A small business’s overall tax liability and filing responsibilities in the state of Georgia depend on several factors, including the type of business, its business structure, the number of employees, and its location. Here are some FAQs small business owners may have about the different kinds of business taxes they could face in Georgia.
How does Georgia tax businesses?
Georgia’s primary vehicles for taxing businesses are its corporate income tax and net worth tax.
Which businesses must file an income tax return in Georgia?
The following businesses must file corporate income tax returns in Georgia:
- Corporations, partnerships, or limited liability companies (LLCs) that do business or own property in the state or receive income from Georgia sources
- Any partnership or LLC that’s treated as a partnership with partners or members who live in Georgia
What is the corporate income tax rate in Georgia?
The rate is 5.75 percent of taxable net income.
Are estimated payments required for Georgia’s corporate income tax?
Corporate estimated payments must be filed quarterly with the Georgia Department of Revenue on Form 602ES, “Corporate and Partnership Estimated Tax.” The due dates may vary according to your tax year. For calendar-year filers, payments are due April 15, June 15, September 15, and December 15 of the tax year.
If your quarterly payment is more than $10,000, you must pay electronically.
Are any tax credits available to offset Georgia’s corporate income tax?
Yes. Georgia offers a variety of tax credits that can reduce up to 100 percent of a small business’s income tax liability. But some credits (e.g., the research and development credit) have certain requirements that may not allow for a total offset of liability.
Can pass-through entities be taxed at the entity level rather than on partners’ or members’ individual income tax returns?
Yes, S corps and partnerships in Georgia can make an annual irrevocable election to pay their state income tax at the entity level at the 5.75 percent rate. (Single-member LLCs that aren’t taxed as a partnership or S corporation are not eligible.) The election is made on Form 600S or Form 700 and must be made by the due date or extended due date for the business’s income tax return.
The election is intended as a workaround for the IRS’s $10,000 limit on the itemized deduction for state and local taxes (SALT) on federal individual income tax returns. By paying the state tax at the entity level, each partner or member receives less taxable income, which reduces their individual tax liability.
Do Georgia businesses that elect the pass-through entity tax have to file estimated taxes?
Yes. They make the payments using Form 602 ES or electronically through the Georgia Tax Center.
How does the pass-through entity election affect the treatment of tax attributes like credits?
Tax attributes don’t pass through to the owners of S corps and partnerships — they remain with the business if it doesn’t make the election in a later year. But a small business that makes the election can also make an irrevocable election to pass through all or part of certain credits to the owners of the S corp or partnership for the relevant tax year.
Which businesses are subject to the net worth tax?
Corporations with a net worth exceeding $100,000 are subject to the net worth tax. (Businesses with smaller net worth aren’t subject to the tax but still must file a return.) Neither partnerships nor LLCs treated as partnerships for federal income tax purposes have to pay the net worth tax.
All corporations doing business in the state for the first time must file an initial net worth return on or before the 15th day of the third calendar month after incorporation. C corporations have until the 15th day of the fourth month. The net worth reported is the net worth on the date of incorporation, and no income tax information is reported.
The tax paid on the initial net worth return covers the period beginning with the date of incorporation and ending with the end of the first income tax year. If the period is less than six months, the tax due is 50 percent. A full year’s net worth tax is due with the first income tax return.
Subsequent annual returns must be filed on or before the 15th day of the fourth month following the end of the tax year.
How is Georgia’s net worth tax computed?
The tax is graduated based on net worth. It starts at $125 and goes as high as $5,000 for a net worth exceeding $22 million. The tax is computed on the net worth reported on the prior year ending balance sheet.
How is the net worth tax computed for corporations incorporated out of state?
A ratio is calculated using property and gross receipts within Georgia and the total everywhere.
How and when do I file my Georgia corporate income tax and net worth tax returns?
Form 600S (for S corporations) is due on or before the 15th day of the third month following the end of the tax year—or March 15 for calendar-year tax filers. Form 600 (for C corporations) is due on or before the 15th day of the fourth month following the end of the tax year (April 15 for calendar-year filers). Partnerships must file their Form 700 on or before the 15th day of the third month following the close of the tax year.
You can file electronically or a paper return. Alternatively, you can hire someone to file your tax returns for you.
Are Georgia’s income tax and net worth tax based on the same time period?
No. The net worth year is one year later than the income tax year. For example, if the income tax year is January 1, 2023, to December 31, 2023, the net worth tax year is January 1, 2024, to December 31, 2024.
Do I need to file a net worth return if I’m not required to file the corporate income tax part of the return?
Yes. You must file the net worth portion annually if you do business, own property, or are registered with the Secretary of State.
Can I obtain a filing extension?
A Georgia corporation that has a federal extension has six additional months to file its returns.
Do partnerships need to file an income tax and net worth return?
Any partnership or LLC treated as a partnership with partners or members living in the state of Georgia must file.
