| www.OSHA.gov | |
| Regional and Area Office Alliances > Region IV > Small Business Tool Kit > Chapter 3 |
  Printing Instructions |
||||||||||||||||||||||||||
| SMALL BUSINESS TOOL KIT |
|||||||||||||||||||||||||||
|
CHAPTER 3 GUIDE TO BUSINESS TAXES
A. INTRODUCTION TO BUSINESS TAXES Some of the most complex issues facing small business owners today are the various taxes and tax structures. The business may be subject to, or responsible for, collecting or withholding:
For assistance with unresolved federal tax problems contact: Taxpayer Advocacy ServiceThe following information is related to the four basic tax groups that are applicable to small businesses. B. TAXES ON THE BUSINESS ITSELF Federal Taxes Income from proprietorships, partnerships or other unincorporated businesses is subject to individual income taxes of the owners using form 1040 with appropriate schedules. Incorporated businesses are subject to U.S. corporate income tax laws. For further information contact: Internal Revenue ServiceState Taxes Like the federal income tax, the state also requires that income from proprietorships, partnerships or other unincorporated businesses be taxed at the state individual income tax rate of the owners. In Alabama, both foreign and domestic corporations are subject to a net Income Tax and Business Privilege Tax. For more information contact the Alabama Taxpayer Service Center nearest you.
C. EMPLOYMENT AND INCOME TAXES Employment related taxes generally fit into three categories: l) those taxes you must pay for each employee; 2) taxes you must withhold from each employee's pay; and, 3) workers' compensation. Workers' compensation is not actually a tax but an expense related to employment. Workers' compensation rates vary depending on industry, occupation and risk factors involved. For more information concerning employment taxes contact the appropriate state or federal agency. Payroll Taxes - Federal For federal unemployment tax and federal income tax withholding information contact: Internal Revenue ServiceAn invaluable resource in insuring timely compliance in Federal Tax Administration is IRS Publication 15, Circular E-Employers Tax Guide [PDF - 564 KB]. It is a 66-page document that covers all aspects of tax management. IRS Publication 505, Tax withholding and Estimated Tax [PDF - 1.35 MB] is also available. To order forms contact: Internal Revenue ServiceSocial Security Tax The contribution rate, also known as the FICA tax rate, is 7.65% for employees and 15.30% for self-employed People. The rates are broken out as follows: 6.2% (Social Security portion) on earnings up to the maximum taxable amount ($87,000 in 2003) 1.45% (Medicare portion) on all earnings. Set by law, these rates haven't changed since 1990.
The Social Security Administration has a web page designed especially for employers. For social security tax (FICA) information contact: Employer Reporting Service Center Toll-free lines to help employers with wage reporting questions or problems. 1-800-772-6270 Monday - Friday 7 am to 7 pm, Eastern Standard Time Payroll Taxes - State For state unemployment tax information, contact: Alabama Department of Industrial RelationsFor workers' compensation information, contact: Alabama Department of Industrial RelationsFor further information on Alabama Unemployment and Workers' Compensation, see the Alabama Development Office publications, A Guide to Simplifying Alabama's Employment Related Laws and Alabama Unemployment and Workers' Compensation Manual. You may request copies by writing to the following address: Research DivisionIn Alabama the taxes administered by the Individual and Corporate Tax Division include the following:
This tax is on the entire net income of every individual and corporation domiciled in Alabama, and of every non-resident deriving income from within Alabama. Income tax is required to be paid throughout the year either by withholding or estimated tax. All employers in the state are required to withhold Alabama income tax. Whenever a new employee begins a new job, he or she is required to complete a form A-4, Exemption Certificate, and file it with the employer. The employer withholds Alabama Income Taxes on the basis of the information furnished by the employee on this exemption certificate. If an employer fails to secure a complete A-4 form from his employee, the employer must withhold Alabama Income Taxes on the basis of no exemptions. A Federal form W-4 will not be recognized in lieu of a form A-4. Every employer