New Hampshire LLC Structure Enables Corporate Tax Avoidance While 81% of Businesses Pay No State Business Tax

New Hampshire operates a unique business tax structure where business activity generates an estimated 39% of state revenue in 2025—the highest proportion of any U.S. state—yet 81% of registered businesses pay no Business Enterprise Tax (BET) or Business Profits Tax (BPT). This dramatic asymmetry results from New Hampshire’s LLC and corporate tax framework that combines aggressive marketing of the state’s “no sales tax, no income tax” status with threshold exemptions and structural advantages that allow the vast majority of businesses to avoid state business taxation entirely. While New Hampshire lacks a broad-based sales tax or earned income tax, the state imposes a 7.6% Business Profits Tax on income over $92,000 and a Business Enterprise Tax on business activity, theoretically creating significant business tax obligations. However, the 81% non-payment rate reveals systematic tax avoidance through LLC structures and threshold management.

New Hampshire’s treatment of Limited Liability Companies differs from most states in ways that affect both federal and state tax obligations. By default, New Hampshire honors IRS classification of LLCs: single-member LLCs are taxed like sole proprietorships, and multi-member LLCs like partnerships, both enjoying pass-through treatment for federal purposes. However, New Hampshire does not treat LLCs as pass-through entities for state purposes, instead requiring them to pay both BPT and BET on New Hampshire-sourced income—theoretically creating a less favorable environment than true pass-through states. Despite this framework, the reality is that threshold exemptions ($92,000 for BPT in 2023), combined with relatively easy manipulation of revenue attribution and business structure, enable widespread tax avoidance.

The Tax Foundation rates New Hampshire 6th overall for business tax climate in 2024, but this ranking masks significant internal contradictions. The state ranks 44th specifically for corporate taxes—the very category that should benefit from New Hampshire’s supposed business-friendly environment. This poor corporate tax ranking is offset by top rankings for absence of sales tax and personal income tax, creating a composite score that obscures how the actual business tax structure functions. The 81% non-payment statistic suggests that New Hampshire has become a de facto tax haven for small and medium-sized businesses that can structure operations to stay below thresholds or attribute income to other jurisdictions, while lacking the outright corporate tax advantages of states like Delaware or Wyoming.

New Hampshire’s business tax structure creates perverse incentives and enables systematic revenue avoidance while concentrating tax burdens. Because business taxes constitute 39% of state revenue—far higher than any other state—New Hampshire’s public services and infrastructure depend heavily on the 19% of businesses that actually pay taxes, creating both unfairness and fiscal fragility. The threshold-based system encourages businesses to artificially limit New Hampshire-attributed revenue to $92,000, fragment operations across multiple small LLCs, or structure operations to shift profits elsewhere. Meanwhile, New Hampshire aggressively markets itself as a low-tax environment to attract business migration and libertarian ideology supports minimal regulation and taxation, creating a race-to-the-bottom dynamic. The result is a system where New Hampshire relies more heavily on business taxation than any other state while simultaneously enabling 81% of businesses to pay nothing—a structural dysfunction that epitomizes regulatory capture and tax policy corruption.