Does Georgia impose sales and use taxes?
Yes, it collects both sales and use taxes.
How much is the sales tax?
The state sales tax rate is 4 percent, and the various counties also impose sales taxes (rates are updated quarterly). In most cases, the applicable rate is that of the county where the customer takes delivery of the property sold. If a customer takes delivery in Atlanta, a city sales tax also will apply, in addition to the state and county sales taxes.
What does the sales tax apply to?
The state sales tax applies to the retail “sales price” (see below) of tangible personal property and certain services. Most services are exempt, except for:
- In-state transportation (e.g., taxis)
- Charges for participation in games and amusement activities
In addition, the tax applies to charges that are necessary to complete the sale of taxable property, such as a delivery fee.
Note, too, that service providers are generally considered end users who are liable for sales or use tax on all tangible personal property they use to provide their service. For example, a hairdresser must pay tax on the shampoo, scissors, and other items they purchase to do their job.
Which costs are included in the “sales price”?
For purposes of the sales tax, the sales price includes the total amount of payment, with no deductions permitted for:
- Your cost of the property sold
- The cost of materials, labor, or service
- Transportation costs
- Taxes imposed on the seller
- Other seller expenses
- Seller charges for services necessary to complete the sale
- Delivery charges
The sales price doesn’t include discounts or, if stated separately on the invoice:
- Interest, financing, and carrying charges from credit
- Taxes legally imposed directly on the consumer
- Installation charges
- Telecommunications nonrecurring charges
- Trade-in credit
How do I pay my Georgia sales tax?
You must register for a sales and use tax number, regardless of whether all sales will be online, out of state, wholesale, or tax-exempt. You can register online through the Georgia Tax Center. The state says you should receive your specific tax account number within 15 minutes by email.
You must file and pay electronically if you owe more than $500 on any return, report, or other document related to sale or use tax, even if some of those payments later fall below $500. If you pay electronically — whether by choice or mandate — you must also file all associated returns electronically.
When must I file my Georgia sales tax return?
Sales tax returns are due no later than the 20th day of the month following the period being reported. You must file a sales tax return even if no tax is due or no sales were made.
Do I need to file estimated sales tax payments?
Possibly. If your tax liability in the previous calendar year was more than $60,000, excluding local sales taxes, you must pay 50 percent of the estimated tax liability for the taxable period on or before the 20th day of the period. Your estimated tax liability is your average monthly state tax payments for the last calendar year, adjusted to account for any changes in the state sales and use tax rate.
You should hold on to your records for at least three years.
What does the use tax apply to?
The use tax is imposed on:
- The first use, consumption, distribution, or storage of nonexempt items purchased at retail outside of Georgia and then brought into the state
- Nonexempt items and taxable services purchased in the state but not taxed at the point of sale.
Items purchased out of state
If the item was used for six months or less outside of Georgia before its first use in Georgia, the tax is applied to the purchase price of the property at the state and local sales tax rate. If the item was used for more than six months outside of the state before its first use in the state, the tax is imposed on the lesser of the purchase price or the item’s fair market value, again at the state and local sales rate.
Your use tax liability is reduced by similar taxes you’ve already paid on the item in another state.
Example. A small business buys a piece of equipment in another state, where it pays a state sales tax but no local sales tax. When it brings the equipment into Georgia the next week, it owes a four percent Georgia state use tax on the purchase price, reduced by the sales tax the small business paid in the other state. It will also owe county use tax on the purchase price at the sales tax rate in the applicable county.
Items not taxed at the point of sale
If you aren’t charged a sales tax, you still must remit the use tax.
Example. A small business buys light bulbs tax-free under terms of resale to sell at its store. If the business uses some of the bulbs to light the store, it will owe use tax on the price it paid for the bulbs.
Are there any exemptions to Georgia’s sales and use taxes?
Yes. Georgia has a lengthy list of exemptions.
Notably, Georgia businesses can purchase tangible personal property for resale without paying sales tax. You’ll need to provide the supplier with a completed Form ST-5, “Sales Tax Certificate of Exemption.”
What about withholding taxes?
Do Georgia businesses pay unemployment taxes?
Yes, but not all of them. You’re generally liable if you have a quarterly payroll of $1,500 or at least one worker in 20 different calendar weeks during a calendar year.
While you’re required to report all wages during the year quarterly, you must pay taxes only on the first $9,500 of earnings for each employee. New employers are assigned a total tax rate of 2.7 percent until they’re eligible for a rate calculation based on their experience rating history.
Does Georgia have any excise taxes I should know about?
Georgia applies excise taxes to the sale of:
- Malt beverages
- Distilled spirits
- Little cigars
- Loose or smokeless tobacco
Taxation of small businesses in Georgia is multi-faceted and complicated. Professional advice and automation can help you better stay on top of all of your obligations.