You can’t escape it: Business and individuals are required to pay federal and state income taxes. Every person residing in the United States is legally required to file a tax return and pay taxes on the money they earned under federal law, and residents of most states also have to pay state income taxes as well.
The difference between individuals and businesses, when it comes to taxes, is that individuals who earned income in a calendar year and are required to pay taxes through the Internal Revenue Service but may be exempt from state taxes. By contrast, businesses in every single state are required to pay a portion of their revenues to income tax payments at both the state and federal level.
Making Sense Of Basic Business Taxes In Georgia
Georgia is no exception to business taxes. The state requires corporations — a category into which many businesses fall, even if they’re not large and spread across a large region, with multiple locations — to pay a tax rate of six percent of their taxable net income to the state of Georgia.
Small businesses are greatly helped by the state of Georgia’s corporate income tax laws in that they don’t have to pay any net worth taxes if they are worth less than a certain amount. Although this dollar value cutoff is subject to change on an annual basis, corporations that have a net worth (the total value of all of a corporation’s assets minus its debts and other amounts payable to other parties) that is equal or less than $100,000 are not required to fork over any money in net worth taxes.
Although they are required to remit a portion of revenues to the state government of Georgia — six percent of taxable net income, just like all other corporations in the state — they’re still legally required to file a tax return that indicates the revenues, deductible expenses, and other relevant information about those businesses. This law came into effect for income earned in 2018.
Corporations doing business in the state of Georgia that are worth upwards of $22 million are required to pay $5,000 for each year they do business in the state. Further, all corporations that conduct business in Georgia, no matter whether they’re located within Georgia’s state lines or are headquartered in another state, are required to submit an initial net worth return prior to the 16th day of the third month they’ve done business in Georgia. C corporations, on the other hand, have an extra month to pay the net worth tax in the state.
Who Has to Pay Sales Taxes In Georgia?
If a company sells goods to people in the state of Georgia, such as over the phone or via a web site, it is required to pay taxes to relevant government agencies in Georgia if it has what’s known as a sales tax nexus in Georgia.
In layman’s terms, sales tax nexus is a complicated way of indicating that a business has a significant, material presence in Georgia. Outside of having a significant presence in Georgia, something that courts of law deliberate on subjectively, businesses that engage in commerce with Georgia residents are considered to have sales tax nexus in Georgia if the business has:
- Delivered goods in Georgia via the company’s private fleet of vehicles.
- Goods stored in one or more warehouses in Georgia.
- One or more employees working in Georgia.
- A business address that is officially registered as its address.
- People working on commission or independent contractors working on behalf of the company inside Georgia.
It’s also important to know that people and businesses that sell goods via Amazon are subject to paying sales taxes in Georgia if their goods are stored in Amazon’s warehouses in Georgia.
A Few More Exemptions For Entities Making Sales In Georgia
As mentioned above, physical, tangible goods are taxed for sale. But what about services?
Even though entities receive money as payment for selling services in a manner identical to entities that sell goods and receive money for them, services sold throughout Georgia are almost always not taxed.
To be more specific, the only types of services that are, in fact, taxed by the state of Georgia are the transportation of people within the state via taxis and other modes of transport, admitting people into events like basketball games, the sale of accommodations, and participating in games and activities played for amusement — such as those at carnivals, for example.
It’s Sales Tax Permit Time
Businesses without a sales tax permit that are caught collecting sales tax under the guise of remitting them to the state of Georgia, whether those entities had actually intended on handing them over to the state or not, are subject to fines and even revocation of their license to operate within Georgia.
As such, all businesses in Georgia and that have a sales tax nexus in the Peach State must register for a sales tax permit and successfully receive one to collect taxes legally on the sale of goods and certain services.
Sales tax permits can be registered for at the Georgia Tax Center, a government agency under the state’s Department of Revenue.
The number of business taxes Georgia entrepreneurs need to know about aren’t all that complicated, once you have a routine established for filing tax returns and making payments. The important thing is to be sure that you have your tax ID and sales tax permit in place before you begin doing business. Doing it the right way from the start can save a lot of headaches later on!