is required to secure completed exemption certificates from his employees, even though he may not be required to withhold any Alabama income tax. Tax withheld is based on withholding tables or the formula provided in the "State of Alabama Withholding Tax Tables and Instructions for Employers" publication. Assignment of an Alabama withholding tax number is required before an employer may submit Alabama Income Tax to the Department of Revenue. Employers file an application for this withholding tax number. The taxpayer must use this code number to identify all payments of Alabama withholding tax and include the number on all correspondence concerning the business's income tax withholding accounts. A declaration of individual estimated income tax is required of an individual who is subject to income tax if he or she anticipates having income from sources other than wages. In the case of a single or married person filing separately having non-wage income of $1,500 or more and in the case of a married person living with spouse and filing a joint return having non-wage income of $3,000 or more, a declaration of estimated income tax is required. Domestic corporations (corporations created or organized under the laws of the State of Alabama) must pay a corporate income tax imposed on net income at the rate of 5%. Foreign corporations (corporations created or organized outside the State of Alabama) pay this tax at a rate of 5% also, and it is applicable to the net income from property situated within Alabama and/or from business done and transacted in Alabama. (Note: There are special rules with respect to the apportionment of income in the case of foreign corporations having income from both within and outside the State of Alabama. The Individual and Corporate Tax Division can be reached at (334) 242-1103. CORPORATE INCOME TAX For tax years prior to 2001, the tax rate was 5%. As of January 1, 2001, the tax rate is 6.5%. BUSINESS PRIVILEGE TAX The Alabama Business Privilege and Shares Tax replaces the domestic and foreign Franchise Tax. To determine the tax rate for the Business Privilege Tax, begin with the federal taxable income. Then multiply that amount by the taxpayer's apportionment factor (Schedule B, line 9). The resultant amount is used in the rate schedule to determine the appropriate rate. Taxpayers having a loss for 1999 will use the lowest rate FINANCIAL INSTITUTION EXCISE TAX Any person, firm, corporation and any legal entity whatsoever doing business in this state as a national banking association, bank, banking association, trust company, industrial or other loan company or building and loan association, and such term shall likewise include any other institution or person employing moneyed capital coming into competition with the business of national banks, and shall apply to such person or institution regardless of what business form and whether or not incorporated, whether of issue or not, and by whatsoever authority existing. PARTNERSHIPS/LLC A single member LLC is not required to submit a separate Alabama Income Tax Return. D. SALES AND USE TAX The Sales, Use and Business Tax Division of the Alabama Department of Revenue is made up of five (5) Sections:
The Alabama Department of Revenue provides links to each section and provides specific information on each tax. Any person desiring to conduct a retail business in Alabama must submit an "Application For Sales Tax License" to the Department of Revenue. A percentage tax, which includes manufacturing, machinery and equipment, and motor vehicles, is applied to all retail sales of tangible personal property, except for those organizations specifically exempt by action of the legislature. For more information on state sales taxes contact: Alabama Revenue Department Sales Tax Division 50 North Ripley Street Gordon Persons Building Montgomery, AL 36132 (334) 242-1490 Note: (For Federal Express mail to Zip 36104) For information on county sales taxes, contact your county sales tax division. For information on city sales taxes, contact your city clerk's office. 1. Sales and Use Section Taxes administered include:
