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
and the maximum is $15,000. Click www.ador.state.al.us/incometax/bus_priv_tx/2008bptfrms.htm for a form with the rate schedule. Credits are available, as described
in the Incentives sublink.
Property Taxes
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 sublink.
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 sublink.
Sales & 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 sublink.
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 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 fee of $175.00. Domestic corporations must reserve the corporate name
with the Secretary of State and pay a state filing fee of $40.00, plus a
fee of $63.00 for a C corporation or $48.00 for an LLC, at the Probate Office
in the Etowah County courthouse. Click www.sos.alabama.gov/BusinessServices/ForeignCorps.aspx for more information.
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 sublink.
