Georgia Business Tax
If you are planning to start a small business in Georgia then according to the U.S. Small Business Administration (SBA), you will be required to file some form of small business tax in Georgia. The type of tax you may have to file will be dependent on the type of business structure. The business structure will also define the Georgia business tax rate like sole proprietorships and partnerships file taxes at the owner’s personal income tax rate and not the federal or corporation tax rate. It is also important to note that depending on the type of business structure, you may need to apply for and obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) as this will assist you with the filing of tax returns in this state.
What taxes do businesses pay in Georgia?
You can form a variety of businesses in Georgia right from a sole proprietorship to an LLC or a business corporation. Each of these businesses will have different tax statuses in the state and may have to file some form of Georgia business tax. Your business may require you to file a single business tax or multiple taxes that will require you to use a Georgia business tax calculator for determining the rate or amount of tax. Each state has its own set of tax requirements, rates, and filing processes as well as tax deductions and credits that help reduce your tax liability. Let’s try to understand the different forms of taxes applicable to small businesses in the state of Georgia.
Corporate income and net worth tax
There are different types of taxes for companies and individuals like the corporate income and net worth tax. The corporate income tax is a form of Georgia business tax that takes into account a non-graduated percentage based on the federal taxable net income of a corporation and is also modified by Georgia statutory adjustments. This form of corporate tax has a flat Georgia business tax rate of 5.75%.
The net worth tax is a small business tax in Georgia that is levied on a company for the privilege of conducting business in the state or for exercising a corporate franchise in the state. If your company has a net worth of equal to or less than $100,000 then this tax will not be levied pursuant to GA Code § 48-13-71 (2020). There is no Georgia business tax rate for net worth tax although the maximum tax amount is $5,000 for a net worth that is more than $22 million.
Sales and use tax
One of the important small business taxes in Georgia is the sales and use tax. This tax is normally imposed on the retail sales price of any tangible personal property as well as specific services. In the state of Georgia, specific services include the sale of accommodation, charges related to participation in amusement activities and games, limo or taxi services, etc. Georgia imposes sales tax on charges by a seller towards completing the sale of a taxable property pursuant to O.C.G.A. § 48-8-2(34)(A).
An example would be that of a seller charging $30 for a t-shirt and $5 towards shipping or delivery of the t-shirt. Herein, the Georgia business tax calculator will factor in sales tax imposed on the cost of the t-shirt as well as delivery, and hence the seller will be taxed on $35.
The use tax on the other hand is a form of tax imposed on any non-exempt items that have been brought into Georgia. This type of Georgia business tax is imposed on the first instance of consumption, storage, use, and distribution of any non-exempt tangible personal property that has been purchased outside the state of Georgia. Depending on the time frame and length of usage, the use tax is imposed according to any of the following:
- The purchase price of the said property using the Georgia business tax rate or the state and local sales tax rate
- The fair market value of the said property using state and local sales tax rate
The Georgia business tax rate or the local sales tax rate applicable will depend on the county where you receive the goods or property. It is important to note that the state sales tax rate is 4% while the local or county sales tax rate can vary from 6% in Glynn County to 9% in Harris County.
A type of small business tax in Georgia is known as the withholding tax. As the name suggests, this tax refers to an amount that a company will withhold from the employee’s wages and pay it directly to the state. This type of tax is withheld from different sources like:
- Employee wages
- Pension and annuity payments
- Lottery winnings
- Nonresident distributions
- Other sources of income as defined by state and IRS
The Georgia business tax rate for withholding tax is based on a graduated scale. You can refer to the Employer’s Tax Guide 2022 for calculating the rates.
Are you thinking of starting a Georgia LLC or a Corporation?