The tax rate is: 4% of the gross receipts of sales of tangible personal property and the retail market value of any property bought at wholesale but withdrawn from stock and used or consumed (except sales of all new and used automotive vehicles, truck trailers, semi-trailer, and house trailers which are taxed at 2% of the net difference paid, farm machinery which is taxed at 1.5% of the net difference paid, and all sales of machines, parts, and attachments for machines used in manufacturing, processing, compounding, mining, and quarrying tangible personal property which are taxed at 1.5%), 4% of the gross receipts from places of entertainment or amusement, and 3% of the total cost price of food products sold through coin-operated vending machines. Local taxing authorities may also impose a sales tax; these rates vary. Seller's Use Tax - This tax is imposed on the retail sales of all tangible personal property sold in Alabama by businesses located outside Alabama that have no inventory for sale in Alabama but only a sales office or agents soliciting retail sales in Alabama. This tax is due on a monthly basis and is to be remitted by the 20th of the month following the close of a month. Businesses filing timely reports are entitled to a 3% discount on Seller's Use Tax Return. The tax rate is: 4% on sales price of tangible personal property; 1.5% on machinery used in mining, quarrying, and manufacturing; 2% of the sales price of automotive vehicles or on the net difference of such sales when a trade-in is involved. In addition to the state rate, there may be city and/or county use taxes due; these rates vary. Consumer's Use Tax - This tax is imposed on the tangible personal property brought into Alabama for its storage, use or consumption in the state when the supplier did not collect seller's use tax on the sale of the property. This tax is due on a monthly basis and is to be remitted by the 20th of the month following the close of a month. No discounts apply. The rates are the same as shown above. Lodgings Tax - This is a privilege tax upon every person or firm that rents or furnishes lodgings or accommodations to transients for a fee. The tax is remitted on the 20th of each month following the month the tax accrues. The tax rate is: 5% of the charges for accommodations in counties of the geographic region comprising the Alabama Mountain Lakes area. 4% of the charges for accommodations in all other Alabama counties. Rental or Leasing Tax - This is a privilege tax levied on the lessor for the leasing or renting of tangible personal property. Leasing tax is due on "true" leases. "True" leases are those in which the title to the property is retained by the lessor at the end of the lease agreement. "Conditional sale" leases, leases in which the title to the property is transferred to the lessee at the end of the lease agreement, are subject to sales tax. This tax, in both cases, should be remitted by the 20th of each month following the month that the tax accrues. No discounts apply. The tax rate is: 1.5% of the gross proceeds from renting or leasing automotive vehicles trucks, semi-trailers, or house trailers; 2% of the gross proceeds from renting or leasing linens and garments; 4% of the gross proceeds from leasing or renting of all other tangible personal property. Any questions regarding any of the above-mentioned taxes, or any taxes not outlined above, should be directed to the Sales and Use Tax Section at (334) 242-1490. 2. Privilege/Business License Section Taxes administered by the Privilege Tax Section are: Automotive Dismantler and Recycler License - This license is required of all persons engaged in the business of purchasing, dismantling, disassembling, or repairing wrecked, abandoned or repairable motor vehicles and selling the usable parts. This tax also applies when selling these vehicles as a unit at wholesale, or selling the hull after the parts have been removed. Privilege License Tax A privilege license is a license requirement of every person, firm, company or corporation engaged in any business, vocation, occupation or profession described in Title 40-12 Code of Alabama 1975. The annual license covers the period of October 1 through September 30. The license will be delinquent on November 1. The State and County license(s) is issued by the county Probate Judge or License Commissioner in the county where the business is located. Unless otherwise provided, a license is required in every county where the business is conducted. Motor Vehicle Dealer Regulatory License - This license is required of all persons engaged in the business of buying, selling, exchanging, reconditioning, rebuilding, etc. motor vehicles in the State of Alabama. Store Licenses Any person, firm, corporation, association or co-partnership, either foreign or domestic, is required to obtain a license to operate, maintain, open or establish any store in this state in which goods, wares, or merchandise of any kind are sold, at either retail or wholesale. A check with city and county officials will determine what local licenses and permits are necessary. Scrap Tire Handlers License Any person who receives, collects, or transports scrap tires must obtain a license. 