TAX NEWS - January 2009

Contractor Process - State of Georgia tax

GENERAL

All general or prime contractors and subcontractors improving real property in the State of Georgia are required to obtain a Sales and Use Tax Certificate of Registration for the remittance of any sales and use taxes that may be due. One may apply for a Certificate of Registration (ST-C Form 214-5C) by submitting a State Tax Application, Form CRF-002, to the Contract Section. You will be contacted within 3 to 7 business days from the date of receipt.

Pursuant to Regulations 560-12-2-.26 and 560-12-2-.43,you are required to submit Form ST-C 214-1 to the Contract Section within thirty (30) days after the execution of the contract only if you have entered into a contract with a resident subcontractor whose aggregate contract(s) amount(s) on any single project equals or exceeds $250,000 and a nonresident subcontractor whose aggregate contract(s) amount(s) on any single project equals or exceeds $10,000.

Each general or prime contractor whose aggregate contract(s) amount(s) on any single project is equal to or exceeds $250,000 with a single subcontractor is required to only withhold 2% up to 4% of the payments due the subcontractor in satisfaction of any sales or use taxes owed this state, unless said subcontractor has filed an approved surety bond with the commissioner. If labor and other charges are not separated from the rental charge, the person so contracting shall be liable to collect a sales tax on the entire contract price. If the prime or general contractor for any reason fails to withhold 2% up to 4 % of the payments due the subcontractor under their contract, such prime or general contractor shall become liable for any sales or use taxes due or owed this state by the subcontractor.

Whenever a subcontractor holding a contract with a general or prime contractor has posted with the commissioner a good and valid bond with a surety company authorized to do business in this state, no general or prime contractor shall withhold any retainage due the subcontractor under their contract with respect to sales and use taxes.

Each general or prime contractor shall send a written notice (Form ST-C 214-7) identifying the total amount of retainage withheld after such amount has been held for a period of 60 days following the subcontractor's sales and use tax return reporting period. General or prime contractors must remit retainage withheld to the Department of Revenue from payments to subcontractors upon notice of demand for payment (Form ST-C 214-8).

No retainage release notices will be sent if it is determined that the subcontractor is not in compliance or the general contractor is not registered with this department with a contractor's sales and use tax number.



RESIDENT

All subcontractors improving real property in the State of Georgia are required to obtain a Sales and Use Tax Certificate of Registration for the remittance of any sales and use taxes that may be due. One may apply for a Certificate of Registration (ST-C Form 214-5C) by submitting a State Tax Application, Form CRF-002, to the Sales Tax Contract Section. You will be contacted within 3 to 7 business days from the date of receipt.

Pursuant to Regulation 560-12-2-.26, if you are a Georgia State resident subcontractor and have entered into a contract with a general or prime contractor whose aggregate contract(s) amount(s) on any single project equals or exceeds $250,000, you may elect to have the general contractor withhold retainage (2% up to 4%) of payments due to you arising out of the contract(s) to satisfy any sales & use taxes owed this state. If this option is chosen, you must complete form ST-C 214-1S in its entirety and return the form to the Contract Section no later than 30 days from the start of the contract;

Or

You may obtain a subcontractor's bond for the project from a surety company (see Regulation 560-12-2-.26 for requirements).

Whenever a subcontractor holding a contract with a general or prime contractor has posted with the commissioner a good and valid bond with a surety company authorized to do business in this state, no general or prime contractor shall withhold any retainage due the subcontractor under their contract with respect to sales and use taxes.

Upon receipt of form ST- C 214-9-RR (Request of Retainage) from the subcontractor, the Department of Revenue shall send a written notice (Form ST-C 214-6) to the general or prime contractor and subcontractor. The general or prime contractor shall be authorized to pay the subcontractor all amounts withheld for the payment of sales and use tax during the period covered on the written notice (Form ST-C 214-6). When a subcontractor's bond is filed and approved by the commissioner, the Department of Revenue shall promptly prepare a certificate (Form ST-C 214-4) and forward the original of such certificate as notice to the subcontractor. Upon receipt of form ST- C 214-9-RR (retainage request) from the subcontractor the Department of Revenue shall send a notice of the subcontractor's surety bond approval (Form ST-C 214-5) to each general or prime contractor in order to be relieved from withholding the retainage.

No retainage release notices will be sent if it is determined that the subcontractor is not in compliance or the general contractor is not registered with this department with a contractor's sales and use tax number.



NONRESIDENT

All nonresident contractors improving real property in the State of Georgia are required to obtain a Sales and Use Tax Certificate of Registration for the remittance of any sales and use taxes that may be due. One may apply for a Certificate of Registration (ST-C Form 214-5C) by submitting a State Tax Application, Form CRF-002, to the Sales Tax Contract Section. You will be contacted 3 to 7 business days from the date of receipt.

Application for Authorization to Perform Contract (Form ST-C 348-1) must be filed for each contract amounting to more than $10,000.00only and a fee paid in the sum of $10.00 for each such contract. A good and valid bond shall be executed by a Surety Company authorized to do business in the State in the amount of 10% of the contract price or the compensation to be received for each contract. Nonresident contractors must file a "Consent to Service of Process" appointing the Secretary of State of Georgia as the true and lawful agent upon whom may be served any summons or other lawful process.

A contract shall not be deemed to be completed until such time as a written notice of contract completion (Form ST-C 348-9) has been furnished by the contractor, accompanied by an affidavit from the Commissioner of Labor certifying that all fees and taxes incurred in connection with the contract have been paid in full. Contact the Georgia Department of Labor at 404-232-3301 for more information.

Bonds shall be released unless a court proceeding has been instituted against the contractor, there are sales tax liabilities with this department, or there are outstanding sales and use tax returns due.

Each general or prime contractor whose aggregate contract(s) amount(s) on any single project is equal to or exceeds $10,000.00 with a single nonresident subcontractor is required to only withhold 2% up to 4% of the payments due the subcontractor in satisfaction of any sales or use taxes owed this state. If labor and other charges are not separated from the rental charge, the person so contracting shall be liable to collect a sales tax on the entire contract price. If the prime or general contractor for any reason fails to withhold retainage of the payments due the subcontractor under their contract, such prime or general contractor shall become liable for any sales or use taxes due or owed this state by the subcontractor. Upon receipt of form ST- C 214-9-RR (Request of Retainage) from the subcontractor, the Department of Revenue shall send a written notice (Form ST-C 214-6) to the general or prime contractor and subcontractor. The general or prime contractor shall be authorized to pay the subcontractor all amounts withheld for the payment of sales and use tax during the period covered on the written notice (Form ST-C 214-6).

No retainage release notices will be sent if it is determined that the subcontractor is not in compliance or the general contractor is not registered with this department with a contractor's sales and use tax number.