA is a must. That is a general American precept. There is no need to be afraid of American taxes. First of all, they are the lowest in the world (if you don’t get registered in New York or California). Secondly, the whole tax system is build as encouraging business development, but not as a means of control of persons out of favor; thirdly, ask for advice of an experienced CPA before every deal – it is a very reliable insurance against different tax surprises.

Compared to Russian taxation system, the main difference is that income to state treasury and federal treasury is fundamental for American authorities; therefore the taxes are low, but absolutely obligatory. In Russia the approach is different – the tax rates are several times higher, but they always keep cheese for you in the hole of tax legislation. Consequently, you are using that hole (and cheese in the form of taxes unpaid to the state), and after that your business and your freedom in Russia completely depends upon the appetites of the officials – if you just optimize the taxes, it is a criminal offence in Russia. If you pay all the taxes you have to pay in Russia, your business is unprofitable – that is the basis of the entire Russian taxation system. If it is not so, send us at least a couple of personal examples.

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