3. Severance Tax Section The taxes administered by the Severance Tax Section are: Oil and Gas Tax - This is a privilege tax on all persons engaged in the business of producing or severing oil or gas from beneath the soil or water. The tax rate varies. Coal severance Tax - This is a privilege tax levied on every person mining coal in Alabama. Forest Products Tax - This is a tax on the harvesting of timber or other forest products from the soil. The tax rate varies according to the measurement specifications and types of forest products harvested Iron Ore Severance Tax - A license or privilege tax required for anyone engaged in the business of mining iron ore or operating an iron ore mine in the State of Alabama. 4. Motor Fuels Section Taxes administered by the Motor Fuels Section include: Gasoline and Motor Fuels Tax - This is an excise tax on the sale, consumption, distribution, storage, or withdrawal from storage of gasoline. There are two tax levied. Local rates vary. Aviation Gasoline and Jet Fuel Tax - This tax is based on fuel used to propel aircraft powered by reciprocating engines and/or jet or turbine engines Motor Carrier Mileage Tax - Motor carrier transportation of persons or property for hire on highways of Alabama. Wholesale Oil License - Wholesale sales of illuminating, lubricating or fuel oils. Lubricating Oil Tax - Selling, distributing or withdrawing from storage in Alabama, for any use, lubricating oils or greases. Scrap Tire Environmental Fee - Act 2003-332, effective September 1, 2003, provides for a "Scrap Tire Environmental Fee" of one dollar ($1) per tire to be collected at the point of sale from the consumer on replacement tires (new, used, and retread), whether or not the tires are mounted on a rim or wheel. The Alabama Department of Revenue has been authorized to collect this fee. A tax form and any remittance due should be filed on or before the twentieth day of the month following each month's activity. The first report will be for the month of September 2003 and must be filed on or before October 20, 2003 6. Tobacco Tax Section Taxes administered by the Tobacco Tax Section include: Tobacco Products Tax - Alabama's tax rate on cigarettes is based on 8.25 mills for each cigarette. This converts to $0.00825 for one stick, $0.165 for a package of twenty cigarettes and $0.20625 for a package of twenty-five cigarettes. State tax on cigarettes is paid by purchasing and affixing revenue stamps to the package of cigarettes. Distributors can only purchase stamps from the Alabama Department of Revenue. State taxes on tobacco products other than cigarettes are paid by tax return. Tobacco wholesalers normally pay the taxes. However, if a retailer receives untaxed products, it is their responsibility to remit the tax to the Department. There is not a stamp for cigars, snuff, chewing tobacco, or smoking tobacco. These products are referred to as "other tobacco products". The state tax rates vary, and taxes are paid by filing a monthly state tobacco tax return that is due by the twentieth of the month for the previous calendar month's activity. The tax for regular cigars is based on the retail-selling price, whereas the tax for little cigars, snuff, chewing tobacco and smoking tobacco is based on weight. Pari-mutuel Pool Tax and Horse Wagering Fee This is a tax fee levied on operators of dog and horse race tracks in Alabama. Pari-mutuel is a system of betting on races whereby the winners divide the total amount bet, after deducting authorized taxes, fees and management expenses, in proportion to the sums wagered individually. The total amount wagered in any particular race is the pari-mutuel pool. Playing Cards Tax Playing cards containing not more than fifty-four (54) cards are taxed at $0.10 per deck. A revenue stamp must be affixed to each deck of playing cards. The revenue stamp can only be purchased from the Department of Revenue. In addition, each retailer must obtain a playing card privilege license. Hazardous Waste Disposal Fees This is a fee on operators of commercial sites for the disposal of hazardous waste or hazardous substance for each ton of waste or substance received for disposal and disposed of at such sites.
