TAX NEWS - January 2009

Contractors Tax FAQ - State of Georgia tax

Q. If I am a subcontractor that has signed a contract with a general contractor, am I still considered a contractor?

A. Yes. A person is a contractor whether he is a general contractor or a subcontractor, or whether he is a resident or a non-resident contractor.


Q. What is a general contractor requesting when they ask me for an S&UT 214-5 or S&UT 214-6?

A. The general contractor is requesting a retainage release notice that states that there are no sales and use taxes due to this state so that they can release monies withheld from the contract. This form is issued by the Department of Revenue.


Q. At what time will I be considered a resident contractor if I have an established main office within this state?

A. You are considered a resident contractor when you regularly maintain a place of business in Georgia for at least a year (must provide proof when requested). Not to be construed to mean that a post office box, site trailer, or similar temporary structure constitutes a "main office".


Q. Why am I required to submit sales & use tax returns if I am not selling anything?

A. Per law, sales and use tax returns shall be made by general or prime contractors and by subcontractors on a monthly basis, unless otherwise authorized, for such taxes owed by each respectively.


Q. Do I still need to submit sales and use tax returns if I don't owe the state any money?

A. Sales tax returns should be filed for all appropriate periods even though no taxes may be due. Failure to file returns as required may result in assessments against the taxpayer until such time as all delinquent returns are filed and all taxes due are paid. Release of retainage depends on submission of all appropriate tax returns.


Q. Why am I required to register for tax if I only have a one time job in Georgia?

A. 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, regardless of the number of jobs they are performing.


Q. When should a general contractor withhold retainage and how much should be withheld?

A. A general contractor should only withhold retainage (2% up to 4% of the total contract amount) when a single contract with a resident contractor equals or exceeds $250,000, or when a contract with a nonresident contractor equals or exceeds $10,000. This is necessary to satisfy sales & use taxes.


Q. When can a nonresident contractor file a blanket bond?

A. Nonresident contractors engaging in multiple contracts, contingent or unit basis where the compensation to be received cannot be determined, a blanket bond may be executed in a sufficient amount, within the discretion of the Commissioner of Revenue but under no circumstances to be less than $10,000.00. Contractors so engaged must report each such contract on or by the first day of March of the subsequent calendar year and pay a fee of $10.00 for each such contract.


Q. I am a contractor performing work for the Federal Government, am I tax exempt because this is a Federal entity?

A. No. The contractor is the consumer regardless of who the real property contract is for.


Q. What are use taxes and why am I required to pay use taxes?

A. A contractor that perform services in this state and who is furnished tangible personal property for use under a contract when a sales or use tax has not been paid to this state by the person supplying the tangible personal property, shall be deemed to be the consumer of the tangible personal property so used and shall pay a use tax based on the fair market value of the tangible personal property. Persons who buy equipment in other states are liable for the payment of a use tax at the same rate and on the same basis as the sales tax, with proper credit allowed for another state's tax.


Q. If I perform work for a county, am I responsible for paying sales and use taxes?

A. Yes. A contractor that performs work for a county is liable for sales and use taxes paid in fulfillment of the contract because Georgia treats contractors as consumers liable for taxes – even if the state or governmental entity is the actual consumer.