Georgia’s new formula for calculating corporate income tax signification reduces the effective rate of taxation of Georgia-based manufacturing, sales, and service companies with substantial sales to customers outside Georgia.
Georgia’s six percent corporate income tax rate applies only to the portion of income that is earned in Georgia. In the past, this portion was determined by multiplying the corporation’s adjusted taxable income by the weighted average of three ratios: property, payroll and sales.
Beginning in 2008, companies operating in Georgia will use a "Single Factor Gross Receipts" apportionment formula. This new formula will substantially reduce Georgia income tax for companies that are based in the state but deliver a large portion of products or services to customers outside Georgia. Under the new law, Gross Receipts, or sales in Georgia, will be the only factor used to determine the amount of a company’s income that is subject to Georgia income tax.
Georgia is the first southeastern state to adopt single-factor apportionment for state income taxes. In addition, Georgia’s broad definition of what sales qualify as out-of-state means that tax savings in Georgia will likely exceed those of future states to adopt single-factor apportionment.
