From a lengthy story in the Indianapolis Star:
A new study of Indiana's business tax structure found that small, Indiana-based manufacturing corporations generally face a higher effective tax rate than larger, out-of-state firms.
The study, conducted by Ball State University's Center for Business and Economic Research, found several inequities in the state's tax code that result in larger, service-oriented businesses almost uniformly paying a smaller share of total revenue in state taxes than smaller, manufacturing-based firms.
The study is provocative because it suggests Indiana's tax code discourages small, home-grown businesses that fuel job creation.
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The study essentially found that the overall business tax rate favored some sizes, industries, and corporate organizations over others.
First, smaller companies generally had higher effective tax rates than larger companies because overhead tends to be higher for smaller firms, painting a fairly clear picture of the regressive nature of the states' overall business taxes where, almost uniformly, larger businesses pay a smaller share of total revenue in state taxes," the report says.
Second, companies that produce goods had higher effective tax rates than companies that provide services. This is because sales tax doesn't apply to services and because manufacturers tend to have more property than service companies. Hicks said.
Finally, companies organized as corporations in Indiana must pay 8.5 percent in income tax, while those organized as LLCs only pay 3.4 percent. As a result, big out-of-state companies like Wal-Mart that register to do business in Indiana as an LLC are taxed at a much lower rate than companies headquartered here, such as Eli Lilly and Co.
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See the full story here:
http://www.indystar.com/apps/pbcs.dll/article?AID=2012209140353
