Understanding Georgia Sales and Use Taxes
Understanding and complying with the sales tax requirements in the states in which you do business is absolutely essential. More states are taxing services, as well as retail sales, so no business owner can afford to be in the dark. In addition, you may find that you are liable for use taxes for products purchased out of state. This article answers some of the basic questions regarding sales tax in Georgia.
Georgia imposes a 4 percent sales tax on sellers for the privilege of doing business in Georgia. This tax is imposed on the retail sales price of tangible personal property. Also, if you are a service provider who transfers tangible personal property to your customers as part of the service you provide, sales tax will be incurred on the tangible personal property transferred. So, if your business buys, sells or uses tangible personal property in Georgia, a sales or use tax liability will probably be incurred.
You, as the seller, are responsible for paying Georgia sales taxes, but the law requires you to pass it on to your customers. State law does not allow you to pay the tax out of your pocket — what as known as absorbing the tax. Furthermore, you can't advertise or represent to the public that you will absorb the tax.
Georgia requires you to obtain reimbursement for this tax from your customers. So, if you fail to remit the correct amount of taxes on a given transaction, the state can go directly to your customer and collect the right amount of tax. While going after each purchaser to collect the right amount of sales tax may be impracticable, the state clearly intended to reserve that right for itself.
You calculate sales taxes by taking the tax rate, which is 4 percent, and multiplying it by your gross receipts. Gross receipts are based on your total retail sales or services you provide in Georgia.Georgia does not provide for any small business deductions from sales or use taxes. However, the state allows you to take a credit against use tax if you have already paid sales or use tax to another state on the property purchased. This credit cannot exceed the amount of sales tax assessed in Georgia.
Georgia Taxes Only a Few Types of Services
In Georgia, certain types of services are subject to sales or use tax. The 4 percent rate of sales tax applies to the following services:
- admissions to places of amusement
- coin-operated musical or amusement devices
- local telephone service
All other service businesses will be exempt from sales tax.
Leases of Tangible Personal Property Treated as Sales
In general, leases and rental agreements involving tangible personal property are treated as sales. As a result, leased and rented property is subject to sales tax.
Georgia Exempts Some Sales from Tax
Georgia allows exemptions from sales tax based on the type of transaction (such as a resale exemption) or the nature of the organization purchasing the product (such as a charitable organization).
Purchases for Resale Are Exempt from Tax
If you purchase goods or products and will resell them in your business, you may claim a resale exemption from sales or use taxes. However, you will have to collect sales tax from your customers when they purchase the goods or products.
Resale exemption certificate. In order to obtain a resale exemption, the seller may require the buyer to present, in good faith, a resale certificate. The state doesn't provides a specific certificate form, so you're free to develop your own resale certificate document. With that said, though, the document should at least contain the following information:
- the buyer's and the seller's name and address
- an indication of the general character of the property being purchasing ("For resale as tangible personal property in the same form as received.")
- the buyer's Georgia registration number
Georgia Allows Blanket Resale Certificates
Georgia allows the use of blanket resale certificates. A blanket resale certificate is a resale certificate that the buyer provides to a seller from whom the buyer will make numerous exempt resale purchases. The idea is that by providing a blanket resale certificate, both the buyer and and the seller can avoid the hassle of having to deal with a new certificate every time there is a purchase. The law does not set forth any specific procedures for accepting a blanket resale certificate. However, the buyer should present, in good faith, a blanket resale certificate to the seller that includes the same information as a regular resale certificate.
The blanket resale certificate will remain valid for an indefinite time period, unless the state revokes the certificate due to misuse.
Physical Presence Required for Sales Tax Liability
Georgia has a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if your business has physical presence within Georgia. To determine if you have a physical presence, ask yourself the following:
- Do I have retail facilities, a warehouse or any office space in Georgia? Maintaining retail or warehouse facilities means that your business has a physical presence within the state. Also, if you have an office for employees, even for business activities unrelated to mail order sales, your business will have a physical presence within the state.
- Do my employees or I enter Georgia for purposes of taking and transmitting orders from customers in Georgia? If your employee or independent contractor enters Georgia for purposes of taking or transmitting orders, your business has a physical presence in Georgia. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence within the state.
- Do my delivery vehicles frequently enter Georgia for purposes of delivering property? Frequent deliveries in Georgia by your trucks will give you physical presence in Georgia. An occasional delivery, however, may not constitute a physical presence within the state.
Refunds Can Be Claimed for Tax Overpayments
If you frequently audit your sales transaction reports, you may discover that through an error, sales or use tax was overpaid on a transaction. If you or your customer discover such an overpayment, the state allows you or your customer to file a claim form ST-12 for a credit or refund. You or your customer should submit the claim on forms furnished by the Georgia Department of Revenue. The state will normally issue a credit memorandum rather than give a refund to the person who made the erroneous payment.
Time limitations for filing a refund claim. If you're going to file a refund claim for overpayment of sales or use tax, you'll have to do it within three years from the date you paid the tax. If you file a refund claim after that time, the state will not approve it.
Florida Imposes Use Tax on Out-of-State Purchases
In order to avoid losing tax revenues on sales transactions taking place outside the state, Georgia also imposes a 4 percent use tax. The use tax is assessed against all persons who store, use, or otherwise consume tangible personal property in Georgia that was purchased out-of-state. If the out-of-state seller you purchase property from is a registered retailer in Georgia, you should pay the use tax to the retailer. If the retailer is not registered in Georgia, you should pay the use tax directly to the state.