Six Keys to Plant Site Selection

Aug. 13, 2010

Tax rate is large factor when companies consider making a move

As the economy begins to show signs of recovery, some manufacturers will be making plans for expansion or relocation. One of the most common factors companies consider when making a move is the tax rate of a particular region. While taxes are important, companies may discover states with low rates are still cost prohibitive because of high property costs or a lack of qualified labor, says Dana Olson, president and CEO of site-selection firm Ecodev LLC. Other points to consider, says Olson, include:

Dana Olson: States with low tax rates arent necessarily the most cost-effective locations.

Labor needs of the business: Since the cost of labor is the biggest expense for most companies, it is important to carefully assess labor needs to find the area that will provide the most cost-effective, qualified labor.
Proximity to clients or vendors: If the majority of a business' clients or key vendors are located in a particular region, it may make sense to locate the business in close proximity to reduce travel or shipping expenses or to provide faster customer service.
Transportation needs: Does the business need to be located near a port or rail system? With rising fuel costs, more companies are looking for ways to scale back transportation and shipping of products.
Local tax situation: Even states that boast they are a no-tax state (e.g., no corporate income tax) do have taxes that will affect your business in one way or another. It is important for a business to know all the applicable taxes it will face, from franchise taxes to sales and use taxes.
Property requirements: The cost of property varies dramatically, up to twice as much, depending on location. As a starting point, companies should outline the amount and type of space required to operate the business.
Quality of life: Before locating a business, companies should ask if the area is recognized as a nice place to "live" beyond a good place to operate a business. Employee retention and future recruitment depend on offering a good quality of life.

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About the Author

Jonathan Katz | Former Managing Editor

Former Managing Editor Jon Katz covered leadership and strategy, tackling subjects such as lean manufacturing leadership, strategy development and deployment, corporate culture, corporate social responsibility, and growth strategies. As well, he provided news and analysis of successful companies in the chemical and energy industries, including oil and gas, renewable and alternative.

Jon worked as an intern for IndustryWeek before serving as a reporter for The Morning Journal and then as an associate editor for Penton Media’s Supply Chain Technology News.

Jon received his bachelor’s degree in Journalism from Kent State University and is a die-hard Cleveland sports fan.