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Georgia Business Tax – Complete Guide

Whether you are a first time entrepreneur or a small business owner; one of the aspects to consider is business taxes. A business formed in any state of the USA may have to fulfill federal, state, and local tax requirements. The types of taxes you may have to file will be dependent on your business structure and state of formation. If you start a company in Georgia then you will be required to file some form of Georgia business tax. Hence, we have created this guide to provide information on the different taxes applicable in the state and how different businesses are taxed including Georgia LLC tax or business corporation tax.

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.

Withholding tax

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?

How Georgia Businesses are Taxed?

If you are planning to start a new business in Georgia then one of the important annual requirements is filing small business tax in Georgia. The state has different types of taxes at the federal, state, and local level, and the taxes you file can vary according to the business structure you have formed. You may have to file more than one form of business tax and may also need a Georgia business tax calculator to determine your taxes. So, let us look at the different types of entities and their tax obligations in the state.

Taxes for an LLC

If you start a Limited Liability Company in Georgia then it will be considered a pass-through entity for taxation purposes. This means that the said LLC is not required to file federal or state taxes as a business corporation does. Instead of filing Georgia business tax by the LLC, the income to be taxed will pass through to the owner of the said business and you and other members will be required to file personal income tax on the same at a rate of 5.75%.

If your company has customer service centers or warehouses in the state and participates in the selling of tangible personal property or other services as mentioned by the Georgia Department of Revenue (DOR) then you may be subjected to sales tax. Depending on your business activity, you may also be required to file another form of Georgia LLC tax known as the use tax. The state sales and use tax rate is 4% although the rates can vary according to the jurisdiction your business is based in. The tax rate in Chatham is 7% but in Montgomery, it is 8%.

Taxes for a C Corporation

If you are planning to form a C corporation in Georgia then your company will be subjected to Georgia Corporation tax. A C Corporation is a traditional corporation and will be required to file federal tax. The Georgia business tax rate is 5.75% of the Georgia taxable net income for a corporation. The said company may also be required to file net worth tax using the Georgia Form 600 (Corporation Tax Return).

A C Corporation may also be subjected to other Georgia Corporation taxes like:

  • Withholding tax if the corporation has employees
  • Sales tax if your company sells tangible personal property or certain services
  • Use tax if your corporation buys non-exempt items outside the state and brings them into Georgia
  • Transportation services tax if your company operates prearranged services for the public like limousine services or sport utility vehicles.

Taxes for an S Corporation

An S Corporation is quite similar to an LLC when it comes to filing Georgia business tax. It is not required to pay Georgia Corporation tax as a company and instead, taxes have to be filed by the shareholders on their personal tax returns as an S Corp follows pass-through taxation. Apart from this, an S corporation will be required to file the net worth tax as well as withholding tax (if there are employees).

Taxes for a Sole Proprietorship

If you form a sole proprietorship in Georgia then it will not be subject to the corporate income tax or the net worth tax. Since this is a sole trader business that comprises a single owner, the sole proprietor or trader will be responsible for filing income tax on their individual tax returns. The small business tax in Georgia will be calculated based on the distributions made to the sole proprietor. The owner of a sole proprietorship will also need to establish a tax account with the state online through Georgia Tax Center (GTC).

Taxes for Partnerships

If you form a partnership company in Georgia then the small business tax in Georgia will be quite similar to that of Georgia LLC tax or sole proprietorship taxes. Partners in this type of business structure will be required to file taxes on any amount distributed to them through the business. They will be required to file individual tax returns or personal tax returns. If you own a property in Georgia then you will be required to file an income tax return using Form 700. It is also important to note that partnerships are not subjected to any net worth tax.

Ready to Incorporate your Georgia Company?

Whether you are planning to form a C Corporation, an S Corporation, Sole Proprietorship, or a limited liability company (LLC) in Georgia, the new business formation process will be different, extensive, and time consuming. This is where IncParadise can provide meaningful assistance. We are an expert incorporation service provider in Georgia and can help to register your LLC or corporation in Georgia.

Once you have formed a new business there are several annual requirements in Georgia that you will need to fulfill. Hence, IncParadise offers additional services to fulfill such requirements like foreign qualifications, annual reports, and filing DBA among others.

Do you want to form a new business in Georgia?