(1) Individuals carrying on businesses in partnerships shall be liable for income
tax only in their individual capacity, unless for federal purposes the partnership
is taxable as a corporation. If so, then the partnership is also taxable as a corporation for state purposes
and is subject to all of the corporate tax laws and regulations. The gross income of an individual partner shall be the gross income the partnership
distributed on the same basis as net income or earnings may be distributed. If the preceding exception applies, then the partner will be treated as a shareholder
in a corporation.
There shall be included in computing the net income of each partner his distributive
share, whether distributed or not, of the net income of the partnership for the taxable
The net income of the partnership shall be computed in the same manner and on the
same basis as provided for individuals, provided no personal exemption shall be granted
and, provided further, that husband and wife partnerships shall not be recognized
for the purpose of this article, unless it can be proven that husband and wife have
each contributed capital out of their separate estates, and not by gift, from one
to the other.
In the case of partnerships, each partner that would otherwise be required to include
more than twelve (12) months of income in a single taxable year may elect to include
such excess in income in one (1) year or ratably over a period of four (4) taxable
In the event the individual partners fail to report and pay the taxes imposed according
to this section, then the partnership and the general partners shall be jointly and
severally liable for said tax liability and shall be assessed accordingly. However, the partnership and/or general partner shall not be liable if the partnership
withholds five percent (5%) of the net gain or profit of the partnership for the tax
year and remits the same to the commissioner. Such amounts paid to the commissioner shall be deemed to be payments of estimated
tax of the partners and shall be allocated pro rata to the partners' taxpayer accounts. The commissioner may allow, or require, block or composite filing by a partnership,
or withholding on a nonresident partner.
Magnetic media reporting may be required in a manner to be determined by the commissioner.
Partnership returns shall be filed in such manner and at such time as prescribed by
(2) For a partnership that has made an election under Section 27-7-26 to be taxed as an electing pass-through entity, the partnership shall pay income
tax as provided for in Section 27-7-26.
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