On July 31, Massachusetts implemented a new software services tax that solution providers say requires them to collect a 6.25 percent levy on a wide variety of tech services, everything from building websites to updating software on a client's computer.
The tax has the state's channel community up in arms, with some having second thoughts about plans to move into or expand their operations in Massachusetts. "If this tax had passed on Jan. 1, I would have strongly considered moving 20 minutes over the border to Rhode Island," said Allen Falcon, CEO of Cumulus Global, a cloud solution provider in Westborough, Mass., who earlier this year expanded his business.
The controversy over the new Massachusetts tax puts a spotlight on the question of which states are the most attractive -- and which states are not -- for entrepreneurs to start a solution provider business and for existing solution providers to expand.
Taxes, of course, are just one of many criteria entrepreneurs should consider when deciding where to start or expand a business. A state's labor costs, regulations, available pool of educated workers, cost of living, telecommunications infrastructure, business opportunities, and track record for innovation all come into play.
CRN researchers and editors undertook a detailed analysis of the business climate in all 50 states to offer readers guidance about what makes some states better than others when starting or expanding a solution provider business.
The CRN analysis covers a broad range of criteria including a state's labor and energy costs, taxes (including tax incentives, corporate income taxes and property taxes), workforce education levels and pool of experienced workers, regulatory environment, level of innovation (as measured by exports and awarded patents), business opportunity and economic strength rankings, and even lifestyle criteria such as crime rates and percentage of the population with access to the Internet.
In addition, CRN surveyed solution providers earlier this year to learn what criteria were most important to them. Those results were used to weigh the criteria in the state-by-state analysis.
A detailed description of the criteria and methodology of the analysis can be found in the accompanying sidebar to this package.
CRN also cross-referenced its analysis of the 50 states with some of its annual lists, including the 2013 Solution Provider 500, which ranks North American solution providers by annual revenue; the 2013 Next-Gen 250 listing of solution providers focused on leading-edge technologies; the 2013 Tech Elite 250 listing of solution providers with a broad range of vendor certifications; and the 2012 Fast Growth 100 and 50 Up-And-Comers, which ranks the fastest-growing North American solution providers. The 2013 Fast Growth list was being finalized at press time and an update will be added to the interactive map at a future date.
For the complete ranking of all 50 states, see the slide show included in this package.
This report originally ran in September exclusively on the CRN Tech News App, available in the iTunes App Store or the Windows Store.
NEXT: Good Move? The Top Five States
GOOD MOVE? THE TOP FIVE STATES
The results of CRN's analysis, in some cases, are surprising. Most people wouldn't think of Utah as the best place to start a technology business. And yet, due to its low taxes, low labor costs and limited regulations, combined with an educated workforce, myriad business opportunities and prospects for innovation and growth, Utah comes out on top as the best place to start and grow a solution provider business.
"It's a very tech-savvy area," said Ryan Westwood, president and CEO of PcCareSupport, a Provo, Utah-based solution provider founded in 2010. (PcCareSupport is a member of the Next-Gen 250.) "It's a very pro-business state."
Almost as surprising is that the No. 2 state in CRN's analysis isn't one of the technology epicenters such as California or Massachusetts, but Virginia, with its low taxes, limited regulations and sizable pool of educated tech workers.
"We're recession-proof here," said Mary Lieb, president and one of three owners of F1 Computer Solutions, based in Warrenton, Va., about 45 miles west of Washington, D.C. (F1 Computer Solutions is a member of the Next-Gen 250.) Lieb pointed to the region's broad range of government, nonprofit and commercial business opportunities, and to the sizable pool of IT-experienced labor. "We're very fortunate where we are," she said.
Colorado (No. 3), Washington (No. 4) and Maryland (No. 5) round out the top five.
BAD MOVE? THE BOTTOM FIVE STATES
At the other end of CRN's ranking is No. 50, West Virginia, with a limited pool of IT educated workers and very limited business opportunities.
"It's certainly not a metro," said Ben Randolph, sales and field service vice president at Citynet, a Bridgeport, W.Va., solution provider, who acknowledged the state is very different from a Silicon Valley or Washington, D.C., tech corridor. "There is a challenge in West Virginia in finding highly qualified IT personnel. But it is getting better," he added, pointing to a growing number of technology-related companies becoming established along U.S. 79 in the northern part of the state.
And while some people may think of Hawaii as paradise, it's more like paradise lost for prospective solution providers. Hawaii, in the CRN analysis, fares poorly because of its high labor costs and business expenses (No. 46), taxes and regulatory environment (No. 43), and business opportunity (No. 49).
Wyoming (No. 48), Arkansas (No. 47) and Mississippi (No. 46) complete the bottom five states in the CRN ranking.
"It's not a place where we're loaded with Fortune 500 companies. It's a rural state," acknowledged Gerard Gibert, CEO of Venture Technologies, a Jackson, Miss.-based solution provider that does the majority of its business in that state, with some operations in surrounding states such as Tennessee and Alabama. (Venture Technologies is a member of the Tech Elite 250.)
Wyoming is ranked No. 50 for business opportunities, which makes for a challenging environment for solution providers such as Casper-based ISC. (ISC is a member of the Tech Elite 250.) "The state of Wyoming has a population smaller than the city of Denver," said ISC CEO and co-founder Win Farnsworth. The state is the least populous in the U.S. (about 575,000) and its biggest cities, Cheyenne and Casper, have around 60,000 or fewer residents with lots of wide-open spaces in between.
"You don't have a lot of commercial or enterprise customers," Farnsworth said. ISC is focused on providing its IT services, including network, security, data storage and unified communications, to public schools, state colleges, and state, county and local governments.
NEXT: Finding The Right Balance