Taxation
Georgia’s 6 percent corporate income tax rate applies only to the portion of income that is earned in Georgia.
Single Factor Apportionment
In 2005, Georgia became the first state in the Southeast to adopt a “Single Factor Gross Receipts” apportionment formula. This apportionment formula treats a company’s Gross Receipts, or sales in Georgia, as the only relevant factor in determining the portion of that company’s income that is subject to Georgia's six percent corporate income tax. Georgia is one of only 13 states currently using Single Factor Apportionment. Most states still use a traditional apportionment formula in which a company’s in-state property and payroll factor into the calculation of a company’s corporate income tax. Single Factor Apportionment significantly reduces the effective rate of Georgia income taxation of companies with substantial sales to customers outside Georgia. In addition, Georgia does not use the so-called “Throw Back Rule,” which many states use to tax income from sales of goods or services to out-of-state customers if the customer’s state does not already tax that income.
Example: Assume that, for the 2011 tax year, In-State Manufacturing Co., Inc. has the following total overall taxable income and gross receipt sales in Georgia as compared to total gross receipt sales:
Taxable Income: $10 million
Percent of Gross Receipts in Georgia: 13%
Accordingly, in 2011, only $1.3 million ($10 million x 13%) of In-State Manufacturing Co., Inc.’s income would be subject to Georgia’s six percent corporate income tax, making its corporate income tax liability $78,000. [$1.3 million x 6%]
Tax Incentives
To learn more about available incentives, please refer to our latest 2011 Georgia Business Incentives brochure (PDF - updated 7/11).
Tax Credits
Georgia offers a range of corporate tax credits that enable companies to minimize or completely eliminate state corporate income taxes which, at six percent, are already among the lowest in the nation. Generally, corporate income tax credits are limited to 50 percent of the taxpayer’s state income tax liability for a taxable year, but, under some circumstances, may offset up to 100 percent of corporate income tax and payroll withholding liability. In some instances, tax credits can be stacked, resulting in realized tax savings greater than 50 percent. In most instances, unused tax credits may be carried forward 10 years. For more information on specific tax credits, please visit Georgia Business Development Incentives.
Tax Exemptions
Sales and Use Tax Exemptions Qualified equipment purchases or leases are exempt from sales tax when the equipment purchased is used in the manufacturing process. Under certain conditions, primary material handling equipment (in warehouses and distribution centers), computer equipment and Class 100 (or less) clean room machinery, equipment and materials can also be exempted. For more information about Sales and Use Taxes and Exemptions, please refer to the Georgia Department of Revenue.
Inventory Tax Exemption Effective January 1, 2011, business inventory is exempt from state property taxes (0.25 mills). Many Georgia counties also exempt from property tax up to 100 percent of qualified raw material, work-in-process and finished goods inventory under
Georgia’s local-option “Freeport” law. In most of these counties, distribution center and warehouse inventories are exempt if the inventory is destined to be shipped out of state. For more information about Property Taxes and Freeport Exemptions, please refer to the Georgia Department of Revenue.