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Business Taxes

Citizens Count Editor

As many already know, New Hampshire does not have a broad-based sales, earned income, or capital gains tax. As a result, taxes on business activity in the state make up the largest portion of the revenue “pie”: an estimated 39% in 2023. In fact, business taxes in New Hampshire count for a bigger portion of revenue than in any other state in the U.S. Even the Granite State’s property taxes count for a smaller percentage of revenue, at 11%. This makes business tax policy a particularly contentious area of debate in New Hampshire.

Types of taxes

Business activity in the state is taxed in two major ways: the business profits tax (BPT) and the business enterprise tax (BET).  

Business profits tax

New Hampshire’s business profits tax (BPT) is a flat-rate tax on a business’s taxable income (taxable income being determined essentially by federal income tax rules, with a few adjustments). The state budget passed in June 2021 scheduled a BPT decrease from 7.7% to 7.6% starting in 2022. Now, it's down to 7.5%.

The BPT applies to all business structures in New Hampshire, from corporations to LLCs or partnerships. Prior to 2022, businesses with less than $50,000 in gross income (income before any deductions are taken) were not required to file a BPT return. SB 101, a bill passed in 2021, raises that threshold to $92,000 and pegs future increases to the Consumer Price Index.

Business enterprise tax

The business enterprise tax (BET) was instituted in 1993 in response to revenue reports showing that only a small percentage of businesses operating in New Hampshire were paying BPT. BPT revenues also varied greatly from year to year, presenting a challenge to budget writers.  

The BET is a more unusual form of business taxation which is levied not on profits, but on a business’s “taxable enterprise value base”, and is unique in the United States. This enterprise value is the sum of three factors: compensation paid to employees, owners, and directors; interest expenses; and dividends paid out. This means that a business can owe BET even if it doesn’t show any net accounting profits. BET obligations also tend to show less variation from year to year.

The state budget passed in June 2021 scheduled a BET decrease from 0.6% to 0.55% starting in 2022. 

Like the BPT, all businesses in New Hampshire are obligated to pay the BET unless they received less than $250,000 in gross receipts.

Relationship between BPT and BET

If a business owes both BPT and BET, only the higher of the two taxes must be paid. For example, if you owe $10,000 in BPT and $14,000 in BET, only $14,000 is paid. Additionally, in cases like this where your BET obligation is higher than your BPT, you can credit the difference against future BPT obligations. So in our example, you’d be able to carry forward that $4,000 payment against future BPT liabilities for up to five years.

Comparisons with other states

The Tax Foundation publishes a yearly “State Business Tax Climate Index” which attempts to make a more comprehensive analysis of respective state business tax environments. For 2023, the group rated New Hampshire 6th overall. Yet a breakdown of the factors used to make the ranking saw the state listed 44th for corporate taxes, this lower statistic being offset by high rankings for the absence of a sales or personal income tax. 

Areas of contention

Tax rate reductions

In recent years, there have been calls to reduce or increase New Hampshire’s BET and BPT rates, particularly during state budget debates. 

Who is paying business taxes?

Some critics of tax rate reductions contend that only a small portion of businesses operating in New Hampshire actually pay business taxes. Reports from the New Hampshire Department of Revenue Administration (NHDRA) do, to some extent, reinforce this assertion. For example, in 2017, 81% of businesses registered in the state paid no BET or BPT. More strikingly, the top 2.9% of those businesses that did pay tax contributed roughly 70% of total BET and BPT revenue. 

Of course, many registered businesses may be small operations which constitute a less significant portion of the state’s economy. In fact, 51% of registered businesses didn’t even file BPT returns, meaning that their gross receipts totaled less than $50,000. 

‘Phantom Gains Tax’ debate

A particularly contentious area of New Hampshire business tax policy related to a provision of the BPT that applied in certain situations: for instance, when someone sells their interest in a partnership at a profit.

For federal purposes, the tax on that profit is levied at the personal, not the business, level with the individual who made the sale paying a capital gains tax on their earnings.

