It's Your Move: The Best States To Start Or Expand A Solution Provider Business


THE TAX BURDEN

And then there are taxes and regulations. Some solution providers, when asked about the tax burdens in their states, complain about how they hinder growth. Others seem to shrug their shoulders, taking the view that there isn't much they can do about them.

The CRN analysis found that Massachusetts is the state with the most onerous tax and regulatory burden, followed by Vermont, Rhode Island, New Hampshire and Maine. At the other end of the tax and regulation spectrum is Utah, which has the lightest tax and regulatory burden, the analysis concluded, followed by Alabama, Oklahoma, Georgia and South Carolina.

That's attractive to many solution providers.

"The regulatory burden is lower in Virginia and corporate taxes are lower," said Aptaria's Lawlor. "Virginia has a reputation as being a business-friendly state." (The CRN analysis ranks Virginia No. 8 for taxes and regulations.)

Even some solution providers in the same state don't see the tax burden the same way. Take Suazo at Platte River Networks in Colorado, which the CRN analysis ranks No. 24 in taxes and regulations. "It's not really a problem. I don't feel like we're in California or some of the other high-tax areas."

Covalent IT's Fowler, while saying he's "not over-regulated," noted that many Colorado communities where the company operates have their own taxes, license fees and other expenses. That, combined with staff salaries (Colorado is ranked No. 36 for labor costs), has led Fowler to hire a financial controller. "That tells you something, that I have a 10-person company and I have a full-time controller."

And then there's the dustup over Massachusetts' newly imposed software services tax, one of only four states that impose such a tax (the others being Hawaii, New Mexico and South Dakota).

"I'm not very happy about it," said Iuvo Technologies' Beilman. "It's more administrative steps we have to follow. And I think it's bad for business. Our customers have limited IT budgets."

But is it enough for a solution provider to consider moving elsewhere?

Maybe, if you ask Delcie Bean, founder and CEO of Paragus Strategic IT, a Hadley, Mass.-based solution provider. Bean recently started a second company, Waterdog Technologies, an IT distributor, and is considering yet another startup.

Paragus is closely tied to its customers in surrounding cities and towns and isn't going anywhere. But because of the new software services tax Bean is seriously considering moving Waterdog to another state and starting his third venture outside Massachusetts as well.

"It definitely gives you pause," he said of the hassles and expense created by the new tax. "When you're starting a company, you're trying to get to profit as quickly as possible."