Underground and Aboveground Storage Tank Trust Fund Charge The charge is collected and remitted by operators of bulk facilities from which a first withdrawal of motor fuels from bulk is made. When fuel is withdrawn from bulk outside this state, the owner of the fuel when it is delivered into Alabama is responsible for collecting and remitting the charge. The charge is based on invoiced gallons. The charge is $1.50 for each 500-gallon increment with the maximum fee being $27.00 for loads of 8,501 gallons or more The monthly return and payment is due by the twentieth of each month. E. AD VALOREM TAX The taxes administered by the Property Tax Division include: Ad Valorem Tax - A property tax levied on the owners of real and personal property within Alabama. All property must be assessed each year, between October 1 and December 31, with the county tax assessor. This property will be assessed in one of the following four classes and assessment rations: Class I. All Property of Utilities - 30% Class II. All Property not Otherwise Classified - 20% Class III. All Agricultural, Residential, Forest Property & Historical Building Sites - 10% Class IV. All Private Passenger Automobiles/Motor Trucks Used for Personal Use - 15% The tax rate is 6.5 mills per dollar of assessed value for the state; local rates vary. For more information on ad valorem tax contact: Alabama Department of RevenueYou can obtain a copy of the booklet General Summary of Taxes, which gives a synopsis of all the taxes and fees administered by the Department of Revenue by calling: Research & Media Affairs(334) 242-1380 For further information contact: Sales, Use and Business License Tax Division P.O. Box 327550 Montgomery, AL 36132-7510 (334) 242-1490 F. MOTOR VEHICLE DIVISION Fees administered by the Alabama Motor Vehicle Division include:
Alabama Motor Vehicle Division P.O. Box 327630 Montgomery, AL 36132-7630 (334) 242-9000 G. TAX NUMBERS FEDERAL EMPLOYER IDENTIFICATION TAX NUMBER: Anyone who pays wages to one or more employees and who has not previously secured an identification number must file with the Internal Revenue Service (IRS) to obtain an employer identification number. The application must be filed by those wishing to pay wages on or before the seventh day after the date on which business begins. The Federal employer identification number will also be needed for use on Alabama tax forms. In order to obtain a federal identification tax number, please contact: Internal Revenue Service 1-800-829-3676 (Request IRS form SS-4) ALABAMA SALES TAX NUMBER: Anyone who sells tangible personal property to an end user and collects sales taxes must have an Alabama sales tax number. To obtain an Alabama sales tax number, please contact: Alabama State Department of Revenue Central Registration Unit P.O. Box 327100 Montgomery, AL. 36132-7100 (334) 242-1170 (Request for form COM 101) ALABAMA INCOME TAX WITHHOLDING NUMBER: Any business that hires employees and pays wages is required to obtain an Alabama income tax withholding number so as to hold and remit taxes withheld to the Department of Revenue. To obtain an Alabama income tax withholding number, please contact: Alabama State Department of Revenue Income Tax Division P.O. Box 327480 Montgomery, AL. 36132-7480 (334) 242-1000 (Request for form COM 101) UNEMPLOYMENT COMPENSATION NUMBER: The unemployment compensation tax number is needed in the event that someone in your company incurs an injury. This number is useful for identification purposes when a report is filed with the Alabama Department of Industrial Relations. To obtain an unemployment compensation tax number, please contact: Alabama State Department of Industrial Relations Industrial Relations Building 649 Monroe Street/Status Unit Room 416 Montgomery, AL. 36131 (334) 242-8830 Accessibility Assistance: Many of the documents in this collection have been made available for training purposes and are accessible as text-enabled PDFs, PowerPoint® presentations, Word® files, or other document types. However, if additional assistance is needed in reading/reviewing these documents please contact the Office of Outreach Services and Alliances at 202-693-2340. Please see the Website Assistance for Browsers, Plugins & Players if you experience difficulty viewing any of the above files.
|
|||||||||||||||||||||||||||
 Back to Top
 www.osha.gov
|
www.dol.gov | |
|
Contact Us | Freedom of Information Act | Customer Survey Privacy and Security Statement | Disclaimers |
||
| Occupational Safety & Health Administration 200 Constitution Avenue, NW Washington, DC 20210 |
||
