Taxes and Fees
Alabama's maximum corporate income tax rate is 6.5%; federal income taxes paid or accrued are deductible, reducing the effective rate to approximately 4.8%. Investments in pollution control equipment also are deductible in computing Alabama income. There are no minimum state income tax requirements. Net operating loss carry-forwards are permitted.
The maximum state income tax on an individual is 5%; federal income taxes paid are deductible in computing individual gross income. Gadsden and some other municipalities have an occupational license fee of 2%, withheld from employee salaries and paid by the employer.
Business Privilege Tax
The Alabama Business Privilege Tax is assessed on corporations and limited liability entities, and is calculated on net worth, an apportionment factor and a company’s federal taxable income in the state. The rate ranges from $0.25 to $1.75 per $1,000 of net worth. (Investments in pollution control equipment are deductible in computing net worth.) The minimum tax is $100, the maximum tax on manufacturers is $15,000, and the tax on family limited liability entities is $500. For forms and rate schedules, click www.ador.state.al.us/incometax/bus_priv_tx/2008bptfrms.htm. Credits are available, as described in the Incentives page.
The State of Alabama, Etowah County and most municipalities assess property taxes. By state law, property taxes cannot be increased without a referendum vote. The rate for businesses is 20% of assessed value, to which varying millage rates are applied. (Residential property is taxed at a 10% assessment rate, and homestead exemptions are available.) In the City of Gadsden, the combined state, county and city rate is 49 mills.
As an example, real property taxes on industrial land and a building valued at $1 million would be computed as follows: $1,000,000 x .20 x .049 = $9,800 per year. Exemptions are available, as described in the Incentives page.
Personal property taxes on machinery and equipment (except for pollution control) are computed with the same assessment and millage rates, but use a composite factor to account for depreciation, resulting in a reduced tax liability each year. Again, exemptions are available. A sample computation is included in the Incentives page.
Sales and Use Taxes
The State of Alabama, Etowah County and local municipalities assess sales taxes on the purchase of construction materials, furnishings and fixtures, as well as use taxes on the purchase of machinery and equipment other than for pollution control.
In the City of Gadsden, the combined state, county and city sales tax is 9% and the combined use tax is 3.25%. Exemptions are available, as described in the Incentives page.
Unemployment Compensation Tax
The state tax ranges from 0.2% to 6.8% (depending on the experience rating of the employer) of the first $8,000 of each employee’s wages paid in a calendar year. A new employer’s tax rate is 2.7%.
This rate is recomputed each year in accordance with a formula that measures the amount of unemployment among the company’s current and former employees. To level out fluctuations in rates of individual employers, the rate takes into account the State Experience Factor, which is an index that measures the average duration and cost of unemployment benefits paid to all claimants over a three-year period. Click http://dir.alabama.gov/uc/employer.aspx for more details.
Corporate Filing/Recording Fees
Foreign corporations (those incorporated in states other than Alabama) must qualify to do business in the state with the Secretary of State, and pay a filing and registration fee of $175.00. Domestic corporations must reserve the corporate name with the Secretary of State and pay a state filing fee of $100.00, plus a recording fee of $63.00 for a for-profit corporation at the Probate Office in the Etowah County courthouse. For more information, click www.sos.alabama.gov/BusinessServices/ForeignCorps.aspx.
Business License Fees
A combined state/county business license is purchased at the Etowah County Probate Office. The license fee varies based on the type of business and gross sales, and ranges from a minimum of $50.00 up to $300.00.
Municipalities also assess business license fees based on business categories. As an example, a company in the City of Gadsden engaged in fabricating, welding and assembly would fall under Fee Schedule #28, where the rate is $100.00 plus 3/40 of 1% on all gross receipts in excess of $50,000; such a company with annual gross receipts of $1 million would pay a license fee of $812.50. Credits are available, as shown in the Incentives page.
Building Permit Fees
Most municipalities require building permits for new construction. More information is on the Permits page.