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How to Make Sure Your Business Isn't Paying Too Much in Sales Tax Consider taking these three steps to avoid overpaying the tax man. Plus, the best and the worst tax states for business owners.

By Gwen Moran

Opinions expressed by Entrepreneur contributors are their own.

Dean Cycon was having an after-work beer with one of his suppliers and complaining about the high price of propane, which powers Dean's Beans Organic Coffee Company, his fair-trade wholesale and retail coffee company in Orange, Mass. The supplier, seeking a silver lining, said, "Well, at least you don't have to pay sales tax on it, because it's used in your manufacturing," Cycon recalls.

When he returned to his office, Cycon found that he had, in fact, been paying sales tax on propane--along with various other supplies used in creating his products.

The Best (and Worst) Tax States for 'Treps
The Small Business & Entrepreneurship Council's Business Tax Index 2011 ranks the 50 states and District of Columbia according to the impact of their tax systems on small businesses. States are ranked based on 18 different tax measures, including income, capital gains, property, unemployment and various consumption-based taxes like gas levies. Here's a look at the top--and the bottom--of the heap:

Best tax systems:
1) South Dakota
2) Texas
3) Nevada
4) Wyoming
5) Washington

Worst tax systems:
47) Iowa
48) New York
49) New Jersey
50) Minnesota
51) District of Columbia

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