New Hampshire doesn’t have a capital gains tax, so if the partner making the profit lives in the Granite State, he or she won’t have to pay any personal state-level tax on the money they made in the transaction.

Things used to get tricky when the partner who made the purchase opted to have their new interest in the partnership “stepped up” for federal tax purposes, reflecting the price they paid for their share of assets. That’s a common enough move, as taking the “step up” allows the purchaser to take full advantage of potential federal deductions.

But in New Hampshire, this had a fiscal side effect. The “step up” adds value to the company, and the state therefore levied its business profits tax against the increase. This effectively saddled the remaining partners in the company—who did not profit from the transaction—with a sometimes significant tax obligation.  

In 2016, the Legislature addressed criticisms of this policy by amending the state tax code to make the “step up” optional for businesses; that is, a company may opt to maintain its lower asset basis for New Hampshire tax purposes, eliminating the need to pay business profits tax on the “phantom” income. Companies may still opt to report the “step up” and pay tax if they choose.

Research and development tax credit

As an alternative—or in addition to—lowering rates on business taxes, some lawmakers and industry advocates have called for New Hampshire to raise the cap on its research and development tax credit.

This credit can be applied to up to 10% of a business’s qualifying manufacturing research and development expenses with each taxpayers share in the credit not exceeding $50,000. It is applied first against the business’s BPT obligation, and then BET obligation if there is any credit still remaining. Businesses must apply for the credit by submitting an application to the Department of Revenue by June 30th of the year following that in which the expense was incurred. Any unused credit may be carried forward for up to five years.

Currently, funding for the credit is derived from business tax revenue, and is capped at $7 million per year. In recent years, demand has far exceeded the cap, leading the Department of Revenue to divide the available credit between businesses with qualifying applications.  

This has lead some to argue that the cap on the credit should be raised higher, or to push for eliminating the cap entirely.

Limitation on net operating loss carryforwards

When a business finishes a year with a net operating loss (NOL), federal tax policy will allow it to “carry forward” the loss against future tax obligations for up to twenty years. New Hampshire law similarly allows businesses to “carry forward” an NOL, but for only ten years, and with a cap of $10 million.

Proponents of raising the cap or extending the period over which it can be applied argue that it would bring New Hampshire more into line with policy in the majority of other states. They argue this would make us more competitive in attracting businesses. 

Others call for lowering the cap or reducing the carryforward period as a means of increasing revenue.

LLC tax

In June 2009 the Legislature passed a short-lived tax on LLC owners. LLC owners became subject to the state's 5% interest and dividends tax. The tax was repealed in June 2010 following a public uproar.


Citizens Count Editor

“New Hampshire should lower business tax rates.”

  • Lower tax rates help existing businesses remain profitable, encouraging them to stay or expand operations in New Hampshire, which will ultimately create more revenue.
  • New Hampshire already has high costs for business expenses such as electricity, health insurance, and unemployment insurance, which makes lower business taxes a crucial factor in attracting and keeping companies here.
  • Tax cuts have stimulated economic growth in other states, reducing unemployment and increasing wages.
  • New Hampshire’s corporate tax burden is ranked 44th in the nation, and must be changed for the Granite State to continue to attract and retain new business.
  • New Hampshire ranks low for business startup activity; lowering the corporate tax burden would help attract more new businesses to the state. 
Citizens Count Editor

“New Hampshire should not lower business tax rates.”

  • A more comprehensive view of the overall business tax climate in New Hampshire that includes rates for taxes such as property, unemployment, personal income and sales, sees the state ranked much more favorably:  6th nationally according to the Tax Foundation
  • Taxes are not solely a burden on business; they are also the means of funding for public services that enable economic activity or reduce the overall cost of doing business.
  • New Hampshire would do more to attract new business by addressing our relatively high energy and labor costs and improving our infrastructure.
  • Reducing corporate income tax rates without cutting spending accordingly has led to fiscal challenges, including budget shortfalls and lower bond ratings.
  • Because New Hampshire relies more heavily on business tax revenue than other states, cuts have a more significant impact on revenue here than they might elsewhere. 


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